Outsourcing often means purchasing redundancy, which benefits small practices that can’t afford to lose a single member of their billing staff.

Should you outsource your billing operations or keep them in-house? The answer will differ for every practice. In this month’s column, you’ll learn what outsourcing can offer—and its limitations—so you can decide if it’s a worthwhile investment. 

Keeping A Hand on the Wheel

One of the most common reasons a practice may balk at outsourcing their billing is the loss of control and oversight. However, as with any vendor a practice works with, the billing company doesn’t assume the ultimate authority or take responsibility away from the administrator or lead doctor in the practice. Rather, outsourcing shifts the workload. 

That being said, “It’s important to establish good communication pathways with the company,” says Corinne Wohl, MHSA, COE, of C. Wohl & Associates. “Many feel they won’t have as much control if they outsource, but with good housekeeping and follow-up on an on-going basis, it can work.” 

“Just because you outsource doesn’t mean the administrator and the doctors are completely released from the knowledge of how billing works,” adds John Pinto, of J. Pinto & Associates. “Whenever an administrator supervises any vendor, they need to know enough to determine whether the service is being done well.” 

Ms. Wohl advises her clients on what to ask their billing company to keep abreast of their account’s status. Some questions include:

• What percentage of our open accounts are out over 90 days?
• What is the current time delay between the date of providing a service and the date of posting?
• What percentage of our claims are being denied, and how do those denied claims break down in terms of the reasons (e.g., demographics or mismatch with diagnosis code and service code)?

A Good Fit?

Outsourced billing can benefit smaller practices because it provides redundancy. Mr. Pinto explains, “If you have a very small practice—let’s say you’re a solo practice with about 500 to 600 visits per month and about $1 million or so in collections—at the most, you’ll need one full-time biller. Everything’s fine if that biller is confident and working in your practice, but if you lose that one biller and there’s no backup, your cash flow abruptly stops.

“When you’re a larger practice, you can have a strong billing manager who supervises several billing clerks,” he continues. “Those individuals may collectively have 50 or 75 years’ experience, and even if you lose one, you’ll still have a fully functioning billing department, unlike a small practice where the loss of one staff member can really harm you.”

Outsourcing can also decrease a young practice’s overhead costs. “A young practice stands to gain an increase in cash flow when they outsource their billing, because they don’t have to hire their own billing staff,” says Ron Rosenberg, PA, MPH, of Practice Management Resource Group. “For a young practice, having a billing staff from the get-go means people are going to be sitting around with little to do until the clinic volume picks up.”

There are some situations where outsourcing benefits growing practices too. Kristi Henricksen Perry, Sacramento Eye Consultants’ administrator, says when she joined her practice they had outgrown their in-house billing capabilities. “We would have had to increase our billing staff to keep up, but employing more than 50 people would change the California laws that apply to our business,” she says. Her assessment of the practice showed that outsourcing was the best option. 

“We set up the billing company on our EHR, and they log into our system as a third party,” Ms. Perry explains. “If we get paper EOBs or checks, we scan everything and they post it to our patient accounts.” 

Her practice employs an ophthalmology-specific billing service. “We’ve found so much value working with them,” she says. “We meet biweekly and they help us understand all the Medicare changes each year and keep us up to date.”

Each billing company has its area of expertise. “Some are better versed in coding or compliance and others with charting,” Mr. Pinto says. “You’d have to be a very large practice before you have what’s called ‘depth of bench’ to handle any questions that come up. The vast majority of practices in-source their billing, but even they turn to outside coding and compliance consultants for many things. There’s a lot of complexity and it changes every year. It’s important for even the strongest of internal departments to have external expertise they can call on.” 

What You Should Know

Billing companies receive a percentage of the practice’s collected revenue—usually between 3 and 6 percent.

There are three kinds of outsourcing solutions: national firms, regional services and freelance individuals or small teams who manage the accounts of a few practices. “National firms may handle all types of specialties but may also be less ophthalmology-specific,” Mr. Pinto says. “The smaller firms of just one or two people don’t provide the redundancy that one often seeks by outsourcing their billing.” 

Billing companies receive a percentage of the practice’s recovered funds—usually between 3 and 6 percent—but this rate isn’t always static. “There are efficiencies that allow us to charge less as we collect more,” Jeff Grant, president and founder of HCMA Consulting, says of his firm. “It doesn’t cost us twice as much to collect $200,000 per month versus $100,000 per month, so we’re willing to pass on the savings from the efficiencies to our client.”

Ms. Perry says the separation of collections and patient care has been beneficial. “While a staff member may be inclined to show leniency, it’s more objective on the billing company’s part—they’re just doing their job and we can focus on providing excellent patient care,” she says.

“Be sure to watch out for billing companies that put all of their attention on the easiest 80 to 90 percent of accounts and don’t put equal effort into getting the payments for the rest,” cautions Mr. Pinto. “That’s why it’s important to ask objective questions. Subjective questions like ‘how’s it going with our accounts?’ won’t get you far.”

If you’re considering outsourcing with a billing company, here are some points to keep in mind: 

•  Assess your practice first. “Before outsourcing, your practice should conduct an assessment of its current billing practices and performance,” says Mr. Rosenberg. “Are you collecting everything that needs to be collected or are you leaving money on the table?”

•  Ask for references. “A good outsourcing company should have a lot of experience in ophthalmology or specialize in it,” he says. “It should have a robust client base and be familiar with payers. Be sure to ask for references.”

• Have the company evaluate your current billing practices. Besides asking for references, it’s a good idea to have the billing company that’s pitching for your business evaluate your current billing approaches. “They’ll identify areas where your billing department is doing a good job and where it could use improvement,” says Mr. Pinto. “If you have one to three billing companies pitch for your business, you may quickly realize that one is better than the other, or you may discover as they evaluate your status that your billing department just needs some technical or training support. Many billing companies will act as spot consultants and provide you with high-level expertise to help you do your own billing better internally.”

• Review the contract with your attorney. “You want to make sure the exit clause is appropriate,” Mr. Pinto says. “This is your cash flow—one of the most important areas of the business—and you want to ensure you’re working with someone who will treat you appropriately.” Likewise, be clear in your agreements that you own the data.

Mr. Pinto, Ms. Wohl, and Ms. Perry have no relevant financial disclosures. Mr. Rosenberg is a founding partner of Practice Management Resource Group, an ophthalmic billing and consulting service based in Pleasant Hill, California, and Tinley Park, Illinois. Mr. Grant is the president and founder of Healthcare Management & Automation Systems, a practice management consulting & revenue cycle management service based in Shell, Wyoming.