Outsource Medical Billing Services- Should A Physician Outsource
By David Duncan, Sat Dec 10th

Should a physician outsource medical services?

This is a very difficult decision for any physician andpartially boils down to this or her own personal ideology andcomfort level. Hospital-based physicians will almost always bebetter off outsourcing because of the office related expensesthat they would not otherwise incur. As the owner of medicalbilling service you may think I'm naturally biased towardsoutsourcing. I can assure you that this is not the case.Physicians who are overly controlling, uncomfortable ormis-trusting toward services are nearly impossible toadminister. I don't want anything to do with those types ofphysicians but I completely respect and understand their pointof view. Setting all ideology aside I would like to delve intothe pros and cons of this difficult and complicated decision.

1. I am a physician who is very interested in the businessaspect of medicine and I do not mind spending my valuable timemanaging the medical aspect of my practice.

Clearly, the best way to do your is to do it personally.Obviously, doing it yourself is probably not an option but ifyou're willing to spend the time and have the interest I wouldrecommend that you do your own billing. Keep in mind that mostbilling service owners and certainly our employees have limitedmedical backgrounds. Physicians who study CPT, regularly attendbilling seminars and keep up to date on industry changes are theultimate medical gurus in my view.

2. I am a physician who has absolutely no time or interest inthe medical aspect of my practice. I am completelyreliant upon my office manager and staff.

Unfortunately, most physicians are in this position. Even ifthey were interested in keeping up with all the changes andelements of medical the practical reality is that thereis absolutely no time. Let's face it; time is your most valuableasset. It's sort of like mowing your own lawn. You'd be waybetter off financially seeing patients for three hours onSaturday morning. I believe the following information willdramatically help with your decision to outsource your billingor continue to do it yourself and with future decisions in theever-changing business aspect of medicine.

The pros and cons of outsourcing your medical services.

I would like to preface this article with a couple of obviousbut important points. If you have a system of controls, keep anopen mind about the competence of your office manager, you'vegot an excellent computer system, proper information systems andyour office is doing a superb job at collecting your money, thenby all means do not make any changes. Conversely if you'replanning to outsource your make sure you hire qualityfirm. I'll spend some time at the end of this article discussingthis further.

Most leading experts agree that it costs about 4.5% of netcollections to perform the function within a physician'soffice. Incidentally, this is close to my actual cost as well.

Theoretically, a service should be able collect moremoney than a physician's office because it is our corecompetency. The question is how much more? This is why I focuson how to choose a service at the end of this article.

The numbers

A. Lets just do the math in a theoretical model.

We'll base our numbers on a practice whose total grossreceivables are $100,000 per month. Obviously, this is an overlysimplistic model designed to quantify the aggregate cost and oropportunity cost of the medical component only.

Current Aggregate Expenses

In-house expense

Total gross revenue $100,000

Current expense $4,500

(4.5%) ---------------

Net Revenue $95,500

Outsourced Expense

Total gross revenue $100.000

Current service exp. $7,000

(7.0% net collections) ---------------

Net Revenue $93,000

Net cost increase with outsourcing = $2,500.00

As you can see in this," all things being equal" theoreticalmodel your practice would incur a $2,500 decrease in net revenuewith the implementation of a outsource strategy. Keep inmind that this model does not address other less tangible issuessuch as your reduced payroll, computer expenses, ect. In realitythe net cost could be substantially less than $2,500. Manyphysicians will perceive this as a small price to pay whileothers will consider it to be cost prohibitive.

5% theoretical increase in gross revenue with outsourced billing

Total gross revenue $105,000 (5% increase)

Billing service expense $7,350

(7% net collections) ----------------

Net revenue $97,650

$95,500 - $97,650 = $2,150.00 increase in net revenue.

As you can see from this model with a 5% increase in collectionsyour net revenue will increase $2,150.00 with the added expenseof the service. Keep in mind that a 5% increase in grosscollections is actually quite conservative and should easily beobtainable by quality service.

Intangibles

B. A service should be able to provide you with asubstantial reduction in your day-to-day aggravations such aspractice management software issues, fewer employees, hassle ofhiring competent employees, less health insurance, lesstraining, ECT..ect. Conversely you will however lose somecontrol over your practice. If the service does notcollect more money your expenses will increase. It's up to youto determine whether or not the increased expense is offset bydecreased aggravation.

security

C. A service should be able to increase your securitylevels by creating a system of checks and balances. As a formerpolice officer I can assure you that crime statistics indicatemost embezzlement/fraud/theft occurs from within. During aninvestigation a store manager for Sears and Roebuck Co. oncetold me," our customers take it out piecemeal but our employeestake it out in wheel barrels" This logic also applies to adoctor's office. A service can provide an extra layer ofprotection because there is a system of independent checks andbalances. Typically services are fairly large businesseswith strict internal controls. My organization Medi-Bill Inc.Operates internally similar to a banking institution with theway we handle funds. It is highly unlikely that the ownership ofa reputable medical firm would risk the consequences ofcommitting fraud against a client.

Conversely, the issue once again boils down to control. Manyphysicians are understandably quite unsettled at having theirchecks and correspondence mailed directly to the billingservice. Further compounding this dilemma is," what will happento the checks and correspondence after the serviceagreement is terminated?"(Again, we will discuss alternatives tothis at the end of the article)

Technology

D. State-of-the-art practice management software is an extremelyexpensive investment. If you've already invested in a highquality computer system I do not believe outsourcing yourbilling would make much sense financially unless your computervendor is charging outrageous support fees. If you'reconsidering purchasing a computer system or a medical recordmanagement system my favorite vendor who we've been working withfor over 15 years is Office Management Solutions (OMS) based inTampa Florida. The owner's name is John Peake and he is by farthe most honest and reputable computer vendor I have ever workedwith. OMS can be reached at 813-963-5582 or www.oms-online.com.

If you need to update your system, purchase a new system or yoursupport fees are getting out of hand this may be an opportunetime to consider outsourcing your medical services.

.

· Is your overall collection rate declining?

· Is your accounts receivable too high?

· Are you experiencing an increased number of denied claims?

· Is your overall frustration level regarding yourbilling/business office very high?

· Are you facing a major capital investment in new hardware orsoftware?

· Are your computer support fees to high?

· Are you having a difficult time keeping or hiring experiencedbilling staff?

· Are you spending too much time on the business aspect ofmedicine?

· Are you concerned that your staff or office manager hasknowledge of your income?

· Are you completely reliant upon your office manager?

· Are you planning to expand your practice?

· Do you believe that your practices cost structure is too high?

· Do you have several employees performing tasks that could behandled by a single more experienced manager?

· Is your computer system obsolete?

· Are hardware, software, and information technology disruptingthe operation of your practice?

If you have any questions or comments regarding this articleplease do not hesitate to contact me at david@usemedibill.com.

This article was written by David Duncan, president and founderof Medi-Bill Inc.

www.usemedibill.com

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