The Power of Outsourcing in Your Medical Practice

October 2, 2013

From billing to compliance to human resources, there is a multitude of ways you can outsource key practice functions to lighten your load.

You can't do it all. Well, technically you can, but not without sacrificing quality control - or your sanity. Medical practice managers these days are forced to contend with an overwhelming number of tasks, from hiring and firing, to EHR conversions, to regulatory compliance, and bookkeeping - all while maintaining a focus on patient satisfaction. "Administrators today are frustrated that they have to do so much in so little time and without the resources they need to get the job done," says Rebecca Morehead, a consultant with Practice Manager Solutions in Orlando, Fla., who has managed medical groups for decades.

Enter: Outsourcing. While practices have long used billing services to process claims, the number of clinical and administrative functions that can be farmed out to a third party has grown significantly in response to demand; from patient education counseling to credentialing to legal advice, and even weekend staffing. But before you call for back up, you'll need to assess the strengths and weakness of your practice to determine whether it pays to outsource. "It depends on what you need and what your practice can afford, but many managers at small practices are working managers," says Morehead. "They may do billing or post payments, in addition to running the practice, and if they also now need to try to watch webinars or attend conferences to figure out how to take advantage of PQRS incentives, that takes them away from their job." Eventually, she notes, having too many balls in the air affects productivity and invites human error.

When to farm it out

There's no break-even point at which outsourcing makes sense for all practices, says Tannus Quatre, a principal with Vantage Clinical Solutions practice-management consulting firm. It all depends on a number of factors, including how effectively you manage your office. "It has much to do with the maturity of the systems and processes you have in place, not just the size of your practice, as many believe," says Quatre. "You have to understand what your core competencies are; those things that are business critical that you are trained to do better than anyone else." For most practices, he says, that includes clinical care, customer service, and relationship marketing, all of which should be kept in-house to ensure quality control. "These are the things that differentiate you in your marketplace," says Quatre. "That's your DNA. Your magic."

Conversely, information technology support, legal expertise, and medical billing are ripe for outsourcing, says Quatre, noting it's often difficult for smaller practices to recruit for such skill sets effectively. "The odds of a small practice being the best provider in a market and being able to find and pay enough to recruit the best medical biller, and also evaluate whether they are doing the best job for the practice, are low," he says. "That's not a core competency - not your magic. That's when it makes sense to outsource." If done right, Quatre adds, you should be able to attain better quality at a lower cost because the service provider can pass along savings that result from economies of scale. Employee leasing companies, for example, can often provide a wider array of health insurance benefits and lower workers' compensation premiums because their pool of clients gives them greater leverage with insurance providers, says Marc Bailey, owner of consulting firm Marc H. Bailey and Associates in Culver City, Calif. Your outsourcing partners, he notes, should also be able to prevent costly errors and identify opportunities for greater efficiency.

For his part, David Raskin, chief executive of Advanced Dermatology & Cosmetic Care in Valencia, Calif., a four-provider practice, pays an outside firm to handle physician credentialing and ensure Medicare compliance in their ambulatory surgery center. "It takes too much time to stay on top of all the new regulations that come out," he says. "In business, you always want to surround yourself with people who are better than you and an outside perspective can be very helpful." Raskin also uses a legal consultant for questions related to human resources, including how to fire an employee without inviting a lawsuit.

But paying for expertise is no panacea, he says. Like all service providers, some are hit or miss. And others charge more than they are worth. "Our previous billing company was doing a God-awful job," says Raskin. He is also considering bringing payroll back in house. "We've found that the amount we actually use our human resources guys for help is minimal, so it's not really worth it to us," he says. "We're looking at possibly breaking up payroll and benefits, and doing payroll on our own."

Conduct an analysis

Cost, of course, is another factor. According to Nancy Enos, head of consulting firm Nancy Enos Medical Coding in Warwick, R.I., managers should perform a cost benefit analysis for any function they are considering farming out. If it's billing, for example, tally up the salary and benefits of all full-time equivalent employees required to do the job correctly, along with the cost of system upgrades, training, supplies, and office space that the billing department absorbs. "Look at all the hard costs of doing it in-house, and then look at the percentage that the billing company will charge you to do the billing for you," says Enos. Many companies charge as little as 3 percent for surgery centers, and up to 7 percent on net collections for primary care, she notes.

Next, measure your performance by tracking days in accounts receivable (A/R), and total A/R over the past few years, and compare that with national benchmarks available from the Medical Group Management Association. If you fall short of the average, outsourcing may pay for itself, says Steve Adams, a consultant with InGauge Healthcare Solutions in Atlanta. A good billing company, he notes, should be able to reduce your A/R that are more than three months old to 5 percent or less, ensuring greater revenue stability and fewer write offs. "In the past, doctors didn't really have to worry about accounts receivable, but now any income they are losing is a cost to their business," says Adams, warning that practices should be sure the billing company they use has certified coders on staff, not just billers who perform data entry. "What doctors sometimes fail to understand is that not all billing companies employ coders," he says. "A certified coder looks at the surgical notes and makes sure the appropriate CPT and diagnostic codes were used. They help convert the doctor's work into revenue."

Medical home advantage

Outsourcing can also be used to enhance access to care, one of the criteria necessary to attain certification as a Patient-Centered Medical Home. According to the National Committee for Quality Assurance, practices that qualify as a medical home must not only be able to manage chronic conditions, and coordinate care between patients and providers, but also be able to provide quality care in the timeframe and manner in which patients want it. That's a tall order for practices with limited resources. Many staffing services, however, offer temporary administrative and clinical staff, part-time traveling nurses, group counseling, online patient education content, after-hours triage, weekend appointment scheduling, and multi-lingual nurses, which can help fill the gap. Bailey notes, however, that bringing in outside clinicians can also create new challenges, as they may fail to appreciate your practice culture.

Check your staff

While third-party vendors can deliver significant value to a busy practice, Morehead advises managers to be sure they're making the most of their existing staff first. Review resumes to be sure each employee's training and professional strengths are being put to the highest use. If the person answering phones has a degree in information technology, for example, your practice may be better served by training that person to manage your EHR, rather than paying for an IT consultant. Likewise, says Morehead, if the person in charge of billing is not a certified coder, and they just took the job to fill in for someone who left (two years ago), it may be cost effective to farm that function out to a company that is trained to verify codes and appeal denials.

The most effective medical practices use outsourcing to supplement their expertise, freeing the office administrator to focus on business strategies that can help her practice grow, adds Quatre. "It's the small- to mid-size practices that really need to stay focused on their core competencies, and they can't do that if they're trying to manage all those other things that fall outside that area," he says. "Those are the ones that get the best bang for their buck from outsourcing."

Shelly K. Schwartz, a freelance writer in Maplewood, N.J., has covered personal finance, technology, and healthcare for more than 18 years. Her work has appeared on CNBC.com, CNNMoney.com, and Bankrate.com. She can be reached via editor@physicianspractice.com.

This article originally appeared in the October 2013 issue of Physicians Practice.