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With declining reimbursement rates and rising operating expenses, it’s no surprise the business of health care has become more complex. As a result, the practice administrator has less time to manage the myriad of practice needs. These include ongoing challenges with patient benefit plans, issues related to computer system technologies, the privacy of data stored on those systems and the multifaceted laws surrounding all aspects of human resource management. All of this leaves even less time to manage the critical billing and collections process.
Now, more than ever, it is important to have a sound operational revenue cycle process in place to combat the peaks and valleys and ensure that your billings and collections are maximized. At the same time, there are few operational aspects of managing a practice that are more critical and time-consuming. With all the intricate details associated with the revenue cycle process from both a financial and a clinical perspective, many practices are evaluating whether to keep billing in-house or to outsource this function along with collections.
Practices that choose to outsource are looking for strategic partners to help with many aspects related to the practice’s overall administrative revenue-cycle operations process and have found it much easier than hiring and training billing staff. Still, there are many administrators reluctant to outsource for various reasons, including loss of control, lack of trust and the lack of buy-in commitment to the practice. Some of the myths of outsourcing are discussed here.
Myth #1: Loss of Control
It is essential to find a vendor who approaches your practice as unique and individual. You should feel comfortable that they are an extension of your office. Outsourcing your billings and collections services does not automatically mean you have to give up all control. In fact, there is much more involved in the entire revenue-cycle process than just sending out claims and receiving the reimbursement from the insurance companies.
It is important to choose a vendor who understands this process from the initial managed-care contracting phase to the final accounting and reporting phase. Seek out vendors whose scope of services includes many of the aspects related to this process and who will let you pick and choose the services that work best for you. The vendors you consider should pick up enough information about your practice during the interview stage that potential problems and possible solutions are identified early on.
In addition, prospective vendors must be prepared to work with you to review all aspects of the revenue-cycle process. They should offer various options for receiving the charges from your practice, including direct charge entry from your location, scanning options, faxing options, FTP uploads and possibly a courier to shuttle superbills from your location to vendors.
There are two important aspects to charge entry to be aware of when looking at outsourcing your billing and collections. First of all, there should be adequate checks and balances in place between the practice and vendor to assure that all charges or superbills are being entered in a timely fashion. A typical benchmark for this would be a guaranteed entry rate of 48 hours. The other important aspect is a confirmation of charge entry against some service/procedure log. The practice needs to be assured that all the charges are entered so there are no missed charges that become lost money to the practice. A third-party vendor should make sure there is a good audit system in place.
Outsourcing this part of operations to an outside vendor should allow for in-house staff to schedule patients, control the demographics and manage patient co-pays and payments, while the third-party company manages more of the traditional “back-end” operations associated with billing and collections. By doing this, your practice can take advantage of all the functions associated with the “front-end,” but leave the tedious and time-consuming claims processing, payment posting, appeals, denial work and account-receivable tracking process to the third-party vendor.
You should expect that the more information you share with your vendor, the greater the likelihood your operations can be adequately diagnosed and solutions recommended.
Select a vendor who recognizes that information — not just data — is powerful. Most vendors will give you the standard reports, which are easily downloaded from the billing system they are using. However, the selected vendor should also work with you to develop reports that benchmark your practice against historic data and recognized national benchmarking indices, such as the Academy or Medical Group Management Association (MGMA) productivity benchmarks. These reports are unique to your practice and would be able to show you very specific information about the performance of your practice.
The vendor should also help you analyze your data and give you feedback about its meaning. This data, once analyzed and broken down into usable information, becomes a dominant tool for you to use when negotiating with payers, assessing the financial performance of the practice and conducting vital strategic planning and analysis.
Myth #2: Lack of Trust
Just as there doesn’t have to be an automatic loss of control, an administrator who is choosing a third-party vendor needs to have a level of trust with the selected strategic partner vendor. This trust is earned by investigating three areas: the compliance program, the quality program and the vendor’s demonstrated philosophy of customer service and patient relationships.
