Outsourcing Vs. In-house Medical Billing

 

After 25 years in the business, we still have many people ask us why a provider should outsource vs keeping the billing in house. It is something that new billing services need to understand in order to succeed. If a billing service doesn’t understand their worth then they will never be able to sign up clients. And both new and established billing services need to recognize when a provider’s office has an in house billing system that is working. If they have a billing system that is working and your service won’t benefit them it’s not a good idea to enter into a contract.

In our experience a provider won’t usually agree to sit down with a service if their current system is working efficiently. They usually only meet with an outside service if they have a problem. But it’s important to recognize when outsourcing makes sense. In order to determine if outsourcing makes sense a cost analysis should be done. Here are some things to consider when performing a cost analysis:

1. Billing Department/Staff costs – This would include the salaries of the employees working in the billing department. If there are employees with multiple functions (billing and front desk, etc) then estimate the amount of time spent on billing (50%, 75%) and take that percentage of their salary. It would also include healthcare costs (if supplied), payroll taxes, vacation time, sick time, disability, office space, and supplies (desk, printer, paper, ink, phone, postage, forms, etc). Basically anything that it is costing the office to have the employee in the building.
2. Software/Hardware costs – Practice Management Systems range anywhere from a few hundred dollars to several thousand. This cost also depends on if the provider purchases server software or if they ‘rent’ software monthly. If the software requires updates, or support those costs need to be considered as well. There is also the computer costs, as well as maintenance on the computers. The cost of any printers, scanners and/or photo copiers would also be considered. These items may still be required if outsourcing however the costs will go down because the usage goes down.
3. Claim Processing Costs – This would be clearinghouse fees, envelopes, postage for paper claims and patient statements, and any other costs associated with actually submitting the insurance claims.

Most medical billing services charge a percentage of the amount collected and studies show that the nationwide average is 7%. In some states charging a percentage is considered fee splitting and is illegal. Whether the billing service is charging a percentage or a flat fee, the costs are usually around 7% of the practice’s revenue.

Studies do show that on average the percentage of revenue collected when using an outside service is higher than the percentage of revenue collected in house. In our personal experience we have seen that the providers that switch from in house to using our service have seen increases in their revenue. In some cases it has been a very large increase and in one in particular it was 60 percent.
Studies also show that 25%-30% of medical office revenue is lost to improper billing. $59% of in house billers do not review EOBS and 55% of in house billers do not appeal denied claims. Our experience supports these studies. We find that most in house billers do not run or work regular aging reports and do not appeal denied claims. They simply send out the billing and accept whatever comes in. Most medical offices have a high turnover of staff and the providers are not involved with the billing so they are unaware of the amount of revenue being lost.
If considering outsourcing a provider should look at all of the costs to billing in house, what their current average revenue is, and how much it would cost to outsource. They should also consider how much they are collecting of the amount being billed out to see if there appears to be an issue. If the in house billing system does not seem to be efficient or effective outsourcing may be a good move. Next newsletter we will go over what a medical office should look for when interviewing a medical billing service.

Providers Need Billing Services More Than Ever

We are often asked if medical billing is a good field to enter and how the new Affordable Health Care Act is affecting this field.  While the Affordable Health Care Act has definitely influenced the field of medical billing, it has not decreased the need for educated medical billers.  The key word in that last sentence is educated.  Doctors need experienced, informed people handling their billing.

There have been so many changes in the past few years that it can be very difficult to keep up with all these changes.  Unless your focus is on insurance billing, it is very easy to miss changes that directly affect payments and cash flow.

Here are several examples of current changes that are going to greatly affect providers when the staff is not aware of these announcement flyers that have been sent to the offices.

1.  Last spring our local Blue Cross/Blue Shield sent out a flyer stating that they were requiring taxonomy codes to be included on all insurance claims or the claims would be denied.  Now, no other insurance carriers to our knowledge require taxonomy codes on the insurance claims, but as of July 2014, our local Blue Cross did.  If you didn’t read that flyer and prepare insurance payments from Blue Cross stopped in July.  Those unprepared offices then had to find their taxonomy codes, enter them on the claims in the correct box and resubmit all claims.  We know of many offices that had an interruption in their cash flow as a result of this change.

