Wednesday, April 29, 2009

How to Properly Outsource Your Medical Billing

By Carl Mays II

One of the key advantages of billing outsourcing, when it is done correctly, is the clear alignment of incentives between the practice and the billing company.

Almost all medical billing companies are paid a percentage of what they collect. This means they are only paid when you are paid. It also means the more they collect for your practice, the more they are paid. Internal medical billers, on the other hand, are almost always hourly employees. They are paid based on showing up in your office, not based upon how well they perform your medical billing or how much money they collect for your practice. This is not an alignment of incentives.

This issue, however, is often not fully understood or appreciated by many providers. These providers frequently say: "the staff works directly for me in my office-- they are more loyal and will do a better job and I can see what they are doing". Experience has shown, however, that this is often not true.

In a conversation I had recently with a busy cardiologist I heard a story that is not unusual. One of the office's medical billers called in sick. Some information was needed while she was out so the office manager went looking through her desk. She did not find the information she needed, but she did find over $40,000 worth of claims that had not been billed and had gone beyond the timely filing deadline. That is right, $40,000 worth of claims that could not be billed and for which no money would ever be realized. Upon the billers return she was "sternly reprimanded for this egregious error. Not fired, but reprimanded for costing the practices tens of thousands of dollars. There is no alignment of incentives present in a situation like this.

This reaction is surprisingly common. Typically practices have so much trouble recruiting, training and retaining billing staff they are reticent to let one go. In addition, the billing staff complains about how understaffed they are and how they cannot be held responsible for not being able to complete even basic medical billing tasks. In this office's case they moved the biller to the front desk and had her in charge of collecting patient demographics. A place where she can do even more harm through poor performance.

I also asked how it was possible that the billing supervisor missed that $40,000. Did they not reconcile charges and payments and track charges, payments and write-offs? To this the doctor replied that "their system did not provide this level of reporting and no such reports were ever given to him". Since, the practice was using a new release of a major billing software, I know this system has such capabilities - it is just that either (1) no one knows how to use the system-that's bad or (2) they just don't want to bother-that's' worse! Just imagine how much money is probably lost at this practice annually.

If you select the correct billing company you can avoid nightmare situations like this. Here are some of the key elements you should seek when looking for a medical billing company:

- A fully integrated tracking system (charges by locations/provider and payments by source - lock box, office, PO Box) should be in place and you should have full visibility into the system at all times.

- Any claims that are denied for timely filing should be the responsibility of the billing company. In other words, they should make the practice whole if they fail to file your claims. This is not a demand you can make of in-house billers (it is not even legal to make it).

- You should have access to the billing system so that you can see real time status of your account.

As physicians struggle with stagnant (at best) reimbursements and escalating costs, it is critical that they make the best possible decision in regards to their medical billing. Selecting a solution that structurally minimizes the risk of poor medical billing is critical.

Without properly aligning the incentives (both upside and downside consequences) of in-house medical billers, you can rest assured that history will likely repeat itself and the biller that lost $40,000 in charges is unlikely to excel at demographic collections.

Selecting a world-class medical billing service that provides total visibility into their process and has incentives that are fully aligned with those of the practice is the most reliable road to outstanding medical billing and financial excellence.

Copyright 2008 by Carl Mays II

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