Is the Labor Shortage Hurting Your Billing Today? Tomorrow?

In the Midst of a Labor Shortage, Is Your In-house Billing Operation Still Performing?

Is your practice or department having trouble hiring billers? Have you lost staff during the COVID pandemic? If so, you aren’t alone. Many workers haven’t returned for a variety of reasons, from not having child care to generous unemployment packages to fear of getting sick, per a recent article in The New York Times. And, surprisingly to many, the labor shortage is expected to be long term, not just a short-term inconvenience!

Medical practices have two billing options: partner with a professional medical billing company or support an in-house billing department. The right option for you depends on both efficiency (measured by cost) and effectiveness (measured by performance). 

Efficiency (cost)

Consider a practice with a four-person billing staff where one needs to be replaced due to COVID or other reasons. From a cost perspective, the four staff members typically would get two to three weeks of vacation and five to 10 sick/personal days. That means 60 to 100 days out of the year, 25 to 40 percent of workdays, where the department is operating short-staffed. A larger staff has the same issue, with slightly less impact on productivity. But in all cases, the costs for salaries, benefits, and other overheads go up every year. And, considering the labor shortage, expect them to go up faster, to higher levels than most are forecasting. 

There are also overhead costs associated with in house billing. Hiring, training and supervision are obvious ones, but don’t forget benefits, bonuses, billing system, IT support, training, office space, miscellaneous costs, etc. Given the current and expected labor shortage, it’s important to factor in significant annual cost increases in nearly all of these areas. Once you assess all these personnel and overhead costs, you can compare them with a medical billing company fee. Note that most, if not all of these costs are increasing every year.

While not strictly a cost issue, some physicians find managing a billing staff takes more time and effort than they would like: especially when staff shortages or other daily challenges interfere with revenue generating clinical activities, or family time. For many practices, the current labor environment is exacerbating this concern and causing tremendous burdens on the physician(s) responsible for overseeing the billing operation’s performance. 

Medical billing services typically charge a percentage of the collected reimbursements. This is a variable expense vs. the fixed cost of in-house billing. Also, these fees are usually locked-in for a three or five year period. In other words, while the costs of running an in-house operation are generally fixed and increase every year, the costs of using a billing company are variable, based on performance and can be locked in for three to five years, sheltering your practice from escalating labor and other costs. 

Is it less expensive to bill in-house? Usually not, given the economies of scale of a sophisticated billing company. But each practice needs to do the math for its unique situation. Just be sure, given the current and expected labor environment, to factor in significant annual cost increases for in-house billing.


Many in-house billing operations are effective at collecting reimbursements owed. But this effectiveness is at risk without a stable, trained staff and consistent management and leadership. Where specialized skills are required, the challenge can be even greater. As the patient portion of reimbursement grows, it takes a very specialized staff to share patient compassion and, at the same time, be effective in a collection effort.  This can be extremely difficult to train and manage in-house.

If you partner with a medical billing company, many of the challenges that affect a small or medium-size team are eliminated. A medical billing company should bring state of the art billing software as well as professionals with expertise in your specialty plus medical coding and billing that are up-to-date on regulations, compliance, and other industry standards. 

If a practice requires specialized skills (e.g. specialty coding), a medical billing company may be much more effective (and efficient). If a practice requires the equivalent of specialized skill half of the month, they may need a full-time person on staff. Medical billing companies can share specialized resources across clients. They are also likely to have better training opportunities and better career paths for coders and billers than with most in-house billing operations, leading to greater stability and experience.

At the end of the day, a physician practice generally tries to minimize the expenses of its in-house operation, since it is a “cost center.” This means investing as little as possible in tools, training, technology and people. In contrast for a billing company, like AdvantEdge, the billing operation is its revenue center and enjoys meaningful investment in tools, training, technology and people.  If interested, a great way to measure your performance against that of a medical billing company is to compare your current net collections percentage, days in A/R, and A/R greater than 120 days outstanding (the three most identifiable metrics used by the industry) to projections from a medical billing company. 

As the news points out, now is a good time to assess or re-assess your staffing situation and business methodologies…as Bob Dylan said, “The times they are a’ changing.” You need to make sure you are staying current and, potentially, changing with them. To see if a medical billing service might make sense for your practice, reach out to an AdvantEdge expert today to learn more. You can also follow AdvantEdge on LinkedIn to stay current on company and medical billing industry news.