Compare costs, benefits of billing service vs. in-house
Question I have been unhappy with my billing
service; the money is not coming in as quickly as I think it should. I
am considering bringing the billing process in-house. What are the pros
and cons associated with this move?Answer At this time, you are probably having a difficult time identifying the benefits of an outside billing service, and the cost seems high compared with the results. Nonetheless, the decision to transition the billing process from an outside service to in-house requires thoughtful consideration. We recommend you evaluate the benefits and costs associated with both options. Here are some points to consider.
With a billing service, billing and collection activities occur off-site. You won’t have to pay rent on space for a billing department or convert a patient care area to an office.
The billing service is responsible for hiring, training and supervising staff. They also are responsible for coverage when any of their employees are out of the office. And they are responsible for acquiring and maintaining all necessary computer software and hardware as well as addressing other technology-related issues.
HCFA rules and regulations are constantly changing. With the increased focus on fraud and abuse, and the potential implications of the latest publication of the Health Insurance Portability and Accountability Act, it is critical that staff (your practice along with the billing service) stay abreast of the latest requirements. To do so, the billing service will have to provide ongoing training to ensure the staff is current on such things as coding issues, regulatory mandates and HCFA rules.
Billing service companies price their services in different ways. In some instances, fees include postage, forms and other individual items. In other companies, one or more of these costs may be separate from the fee for performing the billing and collection activities. There are usually set-up charges for the service itself, along with those associated with electronic claims transmission set-up.
The primary benefit of having your own billing department is that you have more control over how the billing and collection tasks are handled and the staff that is hired to perform them. You also have more immediate access to management information. However, you need to consider the resources and costs associated with moving your billing and collections process in-house. There are some obvious costs and some not so obvious ones.
For instance, space: Where do you plan to house your billing department? Do you have enough space in your current location? If not, can you expand? If so, what is the cost?
And staff: Can your current staff support all of the billing and collection functions? If so, do they have the appropriate training and experience? If not, how many employees will you need and what will you need to pay them? What will be the cost of ongoing training? How will adding staff affect the office culture? How will you provide coverage during staff absences?
As for technology, do you know what billing software is available and most appropriate for your practice? Do you have the required hardware? Will you purchase or lease the billing software or hardware? Who will be available to monitor the system and trouble-shoot?
Then there are regulatory and legal issues to deal with. What will be the cost of ongoing training for your billing staff; i.e., coding, regulatory updates, keeping up to date on the latest billing and collection methodology and tools? Whether your billing is outsourced or in-house, you will still have to provide staff training to ensure that the practice is in compliance with fraud and abuse regulations and HIPAA requirements.
There are miscellaneous and sometimes hidden costs associated with performing your own billing and collection activities. Some examples include HCFA forms, statement forms, printer maintenance and postage. There are costs associated with hiring and training staff. Another consideration is the potential cost associated with terminating your agreement with the billing service.
You can easily compare the two options once you’ve determined the start-up and annual costs associated with bringing the process in-house; i.e., salaries, benefits, rent, software and hardware maintenance.
Determine how much you have paid to the billing service during the last 12 months or project how much you will pay based on current statistics. If fees are contingent on a certain percentage of collections, project the amount you will pay them in a year by multiplying that percentage by the total receipts for a year.
You should also compare both the gross and net collection rates to regional and national norms for the same specialty.
If you decide to move the billing process in-house, there will inevitably be delays in getting the first bills out, in collecting the billing company’s outstanding accounts receivable, and in the transition with the insurance companies. Can your practice sustain a 20% or more drop in cash flow over several months?
If you are still in a quandary after you’ve evaluated the costs and benefits of each option, meet with the billing service customer representative to discuss your issues and how they can be resolved.
The problem may be as benign as improving communications between your practice and their company. The billing service company’s response to your issues may also play a role in your final decision.
We are not advocating one way or another. Sometimes the decision is not a financial one. The benefits of feeling more in control may outweigh any of the costs. However, it is prudent to have as much information as possible to make the best decision for your practice.
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