Whether you’re outsourcing your billing or keeping it in-house, there’ is always a nagging question whether you’re spending too much on getting paid. While it’s impossible to equivocally state what’s best for every practice, there is some basic cost analysis you can compare to see how your practice’s billing expenses compare and whether you’re paying too much for your collections or worse yet, leaving too much-uncollected revenue on the table.
How much does medical billing actually cost?
A couple of years ago, Physicians News Digest ran a sample analysis for a small three-provider primary care practice comparing expenses of in house billing versus outsourcing. The results may or may not surprise you.
First, a couple of details. The following analysis assumes that this hypothetical practice handles about 80 claims per day at an average of $125 each, for annual totals of roughly 20,000 claims for about $2,500,000 in gross billing. Here’s the cost breakdown:
| Costs |
In-house (Annual) |
Outsourced (Avg 5% of net collection) |
| Employee Costs | $104,000 (2 employees with salary of $40k per year each plus 30% in taxes and benefits) | – |
| Technology Cost (EHR, PM, Hardware and maintenance) | $8,500 ($200/doctor/month plus $500 for hardware. Note: This does NOT include upfront costs for new software installation/purchase) | $500 (assumes you will still need a printer and workstation to interact with billing service) |
| Training | $5,500 | $1,000 |
| Patient Billing Support | Extra Manpower (Read $$) | Included |
| Annual Collections | $1,625,000 | $1,750,000 |
| Net Collections after costs | $1,507,000 | $1,661,000 |
| Cost (In %) | 8% | 5% |
Above data suggests that picking up an extra $154,000 per year using a billing service is a no-brainer, and for many practices, that’s the case. The coding and billing process has grown exponentially more complicated in the past couple of years with radical changes ranging from pay for performance incentives, ICD-10, Meaningful Use and all the other regulations that surfaced as a result of the health care reform act.
How do I know if it makes financial sense to switch from in house to outsourced?
If you’ve got an experienced billing staff that’s outperforming in-house averages and your EHR is tightly integrated with your billing system, you may be doing OK keeping your billing in the office, especially if you’ve recently invested in a comprehensive revenue cycle management system. At the same time, it’s hard to ignore that extra $250,000 you could be putting in the bank.
If any of the following applies to your practice, you may be paying too much for in-house billing and outsourcing makes better sense:
- Your billing collection is at or below specialty average, or your collections are static even when your productivity increases and billings go up.
- You have turnover problems in your billing department. Experienced billers and coders are key to collections.
- You’re just starting a new practice. Outsourcing your billing cuts your upfront costs and simplifies the business side so you can focus on growth.
- Your IT department is nonexistent. There’s no avoiding the IT complications that come from keeping your billing hardware and software in house and without adequate support, you can spend a fortune in lost time, upgrades, and repairs to your equipment and software.
Are you wondering if your in-house medical billing is costing too much or leaving too much potential revenue uncollected? Contact the billing professionals at M-Scribe today for a free consultation. We offer billing solutions as low as 3% of collections, adding even more money to
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