Medical Billing Company: Definitions and Explanations
A medical billing company performs most or all medical billing for a physician practice or surgery center. While the majority of practices and centers perform their own billing, there has been a trend over the past several years to “outsource” the billing to a professional medical billing company. The different types of billing companies are described below. Note that “outsource” here does not necessarily mean the work is done offshore: only that it is not done by the practice or center itself.
FAQ’s about Medical Billing Companies
If my practice or center decides to hire a medical billing company, what are the various types and their pros and cons?
There are four types of medical billing companies to evaluate.
- First are small, local companies that can bring personalized service but may not have the resources to be responsive to a mid-size or larger practice/center, especially under demanding circumstances. They probably don’t have hospital or ASC experience and may not have expertise in your specialty. And they may not have the technology you need, in the form of system interfaces, reports, dashboards, etc.
- Second are large, national “name-brand” firms. They offer a wide variety of services and expertise, but with a commensurate price tag. Plus their size makes it hard to offer responsive service to all of their customers.
- Third are mid-size, professional medical billing companies. These firms have deep expertise and technology in selected specialties without the overheads of the large companies. But they are small enough, and focused enough, that clients receive personal service at fair prices.
- Finally, there are billing companies based off-shore. These firms frequently advertise very low prices. But practices need to carefully evaluate the services provided, as they can be very limited, resulting in weak billing performance.
What is the cost comparison between in house billing vs. a medical billing company?
When a practice or center decides to contract with a medical billing company, one of the distinct advantages, compared to billing in-house, is that fixed billing expenses (in-house) are turned into true variable costs (billing company). Medical billing company fees are based directly on their collections results, so if practice or center revenue decreases, so do the billing fees. Where the billing company is providing technology as part of its service (practice management such as scheduling and registration or even EMRs), it is possible to reduce the upfront costs normally associated with technology. Creative medical billing companies work with practices and centers to spread technology costs over the life of the billing contract, dramatically reducing fixed investment requirements.
Sometimes, a practice will perceive that a billing company is more expensive than in-house billing. However, when billing staff, systems, overheads, and IT support are added up, the costs usually equal or exceed the billing company fee. Contact AHS for a cost model if you would like to make the comparison.
Perhaps even more importantly, a good medical billing company is able to do a more effective job with practice/center billing, meaning more cash collected and shorter days in A/R. This increase in cash collected easily offsets any perceived cost difference: e.g. a 5% or 10% increase in cash collected far exceeds any cost difference.
How can physicians and administrators decide whether to handle billing and collections in-house or whether to outsource (medical billing company)? What are some factors to consider?
The factors to consider when evaluating whether to “in source” or “out source” billing and collections are: cash, flexibility, opportunity cost, and staff considerations. Cash will be the most important factor for most practices and centers. The question: can in-house billing collect as much cash as a billing company? In most cases, the answer is, “No.” As an example, experience shows that most practices and centers see at least a 10% increase in cash with AHS billing vs. their in house operation (more than offsetting the cost of the billing fee). The exception would be a practice or center with the right number of highly experienced billing staff, modern technology, and a track record of strong collections and A/R performance.
A medical billing company also makes billing a variable cost vs. the fixed costs of an in-house billing operation. Not only are billing fees directly proportional to practice revenues, there are no up-front technology investments. This flexibility cannot be matched by internal billing.
In addition, physicians and centers who contract with a professional medical billing company have fewer administrative staff, systems, and overheads to manage, allowing them to focus on practice development, productivity, and patients. This opportunity cost is very real, but often overlooked.
Finally, there are the obvious staffing considerations. A practice with existing billing staff may be reluctant to let the staff go, regardless of the financial benefits. In some cases, the practice management and billing company may be willing to hire some or all of the staff and ease the transition. In other cases, staff turnover is high enough to solve any perceived problem. For office-based practices, staff is often redeployed to patient-facing functions. Of course, if a practice wishes to keep billing in-house, then a comprehensive HR plan is needed for employee hiring and retention, training, compliance, certification (e.g. coders), and regular industry updates. Plus sufficient IT support (and budget) for the practice management and billing system(s).
What are the advantages/ disadvantages of hiring a medical billing company? How do you choose between the options? How do you filter through the companies out there?
The advantages of using a medical billing company are described above: cash, financial flexibility, better focus on patients and productivity, and reduced administrative overheads. The disadvantages are that there may not be a role for all of the existing staff.
To evaluate potential billing companies, mid-size and larger practices and centers look for billing partners with experience in their specialty, a track record of strong collections performance, responsive customer service, technology credentials, compliance expertise, and sufficient scale to evolve with the practice/center.
Smaller practices and centers will consider the same factors but put more weight on local companies and on established personal relationships.
What is a specific example of a practice, and how did they gain control of their revenue cycle management processes with a medical billing company? What specific steps did they take?
A mid-size cardiology group with four locations recently switched to AHS medical billing services after working with a low-cost, offshore-based billing service. After only a few months with the offshore company, the practice realized that collections were not ramping up as expected and the offshore company was not responding to the practice’s concerns. The practice requested an analysis by AHS to determine the magnitude of missing collections and the causes. The analysis indicated a large and growing gap, caused by inefficient workflows. The practice next took steps to cancel their off-shore contract while asking AHS to develop an expedited implementation plan. That plan included rapid filing of needed enrollment and credentialing forms, mechanisms for AHS to begin capturing charges immediately, and training for office staff in each location. After only a few months with AHS, the practice revenue was under control and hitting expected levels.
What is the ROI from using a medical billing company?
The “hard” ROI from a billing company is most often driven by improved collections performance. A typical mid-size practice or center will see improved cash flow in three to six months and a 40% return on their billing investment in the first 12 months. In addition, days in A/R will improve, costs will be variable (vs. fixed), and physicians and administrators will have more time for patients and practice development.
Where can I find a list of good medical billing companies?
The professional organization for billing companies is HBMA: the Healthcare Billing and Management Association. Their website lists firms that are members.
For more medical billing company information, fill in the form below of call toll-free 877-501-1611.
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You can call AHS today (877-501-1611) for a free net collections analysis. Or sign up to learn more about reductions in Accounts Receivable, improved cash collection, and changes in the medical billing industry.
