Medical billing business process outsourcing transfers responsibility for a healthcare organization’s revenue cycle management (RCM) activities to a medical billing service provider. The third party may handle only a portion of the RCM function or the entire process. In general, the client or medical provider generates the claim data, while the RCM or medical billing company provides technology, staff, process and other resources. The goal of the medical billing provider is to increase collections and revenues while reducing the client’s total operating costs.
RCM is one of the top functions that organizations outsource the most. Outsourced medical billing is growing at a compound annual growth rate of 7.2 percent (2014 to 2019), and analysts are not expecting a slowdown anytime soon. It is clear that medical billing business process outsourcing is helping the healthcare industry in many ways. Healthcare organizations have proved that a well-managed partnership with a medical billing company can provide the following benefits:
According to an industry poll, many healthcare organizations that outsource medical billing improve the profitability of their practice. About 80 percent of hospitals with more than 200 beds said RCM outsourcing was responsible for 5.3 percent of revenue increases, while 78 percent of those with less than 200 beds said outsourcing was responsible for 6.2 percent of revenue increases. While the cost of outsourced medical billing (local and onshore) can be higher than the cost of running an internal billing department, the increase in collections and revenue makes up for the high initial spending. Practices can further maximize savings by working with an offshore billing firm in an emerging location. However, firms should choose a billing company carefully to ensure that quality, compliance, and performance are not sacrificed.
Outsourced medical billing can reduce total costs for a practice by increasing collections and net revenue. For some practices, the cost of outsourcing can be higher than the cost of running an in-house billing department. However, the potential increase in collections through third party services more than makes up for the initial investment. By outsourcing RCM, a practice also eliminates other expenses and complexities (finding the right people, training billing staff, employee turnover, etc.) associated with internal billing. Another way that a billing service can cut costs is through economies of scale. The service provider spreads the cost across its client base, so each client can get lower rates for services.
For top-performing organizations, the use of efficient, sophisticated RCM or medical billing software is essential to increase practice collections and revenue. For practices with severe financial problems, using the right technology (technology that impacts the bottom line) can mean the difference between breaking even and bankruptcy. Some firms use legacy RCM processes and systems that are so dated that the maintenance cost is greater than the benefits they provide. A Black Book survey found that 21 percent of CFOs that outsourced medical billing services said their company was destined for bankruptcy if software upgrades or outsourcing was not implemented immediately. These companies can avoid the heavy cost of updating their legacy systems by using the service provider’s technology and resources.
Medical billing business process outsourcing is not just for practices in dire financial straits. Most hospitals outsource some part of the RCM process, even those that are performing well. For example, one hospital worked with a third party when they were in the process of replacing their 10-year old RCM system. The client used internal applications as well as third party applications to ease the transition. System upgrades are costly whether done in-house or outsourced to a third party, but outsourcing helps mitigate risk by allowing the provider to share accountability.
Whether they can afford to keep RCM functions in-house or not, healthcare organizations are not immune to staffing issues like high employee turnover and lack of skilled talent. Although not required, medical billers and coders are encouraged to get certified to prove their competency. Billing staff assigned to ensure that documentation complies with federal regulations should also be certified. Billing personnel must constantly attend industry seminars and interact with insurance carriers to comply with regulations.
Hiring and supporting certified and experienced billers can be cost prohibitive, especially for smaller practices. If a medical biller suddenly falls ill or leaves the practice, it can dramatically reduce collections. Each day a critical billing position remains open, revenue is lost. Medical billing business process outsourcing providers can address staffing issues in a cost-effective way. They can onboard experienced staff immediately to replace a worker on vacation, fill open positions quickly, and provide temporary or short-term billing personnel. They hire the best billing professionals that are able to reduce cycle times and increase collections.
Most healthcare professionals would rather spend their time with their patients than with tedious, time-consuming billing tasks. Even physicians who don’t mind doing admin tasks don’t come to work to deal with the financial side of the business. By outsourcing a portion of or the entire RCM process to a third party, practice owners and managers can free up time for other tasks, and doctors can focus on their patients.
Internal billing errors can lead to 25-30 percent revenue losses; even an error rate of 5 percent can drastically increase the total cost of the billing function. Medical billing business process outsourcing providers have systems in place to ensure that claims processing errors are very minimal. Providers employ trained billing professionals to scrub or clean up claims before they are submitted to the insurance carrier. Accurate and complete forms reduce the number of denied or rejected claims significantly.
Another laborious but necessary task is helping patients with their insurance and billing questions. Instead of hiring a full time employee to field calls from patients, it can be more cost-effective to work with a third party that provides dedicated billing support. Billing support can be offshored to call centers in emerging locations for the lowest rates.
Many third party medical billing firms specialize in niche areas like Medicare secondary billing, motor vehicle accident claims, out of state Medicaid managements, and collections related to legal action. Top-performing practices understand that they have to cover all bases to maximize collections. Outsourcing these often difficult billing services can boost revenue and profitability, while allowing the practice to control other RCM processes internally.
The demand for end-to-end RCM outsourcing is on the rise, but not all companies seek a comprehensive, bundled solution. The medical billing outsourcing industry is known for its flexible delivery and pricing models, and most vendors tailor their solutions to each company’s specific needs. This means that smaller practices can opt for transactional RCM services and pay only for the work performed instead of paying a percentage of collections. For example, some providers offer a fixed rate or subscription fee attached to each account, claim, CPT code, or location. A private practice or hospital can work with one third party provider for a new practice management system and another provider for turnkey patient services. The practice can then deploy internal staff to perform other billing functions in the organization. With a flexible delivery model, the practice leverages the expertise of a billing specialist while not entirely ceding control of its entire billing process. Of course, the practice can have the services re-bundled at any time based on changing needs.
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