Certainly one of the driving forces in billing and compliance today is the Health Insurance Portability and Accountability Act (HIPAA). In order to ease your mind that the information shared between the practice and the third-party vendor has appropriate safeguards, the administrator must insist on a review of the internal compliance program.
Not only should there be safeguards like locked cabinets, shredding bins, firewalls and back-up procedures, but a review of the written standards of conduct should be included in the compliance program. This review should include policies and procedures specific to all aspects of the billing and collections process.
An administrator who is looking to establish a strategic partnership should also insist on a review of the vendor’s quality program. Some literature has shown that 80 percent of all providers are victims of employee embezzlement at some point in their practice life span.1 It has also been shown that there is a potential loss per provider of approximately $30,000 per year due to poor follow-through in the entire revenue-cycle process.2
In order to maximize practice revenue, there should be generally accepted payment-posting processes that check payments against the contractual fee schedules, audit processes and appeal processes. The vendor should also offer the ability to have outside accounting firms perform an independent financial audit if the practice so chooses.
Building patient loyalty is a basic way of doing business now more than ever. Providing excellent levels of patient service is a continual challenge, requiring that every communication or transaction between the practice, patient and vendor is handled seamlessly.
As a strategic partner, a third-party vendor should have the same philosophy of and approach to patient service as the practice itself. There should be established guidelines for how communications with the vendor will be handled between the practice administrator, staff and providers, as well as how the vendor will treat and communicate with the practice’s patients. A vendor must be willing to be flexible and should have its own internal tools and ongoing training in regard to both practice and patient service.
Something as simple as demanding a 24-hour response to e-mails and phone calls received from the practice or providing a toll-free number for patients to call could help demonstrate this trust.
Myth #3: No Buy-In Commitment
An efficient submission of claims is no longer the satisfactory solution to the practice’s billing and collections process. The third-party vendor who is committed to working with the practice to ensure the success of the entire revenue-cycle process will look at this affiliation not as another cog in the cash-flow wheel, but as a win-win strategic partnership for all parties. The scope of services that a third-party vendor can offer, the ability to tailor services to your practice’s unique needs and the lack of resistance to change their process to fit your needs is telling of the vendor’s commitment to your practice.
Some vendors will offer to complete an overview analysis of the performance of your current billing and collections process prior to making a formal decision on outsourcing. This analysis will help you determine if outsourcing makes sense for the practice. There are two driving factors a practice should consider when trying to determine if outsourcing is the right choice: cost and performance. If you have:
- Low performance and low cost, think about outsourcing.
- Low performance and high cost, definitely change.
- High performance and low cost, don’t change.
- High performance and high cost, think about outsourcing.
The problem of assessing your process becomes two-fold. First, many practices don’t know how the performance of their current billing and collections process is doing, much less how this process compares with national benchmarks. And, second, what does it actually cost to provide a complete internal billing and collections process?
A third-party vendor should be able to perform a basic assessment of your billing collections performance comparing your practice to industry benchmarks. This should include:
- Comparisons of accounts receivable by days (practice to benchmark).
- Overall days in accounts receivable (practice to benchmark).
- Percent of accounts receivable more than 90 days old (practice to benchmark).
- Gross collection rates and comparisons to benchmarks.
- Adjusted fee-for-service collections rates (against benchmarks).
- FTE benchmarks for billing and collections process.
- Analysis and recommendations to the findings.
After the determination that a third-party vendor is needed, a vendor should be chosen who offers many services and choices to the practice administrator, and has partnerships with many other companies involved with the revenue-cycle process. This must include clearinghouses that submit electronic claims, other collection agencies that they work with closely, information technology advisors and financial services programs provided by bank and credit companies.
There are many ways to locate a third-party billing and collections company. Some of the best ways are to review your national association’s publications, like AAOE’s Consultant Directory. Another way is to ask for recommendations from peers via E-Talk chat sessions or at regional and national conferences.