2.  Just recently our local Blue Cross found yet another way to slow down the claims processing for providers by sending out another flyer that states that in December 2014 (next month) all insurance claims must have the name and date of birth of the policyholder as well as the patient.  This is huge as many offices collect only the patient information, not paying that much attention to the policyholder.  Any claims where the patient is not the policyholder will now be denied.  We are expecting this to also disrupt many provider’s cash flow.

3.  PQRS – As much as we have read and written about PQRS, it will still come as a shock to many offices when an additional 2% is deducted from their Medicare payments next year.  We will hear “Why are they deducting my money again?”  Many providers still do not understand what PQRS.  As a billing service we are educating our providers so that they can decide if they want to avoid the penalty and how they can do that.

4.   With the Affordable Care Act it is now more important than ever that providers are verifying benefits prior to the patient being seen.  Many of these ACA plans have very high out of pocket expenses.  Gone are the days where the provider can simply rely on the amount they receive from the insurance carrier and not worry so much about collecting the patient’s portion (although that was never a good idea – we do know many offices that had that mentality).   It is important that the person doing the billing is on top of ALL billing, including patient billing.

5.  With or without the Affordable Care Act it is also now more important than ever that the providers office is handling denials effectively and working the aging report regularly.  Many offices that do in house billing fall short in this area.  With all of the other changes it is important that providers are collecting on all that they are entitled to.

This is why billing services are still a very good business opportunity.  As we have always said, it is no “get rich quick” scheme.  It is hard work but it is a needed field.  It is also so important to keep up with changes.  Whether they are big or small they affect the income.  It is increasingly difficult for a small provider to keep up with the expenses of a medical practice.  They must find better ways to keep the income steady and maximize their receivables.  Larger practices must make sure that money is not slipping through the cracks since they have so many higher expenses.  Outsourcing to a billing service can be a smart move for both the small and larger offices.

New Marketing Offer

     Medical billing services are often looking for new accounts and new ways to market their services.  We offer three ebooks on marketing to help these business owners find new opportunities.  So we are always looking for new opportunities to teach to our readers.  This week we got a call from a company who asked if we were interested in getting government contracts for medical billing.  We weren’t sure if it was something we would be interested in or not but thought we should learn about it to offer the information to our readers.  We got the basic info and made an appointment for a fifteen minute phone call to hear the details.  Here is what we found.

This was a private company that offered the service of completing the hundreds of pages of application necessary for the government to offer you jobs.  Contracts were granted for 5 years with the opportunity to renew 3 times for 5 year periods.   The company would keep your applications up to date and renewed for 20 years.  They guaranteed you would get work or our money was refunded.  We were asked if we could promise to take on 2 new accounts in a six month period.  We were told that we didn’t need to bid on these jobs.  As a preferred provider the government and some city or county owned organizations were required to utilize preferred vendors.  When medical billing services were required they would get a list with your name at the top and you would get the job.  You could charge between 8% to 13%.  Their charge was $5500.00 for their service.

They also told us that there was only one GSA preferred provider in New York State and they were in the NYC area.  There was a great need for medical billing providers and this one company couldn’t fulfill all the needs.  We asked if we were limited to the NYS area and were told no, they could put us on the national list.

Red flags went up at some of the things we were told.  Some things just didn’t make sense.  The man we were speaking with happened to mention the name of the one preferred provider in NY so we told him we would think about it and he could call back on Friday.  We “googled” the name he mentioned of the other service and sent an email inquiring about the GSA contract.  A few minutes later we got back an email saying don’t do it.  It’s a scam.  She spent $8000 and got nothing in jobs and no inquiries.  She also said that she had to bid for the work and that there was only one instance in 18 months that she could bid on and she didn’t get the bid.  So beware of this tactic.  It may have worked out for some and we would love to hear about anyone else’s experiences.   If you have had any experience with this type of work please share your information.  We can all help each other.

10 Must Ask Questions in Choosing the Right Billing Service

Outsourcing medical insurance billing has become much more prevalent in recent years. The need to collect maximum reimbursement for services has caused many doctors and therapists to look to professional billers to do the job. When a provider meets with a billing service to consider using their services there are several key questions that should be asked to determine if they will meet your needs.

