Physician Practices Benefit from Outsourcing Billing Operations

Everyone makes mistakes; that's why they make erasers. But when it comes to medical billing, the mistakes can be costly. For example, it is estimated that billing errors can lead to loss rates of up to 10% of a physician practice group's revenue. That's significant money. Outsourcing, however, can eliminate those errors by putting all or portions of a practice's billing operation in the hands of specialists.

Everyone makes mistakes; that’s why they make erasers. But when it comes to medical billing, the mistakes can be costly. For example, it is estimated that billing errors can lead to loss rates of up to 10% of a physician practice group’s revenue. That’s significant money. Outsourcing, however, can eliminate those errors by putting all or portions of a practice’s billing operation in the hands of specialists.

“We used to collect about 75% of the work we did,” explains Susan Ward, practice manager for Birmingham In-Patient Physicians, a hospital practice based in Alabama. “Now we’re in the mid-90s. That’s a huge difference.”

A continuing trend

Frank Marshall is CIO of MedSynergies, a revenue cycle management company. He explains that trends in the healthcare industry are likely to make outsourcing of billing operations even more attractive to physician practices. “More physician practices are consolidating,” says Marshall. “They’re becoming bigger groups, and are usually sponsored by hospitals, so outsourcing becomes more attractive to them.”

One such entity is Urbana, IL-based Carle Foundation Hospital. Four years ago, the hospital acquired several practices from the Carle Clinic Association, a large multi-specialty physician-owned group at the same location. David Cook, vice president of physician practice management for the hospital, recalls that at the time, the hospital’s billing operations were “on the edge of respectable, but not very good in terms of our business metrics.” MedSynergies helped the hospital go live on physician billing in 60 days, and today, “We’re now at a best practice position in a few of our metrics,” says Cook. “And our days-in-accounts-receivable metric is very good.”

Some of the keys to making outsourced billing work, says Cook, are technology compatibility and reporting. “You may have this great database sitting out there, but can you do anything with it to make management or strategy decisions? MedSynergies has done a very good job for us of reporting out the information that’s buried in our system.”

Noticeable benefits

Ward explains that she and her husband John, who is a hospitalist, used to do their own billing, and it was a nightmare. “We had a girl who worked in our billing office, and we found that instead of re-filing things, she would just throw them away,” recalls Ward. “There was a lot of money that was just getting thrown away.”

Four years ago, Ward and her husband turned billing operations over to The Valletta Group, which caters to small- and medium-sized physician practices. Valletta created a billing system that fit the Ward’s operation, and enabled them to get the most out of the work John does. “I understand the reservation of making a change, because we had it too,” says Ward. “How much time will it take for things to catch up? How long will you have to go without money? But with everything being electronic these days, we didn’t even notice the switch. Now, I would never go back to handling billing in-house.”

What are the dangers of not outsourcing billing operations? Cook says a scenario he has seen often is that a small- or mid-sized physician office might have a biller who has been with the practice for 20 years. She’s trusted, and has always done a great job. But one day she gets sick or retires. “You look up a year later and your accounts receivable is a mess and your cash flow is in tatters,” Cook explains. “And you’re trying to figure out how to make payroll and pay your rent. As a small practice, it only takes one or two variables to dramatically change your cash flow. Outsourcing offers less risk to a practice because you’re not subject to staff turnover.”

Align goals

Marshall explains that when it comes to selecting an outside firm to handle your billing, aligning business strategy is critical. His mantra is to select the right process and leverage it with the right people and technology. That allows MedSynergies to be more efficient as well as more effective for its customers.

“[Physicians] need to look for an organization that’s going to be around; that has invested in its people, technology and process,” says Marshall. “Too often, we’ve seen physicians that have been sold a bill of goods. What they should get is a detailed game plan for how they’re going to get to the return that the billing service has promised. That’s critical to the success of an outsourcing arrangement.”

Echoes Ward, “Having done our own billing, that experience taught us what to look for [in a billing company]. Whoever does your billing, that’s crucial in that it affects your entire lifestyle. It determines what you get out of it.”

Ed Rabinowitz is a veteran healthcare reporter and writer. He welcomes comments at edwardr@ptd.net.