In-house vs. Outsourced Billing: Tips for Medical Office Managers

Posted by Practice Management Institute on Jun 26, 2019 8:11:33 AM
Practice Management Institute

Portions of this article were originally published in BC Advantage Magazine March 5, 2019

A whopping 25 to 31 percent of total health care expenditures in the U.S. are administrative costs, according to a time-driven, activity-based costing study published last year in the Journal of the American Medical Association (JAMA)1. These are huge margins for healthcare providers already squeezed by insurers and increasing costs of care. You may wonder if the grass is greener on the other side.

Does the thought of handing your claims over to a billing service leave you feeling anxious? Would bringing your claims management in-house be a better option for your practice? Here are some approaches to consider.

Weighing In-House Vs Outsourced Billing Options

Researchers studied a large academic health care system with a certified electronic health record system. They concluded that at least 62 percent of their costs were for billing and insurance-related activities. That’s about $20 per primary care visit.

Convenience, cost, and speed are the top reasons that independent providers choose to outsource their claims processing. New providers often outsource billing to lessen the burden on setting up the office. When staff is lean, employees are covering phones, checking out patients, making collections calls. Billing and denial management may not receive enough attention. Stalled collection efforts and process inefficiencies may point to outsourcing.

If your provider(s) takes an active role in claims management, in-house billing is probably going to be the best option. Claims issues and resolutions can be addressed faster onsite. 

You may decide to outsource some types of billing operations such as: insurance verification, coding/charge entry, pay posting, claims submission, following up on unpaid claims, tracking claims, AR/denial management, appeals and reconsideration/redetermination, and patient statements/collections of remaining balance.

Questions to Ask

How healthy is your current revenue cycle? Which option offers the best return on investment? What is in the best interest of your practice? Who needs to be involved in the decision? What are the expectations for the change? Providers that participate in the decision-making process are more apt to be satisfied with the result. Their comfort level with in-house billing may outweigh the cost savings.

Compliance Concerns

Common risk areas to consider when hiring a billing service include failure to obtain a business associate agreement, using unsecured email and/or fax, non-HIPAA compliant file sharing, selling off accounts without proper disclosure to client, outsourcing their services to an independent off shore company, upcoding services without authorization, and no internal compliance training or compliance program. A billing service needs auditing reports to fulfill requirements of their compliance plan. The Office of the Inspector General (OIG) allows only up to a 5 percent margin of error.

Perform a Cost Analysis

A cost analysis will help you weigh the benefits and drawbacks for your unique situation. When performing a cost analysis for in-house billing processes, look at things like software and hardware, processing costs like man-hours, postage, paper, the percentage of billing collected, and outstanding collections. Factor in the benefits package for employees: wages, medical insurance, sick time, paid vacation, training, etc.

The reports derived from your cost analysis should provide a clear picture of financial performance whether working claims in-house or outsourcing.

When you have good processes, communication, and accountability in place, you can be successful in either model.

Check References

Do your due diligence and choose carefully. If the service has poor performance reviews, the headaches surrounding your billing issues will not improve. A billing service should be contractually obligated to follow-up on unpaid and denied claims. Otherwise, there may be no financial incentive for follow-up, and there may be a higher up-front fee to get the lowest cost per claim rate.

Find out Which Billing Model is Right For You

CMOM teaches practical administrative skills that lead to improved communication with providers, third-party payers, patients, and business associates. Learn guidelines and examples that will improve decision-making and tactical skills. Graduates of this program will be better prepared to manage risk, motivate employees and improve the financial outlook in a medical office.

Learn More About CMOM

  1. JAMA. 2018 Feb 20; 319(7): 691-697

Topics: Practice management, CMOM, PMI Certification, Certified Medical Office Manager, medical office manager topics, medical practice issues, medical billing