How To Calculate The Cost Of In-House Medical Billing
For many practices, the question of whether or not to outsource the medical billing function has been on the back burner for some time. We say it’s time to take an objective look at the issue and bring yourself closer to making a decision that could be a shot in the arm for the financial health of your practice. Ask yourself just how much it costs you –in hard costs and soft costs—to keep the billing function in-house.
Calculating the hard costs is easy. A number of factors must be taken into account when trying to calculate this number, including:
- the cost of salary and benefits for your billing employees and their supervision
- the cost of computers, software, books, paper, forms, and office equipment used
- statements and postage
- phones and office space used
Medical Billing Resources has devised a simplified way of figuring out the hard costs associated with in-house billing, which can be downloaded from our website in the form of a Billing Expense Worksheet.
The worksheet walks you through making a rough estimate of the percentage of your monthly revenue that is dedicated to the billing function of your practice. We have used industry standard constants to help with the calculations, saving you from having to drum up a lot of numbers that are not easily compiled. This makes the calculation process a lot faster, and will give you a starting point to work from. It’s not uncommon for practices to find that they’re spending 15 to 30 percent of their monthly revenue on billing, when the average rate for outsourced medical billing is 6 to 8 percent.
It’s the soft costs, though, that you will also want to take into account when trying to assess whether it’s really in the best interests of your practice to outsource the billing and coding function. You have to consider the cost of absenteeism, which translates into delayed billing, for one thing. Also, since most in-house medical billers are not Certified Professional Coders (CPCs), consider what your billing is missing in terms of improperly appended modifiers, or improper bundling or unbundling of codes. Ask yourself whether your biller is intuitive enough to find “missing” codes. It’s right to bill for all procedures performed, but sometimes the physician doesn’t document every procedure performed because of the disjointed nature of the average office visit. For example, if someone comes in with “wrist pain, possible fracture,” but you don’t document that you took an x-ray, will your biller recognize that the x-ray must have been done—due to the diagnosis—and ask you whether you took an x-ray, which can then be billed out? CPCs are trained to look for situations like this and ask those revenue-increasing questions. How many times in a month will a scenario like this play out in your practice, and how many thousands of dollars could you be missing out on because your biller is not educated or experienced enough to know what questions to ask?
With a medical billing company that employs CPCs, you’ll have the benefit of their investment in education, and can be assured of the knowledge that they know what questions to ask when reading encounter forms or operative notes. Because they’re certified coders they know what to look for to increase your reimbursements.
Billing companies also have technology on their side, the cost of which has been spread over a wide client base, and that is usually unavailable to the average practice. Technologies like claim scrubbers and electronic transmissions not only speed up the time that elapses from submission to reimbursement—speeding up your cash flow—but also help to prevent rejections before they happen by scrutinizing the content of a claim to ensure it meets all the payer-specific guidelines.
When a claim does get rejected, what incentive does your biller have to vigorously pursue the funds by editing the claim information to counter the reason for rejection? With an outsourced medical billing company, they don’t get paid until you get paid, so they have a built in reason to actively amend claims and write rejection redetermination requests because they have a vested interest in making sure you get paid.
There are other things you need to take into account when deciding to outsource your medical billing. Other technologies can be available to you through a billing service that you couldn’t necessarily afford on your own, like online real-time patient eligibility lookups and online bill pay for example. How much time does your biller and the rest of your staff spend on the phone trying to verify eligibility for services—if they run a verification process at all? One of the greatest revenue losers we see with new clients is that patients turn out not to have been eligible to receive the services performed, and industry folks assert that offering an online bill pay option can cut patient accounts receivable by as much as 35%. You also need to consider whether your in-house biller is keeping up-to-date on fee schedules from all the carriers you service, and whether your office has a compliance plan in place that will keep you on the right side of the regulatory commissions.
All of these are perks that come standard with most good billing services—certified professional coders and certified specialty coders know how to read your language, and technologies available through services give you the tools you need to stay competitive with the big practices. The soft costs are not as easy to calculate as the hard costs, but when considered together, they usually equal an educated decision to outsource the billing function and keep your staff free to do what you do best, caring for patients.