Choosing the right approach to medical billing and coding is a critical decision for healthcare providers in the US, as it significantly affects both their financial performance and patient care. This decision typically revolves around two main choices: managing billing internally or outsourcing it to a specialized medical billing company.
Both options present distinct benefits, drawbacks, and challenges. This article provides a comprehensive guide to help all independent medical practitioners in the US, small clinic owners, private practices, hospital managers, specialties healthcare and wellness centers determine which approach is best suited for their practice.
By exploring the advantages and disadvantages of in-house billing versus outsourced billing services, we aim to offer valuable insights into the full scope of medical billing and collections solutions. This guide will help healthcare professionals align their billing processes with their practice’s unique needs and long-term objectives.
Outsourced Medical Billing vs In-house Medical Billing Pros and Cons
In this comprehensive guide, we will walk you through the benefits, opportunities and challenges of both approaches as you may contemplate on whether to hire an onsite medical billing experts team or just entrust an outsourced billing and coding company to handle the entire revenue collection process on behalf of the client’s practice.
What is meant by outsourced medical billing?
In contrast, outsourced medical billing transfers the responsibility to a third-party partner, typically a specialized medical billing company. These companies are experienced in providing a wide range of services, including claim submission, coding, follow-up on unpaid claims, and handling patient billing inquiries.
Choosing this option enables healthcare providers to focus primarily on patient care, while the complex and time-consuming tasks of medical billing are managed by skilled professionals with expertise in the field
What is meant by in-house medical billing?
In-house medical billing, also known as onsite medical billing, is when healthcare providers manage their billing operations internally within their organization. This approach requires assembling a dedicated team of billing specialists responsible for handling all aspects of medical billing, coding, and collections.
To efficiently manage in-house billing, providers must invest in specialized medical billing software and build a robust infrastructure. Additionally, it is essential to ensure that their staff is thoroughly trained to navigate the complexities of the billing process. While in-house billing provides direct control over the process, it also requires significant resources and ongoing commitment to maintain efficiency and compliance.
Advantages of In-House Medical Billing
In-house medical billing management offers advantages that are:
- Greater Control and Oversight
Managing medical billing internally gives healthcare providers direct control over the process. This enables faster responses to billing issues and a more personalized approach to patient accounts, fostering stronger provider-patient relationships.
- Onsite Team for Direct Communication
With an in-house billing team, communication is immediate and direct. The team is readily available during office hours to handle billing questions and address issues as they arise.
- Stronger Patient Relationships
In-house billing teams often have a deeper understanding of patient histories, which helps create a more personalized and compassionate billing experience. This can lead to improved patient satisfaction and stronger patient-provider relationships.
Challenges of In-House Medical Billing
While there are clear benefits, in-house billing can come with significant challenges:
- Resource-Intensive: Managing billing internally requires a substantial investment in staff, training, and technology, which can strain smaller practices.
- Scalability Issues: As the practice grows, managing billing in-house can become more complex, requiring additional resources to maintain efficiency.
Advantages of Outsourced Medical Billing
- Cost Savings
Outsourcing medical billing often leads to cost reductions as external providers can offer lower prices starting from just 4% of the monthly revenue collected. This allows healthcare organizations to save on staffing, training, and software expenses.
- Improved Efficiency
Outsourcing allows healthcare providers to focus on their core competencies, such as patient care, while leaving billing, coding, and other administrative tasks to specialists. This helps streamline operations and improve overall efficiency.
- Flexibility and Scalability
Outsourced medical billing companies provide flexibility, allowing healthcare providers to easily scale up or down based on demand. This is particularly useful for practices experiencing growth or seasonal changes in patient volume.
- Access to Specialized Expertise
Outsourcing gives healthcare organizations access to specialized billing and coding expertise that they might not have in-house. This is especially valuable when new technologies or complex billing scenarios arise.
- Encourages Innovation
By partnering with external providers, healthcare organizations can tap into new technologies and innovative processes that improve billing and overall operations. Outsourcing can introduce new ideas and efficiencies that enhance the practice’s performance.
How does outsourced medical billing work?
When an independent practitioner, clinic, or hospital decides to outsource either the entire end-to-end Revenue Cycle Management (RCM) or specific parts of the billing process—such as coding, follow-ups, or denial management—they follow a structured approach.
Before committing to outsourcing, healthcare providers typically research and evaluate potential medical billing companies. They assess the company’s reputation, services offered, and whether it fits within their budget. Once they’ve shortlisted a suitable company, a detailed meeting is held between both parties to discuss the specific services, pricing, and terms.
If both sides agree on the terms and conditions, the outsourcing process officially begins. The medical billing company then takes over the agreed-upon tasks, allowing the healthcare provider to focus on patient care while the external team handles billing and collections efficiently.
What percentage do most medical billing companies charge?
When outsourcing medical billing, most companies typically charge a percentage of the total monthly revenue collected. This fee usually ranges from 4% to 10%, depending on the scope of services provided.
Let’s break down the hypothetical math based on John’s monthly revenue collection of $30,000 USD and his outsourced billing company charging 5%.
- John’s monthly revenue: $30,000 USD
- Billing company charge: 5% of the total monthly revenue.
| Percentage Charged | Calculation | Billing Company Charge |
|---|---|---|
| 4% | $30,000 × 4% = $30,000 × 0.04 | $1,200 |
| 5% | $30,000 × 5% = $30,000 × 0.05 | $1,500 |
| 6% | $30,000 × 6% = $30,000 × 0.06 | $1,800 |
| 7% | $30,000 × 7% = $30,000 × 0.07 | $2,100 |
| 8% | $30,000 × 8% = $30,000 × 0.08 | $2,400 |
| 9% | $30,000 × 9% = $30,000 × 0.09 | $2,700 |
| 10% | $30,000 × 10% = $30,000 × 0.10 | $3,000 |
So, the billing company would charge $1,500 USD for handling John’s medical billing for that month.
Certain medical billing and coding companies that offer additional features like client portals, billing software, coding tools, and IT support tend to charge on the higher end of the spectrum. In contrast, billing companies that provide more basic services may charge a lower percentage.
In a nutshell, the outsourcing charges of billing companies depend on various factors, like the size of the practice, the overall patient base and the number of providers practicing at a healthcare facility, hospital or clinics.
What are the potential risks of outsourcing in healthcare?
Outsourcing healthcare services can offer several benefits, but it also comes with potential risks that organizations should carefully consider:
- Loss of Control Over Quality and Standards
Outsourcing may result in reduced oversight over the quality and standards of services, as external providers are responsible for delivering those services. This can be particularly concerning in patient care, where the quality directly impacts patient outcomes. - Confidentiality and Data Security Concerns
Relying on third-party providers to handle sensitive medical information raises concerns about data security and confidentiality. Electronic medical records and other digital data can be vulnerable to cyber threats or breaches, making this a critical consideration. - Coordination Challenges
Outsourcing to multiple providers, especially across different locations, can complicate care coordination. This lack of seamless integration can make it harder to ensure patients receive consistent and well-coordinated care. - Loss of Institutional Knowledge and Expertise
By outsourcing certain services, organization’s risk losing in-house knowledge and expertise. Over time, this can make it more difficult to maintain specialized skills and adapt to changes in the market or industry. - Challenges in Managing and Monitoring Performance
Managing and monitoring the performance of external providers can be challenging, especially when working with multiple providers or those in different regions. This may lead to difficulty in ensuring that outsourced services meet the organization’s standards and expectations.
