Medical Billing & Coding

First – What does it mean to outsource?

Answer: Those in charge of billing and coding are the invisible engines in the healthcare machinery. It’s their job to ensure billing is done properly, all medical codes are up-to-date, and to ensure their patients are reimbursed properly. Medical billing can be a demanding and challenging task for many medical offices or facilities who do not have access to the essential skilled manpower to perform the duties properly. As a result, healthcare providers, physicians, and practitioners prefer to outsource all or some of their medical billing responsibilities to a third-party service provider like RelianceMM.

“For most practices, the outsourcing decision boils down to one factor: Cost.”

One benefit of outsourcing is reducing overhead and saving money. Let’s look at a quick-cost analysis to help compare the costs of in-house billing vs. outsourced billing with RelianceMM.

Quick Cost Analysis

To arrive at the values below, we have used what we believe to be industry averages. Here are the characteristics of this practice:

Three primary care physicians;
Two medical billing specialists;
80 insurance claims filed per day (19,200 per year);
$125 billed per claim on average ($1,500,000 per year); and, let’s assume that the billing service has a high collection rate on claims.

So, how much does each billing approach cost? Let’s look at the average annual cost.

Some background on our cost assumptions are below.

Billing Staff Cost

IN-HOUSE: This was calculated by adding up the median salary of two medical billing employees ($60,000), healthcare costs for two employees ($9,000), federal and state taxes for two ($12,000), and training costs to keep the employees updated on the latest industry developments ($2,000). Finally, we’ve included $15,000 in ancillary costs for statement paper, office space, office hardware and other miscellaneous costs.

OUTSOURCED: We factored in 40 hours of time per week required to manage tasks related to billing at RelianceMM’s full-time rate of $3,840 per month or $46,080 per year for this office’s size. We also factored in 5 hours of time per week required to manage tasks in-house related to billing at approximately $15 per hour. Even the best medical billing service will require follow up from a practice about issues. This totals an additional $300 per month or approximately $3,600 per year.

Software and Hardware Cost

IN-HOUSE: We’ve factored in an annual cost of approximately $7,000 for practice management software ($200 per month, per doctor) and another $500 for computer hardware costs. This does not include the upfront cost of a software system.

OUTSOURCED: This reflects the computer and printer the practice would still need to interact with the billing service and print documents.

Direct Claims Processing Cost

IN-HOUSE: Clearing house fees for a provider submitting 19,200 claims per year would be approximately $300 per month ($100 per physician), or $3,600 annually.

OUTSOURCED: RelianceMM will utilize the system already implemented within the practice. If the practice does not have a claims processing system, we will assist in finding a cost-effective system for the practice. Therefore, we left this price as is since the office will be responsible for this service.

Percentage of Amount Collected

IN-HOUSE: The percentage of revenue that a practice collects varies widely by specialty. Our example practice collects 60% of what it bills. According to industry experts, this describes an in-house billing department that is average at bill collection.

OUTSOURCED: A practice can expect a 10%-20% increase in the amount they’re able to collect by switching to a billing service. We factored in a 10% increase in the amount of money collected by a billing service as an average between the two. Most of the time, RelianceMM can help increase collection rates even more.

Should You Outsource Your Billing?

Besides costs, there are other factors that would spur a provider to consider outsourcing their billing.

Your billing process is inefficient.

If you’ve been watching your collections drop while the time to collect increases, you may have issues in your billing department. Outsourcing to a third-party billing service typically decreases the number of rejected claims and decreases the time it takes to receive payment from a payer.

You have high staff turnover.

Turnover in a provider’s billing department is damaging. Claim processing is the economic lifeblood of a practice and a new addition or replacement in the billing department will unavoidably lead to a slowdown in the processing of claims.

You’re a new provider.

New providers have plenty to learn and worry about aside from their billing. Outsourcing their billing can give them much needed relief from the day-to-day stress of launching a new practice, without a trial by fire in hiring, training and managing employees.

You have different priorities.

Many doctors are not solid on the business side of running a practice. They became doctors to help patients – not worry about the administrative/clerical side of the business. Outsourcing your billing process eliminates the hassle and frees providers to concentrate on patients.

Which Approach is Right for my Practice?

It’s important for a practice to factor in their individual costs and preferences when deciding whether to outsource their medical billing. In an apples-to-apples comparison, we found that outsourcing had the higher net income. However, cost isn’t the only issue practices should consider. Contact us today and speak with one of our owners to get some help with your decision.

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