There are many questions you may want to ask prospective vendors. This list is intended only as a guideline of questions to ask. You may want to add to it to define more appropriate questions.
- How long have you been in the billing and collections business?
- What information system do you use?
- Would you be willing to demonstrate the billing and collections system?
- Will the practice be able to access the practice management system at the practice site?
- What are the specialty types of clients you bill for? Do they include ophthalmology practices?
- How does communication between the practice and the billing service occur?
- How many clients do you currently support?
- What are your billing-compliance policies and procedures?
- Are your employees certified or credentialed?
- Do you conduct background checks on new and current employees?
- How do you measure employee productivity?
- Do you have ongoing training for your employees?
- Do you have a customer-service process or guidelines you can share?
- Do you perform quality-assurance reviews of your employees’ work?
- Do you provide management reports on a monthly basis? What are they?
- Can you produce individualized, unique reports?
- Do you follow standard industry-recognized benchmark performance criteria?
- What is your procedure for deposits? Lock boxes? P.O. box?
- How often do you submit claims to insurance companies?
- How often do you send patient statements?
- How are denied claims posted, tracked and resolved?
- Are payments posted as single line items?
- How are credit balances and refunds handled?
- Is there a policy and procedure in place for bad debt or small balance write-offs?
- How are bad-debt collections handled?
- Do you have a HIPAA-compliant record retention and storage policy?
- Do you provide electronic imaging?
- Do you have a disaster-recovery policy?
- How do you charge for your services? Percent of gross collections? Per claim? Other?
- Are there costs associated with startup? Adding new providers?
- Is there a conversion process and schedule?
- How is accounts receivable handled from a previous billing company or in-house billing process?
- Who has ownership of the data if the contract is terminated?
- Can you provide a list of current and past client references?
- What other services besides billing and collections do you offer? Practice management? Consulting? Bookkeeping? Credentialing?
Third-party vendors should offer a list of clients for you to contact so you can compare references. You want to make sure the vendor has the ability to service your particular practice. Ophthalmology practices have unique sets of coding rules and requirements when submitting claims, so it is important to make sure the third-party vendor understands these issues.
As the practice administrator, you should ask these clients about the quality of service and ask them to cite a process or problem stemming from the vendor and to describe how specific actions or improvements were made. The response from those clients will indicate the ability of the vendor to react to unique situations related to your practice.
There are as many ways to price the services of a third-party billing vendor as there are vendors. Some vendors will charge a flat rate per claim submitted. Most typically you find that third-party vendors price their services according to a percentage of gross revenue from the practice. In addition to the percentage, they may add pricing for additional services, including per-claim pricing for electronic claim submission and pricing for patient statements.
Another key to vendor selection should be the ability and willingness to offer quality metrics and accessibility of the data for the practice at any time. There should be a feeling that there is a seamless transparency between the practice and the vendor for every detail of the revenue cycle process.
The truth is outsourcing your billing and collections to a third-party vendor does not have to leave you with the fear there is loss of control, lack of trust and a lack of buy-in commitment. It has been reported that 17 percent of medical practices currently outsource their billings.3 With all the specialization involved in submitting claims through electronic modes, and understanding bundling and coding and the intensive follow-up time involved working denials and appeals, it is assumed this percentage will climb rapidly in the near future.
If you decide to outsource, choose a vendor who has the scope of services you are looking for, can help with your information and reporting requirements, is flexible in how they approach the unique needs of your practice and really wants to create a strategic partnership to help your practice maximize the reimbursement and revenue cycle management process.
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About the author: Marcia L. White is president and CEO of Essential Healthcare Solutions. The article was adapted from the November/December 2008 issue of Executive Update.
1Southern Medical Association, January 2003.
2Physicians Practice Digest, “Billing and Collections: Mine Your A/R Reports.”
3Medical Group Management Association, “Performance and Practices of Successful Medical Groups.”