Should You Outsource Billing?

Whether to handle your billing in-house or hire an outside billing company is an important decision with significant implications for your practice’s long-term financial health. It’s a good idea to look at all the pros and cons to ensure your decision is the right one.

Compare the costs

Typically, a billing company takes a 6% to 9% commission on all money they handle. In other words, if your practice sees $1 million in business annually, the billing company would take $60,000 to $90,000 of that amount.

Bringing billing in-house can reduce these costs to around 3% of your take — or $30,000 out of $1 million in business. So this might seem to be a straightforward decision: Save $30,000 to $60,000 annually by keeping billing in-house. But it’s not that simple. One hard truth is that, unless you have, or someone on your management team has, a fundamental understanding of coding, billing and collecting — and a willingness to stay up to date on the systemic changes that will likely be necessary over time — it’s better to outsource. The additional cost can be more than offset by the additional revenue that the billing company’s expertise will help generate.

Look at the potential drawbacks

Billing companies generally charge a setup fee that ranges from $500 to $3,000. This acts as a disincentive for physicians interested in jumping to a competing billing company, because they’ll have to cough up the fee again.

In addition, billing companies usually use a contract that locks the practice into a specific contractual period. The contract generally specifies that you can break it only if you’re not happy with the company’s services and can prove the company isn’t meeting industry standards. This can be challenging, because industry standards aren’t well established or easy to prove.

Many billing companies set up a system where checks are sent directly to them instead of to the physician. The billing company then parcels out the money after it draws its fees. Obviously, you need to trust a billing company to be transparent concerning its control over your funds. If trust is lacking, it can complicate the relationship.

The most common complaint about billing companies is that they sometimes fail to chase the money. Because they are paid on a percentage, their time and energy tend to go into handling bigger customers and claims.

Consider the possible benefits

Handling billing yourself can be complicated — and the requirements are constantly changing. Keeping billing in-house requires you to hire at least one person possessing the pertinent skill set. You or that person (or both) would need to be educated on billing and then stay current with billing procedures, coding changes and modifiers. Regularly obtaining continuing education on billing practices is critical.

A good, professional billing company can streamline your billing processes — and, if it’s a company you trust, this can eliminate a lot of headaches. Billing isn’t taught in medical school, and it’s not something you can easily pick up — besides, there’s too much at stake to wing it. You need to balance the expense of hiring a billing company with the costs of training and employing people to perform in-house billing. If you hire a company, be sure to sign a HIPAA business associate agreement.

Stay aware of the issues

Regardless of your billing decision, as a physician, you always have billing responsibilities. You have to ensure that what’s in the chart and sent off to the billing company is accurate. And if a patient calls with a billing problem, you’re still the one who is ultimately responsible for resolving the matter.


10 considerations when hiring a billing company

  1. Determine whether the billing company is familiar with your specialty. Some agencies specialize.
  2. Ask if you have to buy software that integrates with the billing company, and take these costs into consideration. Ask about software installation, troubleshooting and upgrades.
  3. Find out whether the company will have access to your accounts and whether you’ll be able to access and review the accounts as they stand with the billing company.
  4. Decide the parameters of the billing company’s role. Your contract has to specify the details concerning submitting claims and collection processes.
  5. Set a method for keeping track of what the billing company is doing. Ask if you can audit your own records, whether by request or via an online access system.
  6. Get a sense of the billing company’s procedures and billing protocols. Insist on an action plan for steps to take when a claim is 30, 60, 90 and 120 days old.
  7. Find out what the billing company’s average days in receivables is. This tells you how long the average claim goes before it gets paid and is an indicator of the company’s ability to collect claims.
  8. Fully understand the billing company’s contractual termination requirements.
  9. Determine whether the company outsources services or performs everything in-house.
  10. Ask if the billing company’s staff are certified coders/billers, whether they have continuing education practices, and how they stay current on changes in billing and coding.

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