What is the turnaround time for submitting claims?

The expected turnaround time for submitting a provider’s claims should be written into their contract and compliance plan. Most billing services submit claims within 3 to 5 days of receiving the claims but we have seen some who give no indication of when the claims will be submitted. Worse yet, we have seen billing services fail to submit claims after two weeks of receiving them. In order to avoid timely filing issues and to insure a constant cash flow it is crucial to submit claims as soon as possible.

Do they have a compliance plan and a business associate’s agreement?

While it is not the responsibility of the billing service to provide a business associate’s agreement it is a violation of HIPAA laws to not have an signed BAA between the billing service and the provider. All billing services should be aware of this law and make sure their clients are not in violation of any laws.

A compliance plan outlines in writing the policies and procedures of the billing service in regards to the services they provide. The Office of the Inspector General has issued a guideline for compliance plans for third party billing services.   The guidelines identify risk areas specific to third party billing services and can be found at http://oig.hhs.gov/fraud/docs/complianceguidance/thirdparty.pdf. A provider can ask for a copy of the billing service’s compliance plan to see how they actually handle their work, training, internal auditing and continuing education.

 

What reports do they provide?

Reporting capability is an extremely important part of running a successful medical practice. There are many reports which when generated can give the provider a good idea of how the practice is running. Good practice management systems will provide many helpful reports. There are a few free practice management systems with very limited or no reporting capabilities. You want to make sure that reports will be provided upon request. The following are examples of some reports that should be available to you.

Insurance Aging Reports – All medical offices or their billing service should be running and working regular aging reports. These reports show all insurance claims which remain unpaid. These reports can be run for all claims out over 30, 60, 90 or 120 days. Any claims that have been sent electronically and not paid in 30 days should be checked on.   If the billing service is running regular aging reports they should be providing providers of the results preferably on a monthly basis.

Year End Reports – Will they provide a year-end report showing figures needed to report on income tax returns. This may or may not be a necessity to all offices but it is important to some.

Transaction Reports – Often a transaction report may be run for various reasons which can identify any insurance claims sent during a specific time frame or with a specific insurance carrier.

Day Sheet – A day sheet will provide a report of every entry that was made through out the day.

Patient Balance Report – This report will show exactly how much money is owed to the practice by each patient. This is often the report used to send out patient statements.

Insurance Analysis Reports – An insurance analysis report is often helpful to a provider to determine how much of their business is with each insurance carrier.

 

Will I be able to communicate directly with the person who does my billing?

Some billing services do not allow the employee who is actually working on the account to communicate with the provider.   While it is important to be able to go to the owner or manager of a billing service with bigger issues, the daily issues that come up with insurance ID numbers or dates of birth should be handled directly with the person working on the account.

 

Do they answer the phone and if not what time frame so they return calls? – This may seem like a “no brainer” but we have many providers tell us they cannot get a person in charge on the phone with their billing service. We have actually had a doctor hire us because we answered the phone when he called. We have also been told by providers that if their billing service does not want to discuss a problem with them they won’t return the call at all. This is crazy. In order to have a good working relationship it is imperative to establish good communication up front.

 

Do they require using their billing service forms? – If the service does require that you use their forms, make sure this will not cause a lot of extra work in your office. Most services are willing to work with the forms or system the provider is currently working with.

 

Do they have access to your money? – In most cases the checks or electronic deposits go directly to the providers who then forward payment notifications to the billing service. Some billing services set up a lock box to receive payments and then they are responsible for depositing all payments into the provider’s bank account. Some billing services even receive all cash payments made in the office and have direct access to the money in the bank account.  Unfortunately with the fraud and embezzlement that can be common in this industry this is not always a good idea. It is not necessary for a billing service to have access to the provider’s cash or bank account even if they do make the deposits.

 

How often do they work aging reports? – Aging report should be worked between every four to six weeks. With some carriers instituting 90 days timely filing limit and sometimes even less, claims can be denied for timely filing if aging reports are not worked regularly.   In our personal experience we find that many offices and even billing services do not work aging reports on a regular basis causing much lost revenue.

 

What is their system for patient billing? – Patient statements should be sent out regularly. Does the billing service have a system for patient billing? Do they handle collections?

