Effective revenue cycle management is important for the financial health of medical practices, and medical billing plays a key role in this process. Practices face the choice of handling billing in-house or outsourcing it to third-party services. In-house billing offers control but requires significant time and resources, while outsourcing can streamline operations and improve collection rates. In this, we will examine the processes, pros, and cons of both approaches, comparing the costs and benefits.
In-house Medical Billing
The staff at a clinic or health department handles every aspect of revenue cycle management. This includes submitting claims to a clearinghouse, Medicaid, or directly to insurance companies for reimbursement. They also set service charges, collect patient fees (such as copays and deductibles), and manage accounts receivable.
In-House Billing Process
The in-house process for handling insurance claims includes several essential steps common to every practice.
Entering Patient Information
First, the medical team entered details into billing software from a superbill prepared during the patient’s visit. This superbill contains critical diagnosis and treatment codes, along with essential patient information required by the insurance company to process the claim.
Claim Submission via Clearinghouse
The practice then submits the claim through a medical billing clearinghouse. Here, the clearinghouse verifies the claim and forwards it to the payer while also “scrubbing” the claim for errors (for a small fee) to minimize rejections. Using a clearinghouse saves the practice time and money by lowering the claim rejection rate.
Claim Status Notifications
Once the payer accepts or rejects the claim, the clearinghouse notifies the medical practice of its status. If a claim is rejected, the staff gathers additional information and resubmits it as necessary.
Cost Per Submission
Practices are charged for each submission, even for corrected claims, making accuracy critical to managing costs effectively.
Outsourcing Medical Billing
Healthcare providers often outsource their medical billing to third-party services known as medical billing companies. These services usually charge a percentage of a practice’s collections as payment for managing various aspects of the clinic’s revenue cycle. Some may also include recurring monthly fees as part of their billing model.
Outsourcing Medical Billing Process
Outsourcing Medical billing offers a simpler alternative to in-house management for medical practice staff. Instead of handling every billing step, staff can easily scan and email superbills and related documents to a medical billing service provider.
Affordable, Transparent Fees
Most billing service providers, such as Taskesy, charge a small percentage of the collected claim amount, typically around 7%. This clear, predictable cost structure is often more manageable than in-house billing overhead.
Time-Saving Convenience
Convenience is a top reason practices outsource their billing. The billing provider takes care of data entry, claim submissions, follow-ups on rejected claims, and even sends patient invoices—freeing up valuable time for the practice’s staff.
Enhanced Efficiency with EHR
If a practice uses electronic health records (EHR) software, the process becomes even smoother. Patient superbill details can be stored in the EHR and transferred securely to the billing provider through interoperability, eliminating the need to manually scan and send documents.
Outsourcing billing with partners like Taskesy lets practices streamline their workflows, improve efficiency, and save, allowing more focus on patient care.
Sample Comparison Of In-House vs. Outsourcing Medical Billing
Even if your clinic has the capacity to handle billing in-house, it’s worth comparing the costs of in-house billing versus outsourcing to see which option is more cost-effective. Here’s an example analysis to help you evaluate the costs and projected revenue for each approach.
Billing Department/Staff Costs
For in-house billing, the total cost amounts to $29,500, which includes salaries and benefits for five full-time equivalent (FTE) billing specialists, ongoing training, and ancillary office costs. In contrast, outsourcing billing services cost only $1,600 for managing information, calculated at two hours per week at a rate of $15 per hour.
Software and Hardware Costs
In-house software and hardware costs total $4,400, covering practice management software, data storage, and system upgrades. The outsourced model requires only $750 for the essential computer and printer needed to interact with the billing service.
Direct Claim Processing Costs
The in-house model incurs $1,200 in clearinghouse fees for claims processing. Conversely, outsourced services generate $2,400 in ongoing hardware costs associated with maintaining necessary technology.
Percentage of Billings Collected
The collection rate for in-house billing is 60% of gross billings, while outsourced services achieve a higher rate of 95%.
Collections
With gross billings of $500,000, in-house collections amount to $300,000, while the outsourced model collects $475,000.
Collection Costs
Total collection costs for the in-house model reach $37,500, whereas outsourced collection costs are $26,850.
Net Collections
Net collections are $262,500 for in-house and $448,150 for outsourced billing.
Choosing the Best Option for Your Practice
When deciding whether to outsource medical billing, independent practices should consider their budget and specific needs. In a hypothetical scenario, it was found that the outsourcing model resulted in higher net collections compared to the in-house approach.
However, cost should not be the sole consideration for medical practices when deciding whether to outsource. There are several other factors in this critical business decision that may be more important than costs for some practices.
FAQs
1. What are the benefits of outsourcing medical billing?
Outsourcing can streamline operations, improve collection rates, and reduce staff burdens, allowing healthcare providers to focus on patient care.
2. What costs are involved in in-house medical billing?
In-house billing costs include staff salaries, software and hardware, clearinghouse fees, and ongoing training, which can add up significantly.
3. How do collection rates compare?
Outsourced billing typically has higher collection rates (around 95%) compared to in-house (about 60%), leading to increased net collections.
4. What role does technology play?
Technology is essential for both in-house and outsourced billing. Outsourced providers often use advanced systems that enhance efficiency and accuracy.
5. Are there risks in outsourcing medical billing?
Yes, risks include data security concerns and potential loss of control over billing processes. Choosing a reputable billing partner like Taskesy is crucial to mitigate these risks.
