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Benefits of Outsourcing Your Medical Billing: In-House Medical Billing Pros & Cons

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To call medical billing time-consuming and challenging is an understatement. Between juggling insurance carrier demands and shifting regulatory requirements with the demands of a medical practice, it's little surprise many providers consider outsourcing. This article compares outsourcing vs. in-house medical billing to help you determine which option better suits your needs.

What Do Medical Billing Services Provide?

Services vary according to the provider. At a minimum, most medical billing providers offer the following:

  • Claim scrubbing, generation, and submission
  • Insurance carrier management and follow-up
  • Patient invoicing
  • Post and process payments
  • Customizable, real-time reporting and analytics
  • Transfers to collection agencies

More advanced services may include:

  • Specialty-specific coding
  • Credentialing for insurance carriers
  • Appointment scheduling and reminders
  • Verifying insurance eligibility
  • Medical transcription

Pros of Outsourcing Your Medical Billing

There are a number of benefits to outsourcing, although some depend on how large – or small – your practice is. For example, smaller practices with limited resources typically find that outsourcing medical billing allows them to focus those limited resources on patient care. Other possible benefits include:

  • Financial savings: Outsourcing allows you to streamline operations, saving you money on salaries, benefits, and even employee equipment and office supplies. In addition, you no longer pay for medical billing software.
  • Reduced errors: In-house billing produces significantly more errors than a service does. This is due in part to your staff facing distractions that the service's staff does not. But it's also the result of the training professional medical billers receive. Their singular focus and in-depth training lead to fewer rejected claims.
  • Faster turnaround: Medical billing companies are usually paid as a percentage of the reimbursement amount. This is incentive for them to process your claims quickly and follow-up with carriers if a claim is denied or rejected. In addition, the volume of claims submitted by a medical billing company gets them a faster response time from the carrier.
  • Increased cash flow: Revenue cycle time is reduced thanks to electronic claims transmission and fewer errors when making claims and posting payments.

Pros of In-House Medical Billing

The main benefit to handling your medical billing in-house is the feeling that you have a greater level of control over the process.

Cons of In-House Medical Billing

The cons of handling your medical billing in-house are essentially the opposite of outsourcing.

  • Costs are higher, as salary, benefits, software, and equipment nearly always cost more than the fees you pay a service.
  • Compliance issues are probably the greatest challenge of in-house medical billing, particularly with government programs such as Medicare and Medicaid. Add in HIPAA regulations and multiple insurance carriers and it's no wonder that many smaller practices that operate in-house billing experience compliance issues.
  • Employee issues such as not following up on denied/rejected claims, failure to act on encounter forms, and even embezzlement are a risk with in-house billing.
  • Cash flow interruptions are more likely if you have a small billing department and an employee terminates or even just gets sick or goes on vacation.
  • Patient care may suffer if staff is limited and employees are juggling patient interactions and time spent on billing tasks.

How Much Does a Medical Billing Service Cost?

Medical billing costs vary widely according to the services you choose, the size of your practice, and the amount you bill. Most billing services charge as a percentage of what they collect. This incentivizes the billing company to collect as much as possible as quickly as possible, which typically leads to increased cash flow for your practice. In other words, they don't get paid until you get paid.

  • The average percentage rate is 6 to 8 percent of the amount collected
  • Medical billing services charge a range from 4 to 15 percent

Some providers charge a flat rate per claim instead of a percentage. Most healthcare providers prefer the percentage charge, however, since they're only paying for claims that have actually been paid. You see flat rates most often with services that specialize in a particular type of billing, such as Medicare/Medicaid specialists.

  • The average flat rate is between $4 and $6 per claim
  • Flat rate fees range between $1 and $8 per claim

When comparing providers, make sure you know what the price includes. Don't be afraid to ask plenty of questions, particularly when contracts are involved.

  • Is there an extra charge for correcting and resubmitting rejected claims?
  • Is there a separate charge or cost for inpatient versus outpatient claims?
  • Do they have a monthly minimum?

That last question is particularly important, as many billing services advertise extremely low rates. But, there's a catch (isn't there always?). You only get that rate if your billing meets certain thresholds, which are typically so high that few practices could meet them. Make sure you know exactly what services the rate you're quoted includes.

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