 

These are just some of the important questions a provider should ask. There may be other questions that are specific to the provider’s needs. The important thing is that the provider should learn everything they can about the billing service before making a decision. All too often providers enter into an arrangement with a billing service without asking the right questions. Not all billing services are equal or will meet the needs of the provider. A provider should interview them thoroughly and check references before entering into a contract.

 

 

 

 

Business Associates Agreement Now Required

Back in September of 2013 it became a requirement that any provider using an outside medical billing service must have a Business Associates Agreement on file.  This is the responsibility of the provider, not the billing service, but only 2 out of over 40 of our providers even contacted us to see if they have one.  That amazes me.  I’m not sure why.  I know providers main task is to treat patients, but they must make themselves aware of the other responsibilities that they have as well.  If they don’t then they need to make sure that they have someone else looking out for them.

For example, have an office manager, or their spouse making sure that they are keeping up with all these changes.  I can only wonder how many are ready for ICD 10.

 

We recently sat down with a husband and wife, both MDs, who had no idea about the BSA.  We don’t do their billing but we do other work for them.  When we mentioned it they had no idea what we were talking about.  And their billing service didn’t mention it to them either (no surprise there though).

 

If you are a billing service, or if your office uses a billing service, make sure that the BSAs are on file.  If you are a service, do your providers a favor and do it for them.  Tell them it is their responsibility but you have one all ready for them.  They will appreciate that and knowing that you are looking out for them.  They will also be reassured that you are up on what’s happening.

The Death of Percentage Billing

Percentage Billing – Dying Like the Dinosaurs

Many people in the medical profession do not realize that percentage billing, or charging a percentage of what the provider brings in, is considered fee splitting in several states.  Fee splitting is an arrangement between a medical professional and a colleague to share a fee.  It is illegal in certain states for a medical provider to enter into a fee splitting arrangement.

Although we live in a fee splitting state, New York, most doctors we talk to still want to pay a percentage to a billing service rather than a flat fee or other method.   Their thought process is often that other billing services charge a percentage so they want to be able to compare apples to apples when looking for a billing service.  They sometimes know that it is considered fee splitting and don’t care but sometimes they are totally unaware.  Although it is not common to be charged with fee splitting for such an arrangement it has happened.

There are other methods of charging for billing services such as a flat fee, a sliding scale based on number of claims, per claim or hourly.  Ideally we prefer a flat fee or sliding scale when negotiating with a provider.  A flat fee can be a little more difficult to determine but it definitely has its advantages.  The best way to determine a flat fee is to estimate the amount of time required to handle that account and multiply it by what you need to charge per hour.

In addition to being illegal percentage billing can have other disadvantages.  Each year co-pays are raised by the insurance carriers.  It is now very common to have a $40 or $50 co-pay.  Patients often find that they pay more out of pocket for doctor visits than the insurance carrier pays for that visit.  This is affecting many billing services.
If the billing service has agreed with their provider to charge a percentage based on what the insurance pays they are finding that they are doing the same amount of work each year but getting less for it.  Unless their agreement with the provider is to bill (and collect a percentage on) patients for co-insurance, deductibles and  co-pays that weren’t collected at the front desk when the patient was seen, these billing services are making less money on the same work they did the previous year.

This has greatly affected specialty billing such as chiropractic where it is common to charge $30 – $50 for a visit.  Often the insurance pays nothing but the patient may want the visit billed so it is applied to their out of pocket expense for the year.  If the billing service is charging the chiropractor based only on the receivables from insurance billing they will find they are billing many claims that get no pay but cost them money to submit and track.

If the billing service is doing a full practice management and is also handling the patient billing by keeping track of the co-pays and sending patient statements out when patients owe money they are generally getting paid on the patient payments also.  So the fact that insurance carriers are paying less doesn’t affect them so badly.  But it is common in many offices for the provider to want the billing service to only handle the insurance billing while they handle the patient receivables in the office.

In order for billing services to stay in business they are finding that they must either increase the percentage they are charging or be more selective in the work they accept.  Increasing the percentage is difficult as many providers are looking for the best price.  With as many other options available for charging providers for billing services we expect to see more alternative ways of charging becoming much more common.