Should You Outsource Your Billing?

January 24, 2008
Owen Dahl

Yes.

Yes. No. Maybe. How's that for addressing the question? There are pros and cons to either approach, but the actual decision should rest on the circumstances of your practice.

Billing services operate off-site. They typically enter your charges and payments, process claims, send statements, generate canned monthly reports, and (hopefully) make a significant dent in difficult collections. The key reasons for seeking this solution relates to technical, personnel, and financial issues. Does your practice have problems with:

  • Computer systems management?

  • Constant upgrades for both software and hardware?

  • Problems with back up and loss of information?

  • High billing staff turnover?

  • A dearth of qualified billing candidates in the local market?

  • A shortage of capital?

Then a billing service may be your answer. But take care to shop wisely. Specifically, make sure that your chosen billing service:

  • Has solid payer relationships to facilitate electronic claims submissions and remittances.

  • Is bonded -- particularly if your payments are directed to the billing service office. This is to protect your practice from an external source of embezzlement.

Note that giving up inhouse billing may mean giving up control of a key component of the successful practice: cash management. You may or may not be happy with a billing service's level of effort with collections. You may feel "out of the loop" because you won't see EOBs. Or you may get frustrated by inadequate reports from the service. On the other hand, you won't have the daily hassle of doing the billing yourself, and peace of mind counts for a lot. You'll have to decide if this balances out the loss of control.

Remember, utilizing an off-site billing service doesn't mean that your practice should give up proper coding protocols. The onus of choosing the correct CPT and ICD codes rests squarely on your practice; your billing service will enter only what is on your encounter forms.

As for costs, most payment agreements with billing services are based on a percentage of collections, ranging from four to 15 percent. Be wary if a billing service offers advice on coding (e.g., upcoding, bundling, or unbundling), as this may be construed as an effort on their part to gain higher payments from your practice -- a situation that can bring Medicare/Medicaid auditors knocking on your practice door! An arrangement for billing should only be for billing. An arrangement for coding advice should be separate and stand on its own.

Reporting can be a real problem, especially in the current pay-for-performance environment. Your practice may require special reports not routinely available, which could involve additional, significant cost. Be cautious, too, of seemingly attractive options for electronic medical records; make sure they truly fit the needs of your practice. You should negotiate specific terms and clear expectations at the beginning of your business relationship.

Finally, make sure you have a written agreement that includes a clearly stated termination clause. State in writing that following the termination of your business agreement, the billing service is still responsible for a period of ongoing collections (e.g., four months to clean up accounts), and that your practice will receive all of its information at that time. The billing service must return not only your source documents, but also a hard copy or readable file "dump" of all your transaction history, covering your entire term of service.

There are many functions that a quality billing service can provide for your practice; however, the final answer rests, as always, on the circumstances of your practice.

Owen Dahl, FACHE, CHBC, is a nationally recognized medical practice management consultant with over 24 years of experience in consulting for and managing medical practices and author of Think Business! Medical Practice Quality, Efficiency, Profits. He can be reached at odahl@comcast.net or 281 367 3364.