The decision of whether or not to outsource medical coding and billing services is one of the most important considerations that a small or midsized medical practice will ever have to make. After all, poor revenue cycle management can cause even the best gynecology practices in the world to fail.
In the realm of coding and billing, the coder looks at the medical record and assigns diagnosis and procedure codes, while the biller assembles and submits the bill to a payer. Additionally, the biller follows up on claims that are rejected or only partially paid and also bills patients directly. These time-consuming and intricate functions require specialized education. Both can be either performed by employees of the practice or outsourced to companies specializing in these tasks.
Breaking Down the Cost of In-House Coding and Billing
When deciding whether to outsource coding and billing services, a practice needs to understand the costs involved in each scenario.
The costs of directly hiring coders and billers are overhead, including:
- Salary and benefits;
- Space;
- Office furnishings;
- Computer equipment and software (plus updates and upgrades);
- Initial training and retraining as federal compliance rules change;
- Employee absences for sick time and vacation; and
- Employee turnover.
While the first item on the list — salary and benefits — can be reduced by hiring part-time employees, the rest of the list is generally ironclad.
What Does It Cost to Outsource Medical Coding?
If a practice chooses to outsource medical coding instead of hiring in-house, it can expect to pay a flat fee per chart for coding services. The most expensive charges to code are operations, which tend to be around $15 to $18, but the charges for outpatient office visits and services are much lower. For billing, companies charge a percentage of what is collected — anywhere between 5 and 15 percent. Additionally, both types of businesses may offer a sliding fee that decreases as volume increases.
A cost analysis can help practitioners determine which option is right for them. Physicians News Digest published a hypothetical billing scenario around a three-physician practice, using common industrywide assumptions. In this scenario, the actual costs of billing were nearly identical because the overhead costs of direct hires were nearly equal to the fees paid for outsourcing. The major difference was that the percentage of collections was substantially greater in the outsourcing scenario, indicating that outsourced billing was the preferable option in this case.
Weighing the Pros and Cons
In the end, the goal is to turn patient visits and procedures into revenue. Sound and efficient billing practices create more satisfied patients who are less likely to become dissatisfied once they receive their bill.
If a practice chooses to hire for these positions, the physician or practice manager has direct access to the people doing these jobs. He or she can see the bills go out and the payments come in. Each patient also has direct access to the person who mailed her bill. However, if a biller takes a well-deserved vacation, the practice may not have another employee who can step in to fill the role temporarily. Absences and employee turnover can create billing backlogs, which lead to downturns in the revenue cycle.
If these functions are outsourced instead, the practice can rest assured that its billing will continue regardless of vacation time or employee turnover. An excellent billing or coding business will be also able to offer the medical practice feedback and advice on charting and documentation, which increases both claims paid and documentation compliance. Keep in mind, however, that even when outsourced, someone at the practice has to oversee the process of sending master bills to the billing company as well as receiving and reviewing reports. Efficient electronic medical records (EMRs), record management and image management systems that ensure seamless file transfer are integral to this process.
Coding and billing companies are hired on a contractual basis. If they do a good job, the practice typically renews the contract. If not, the practice is likely to hire a new coder or biller once the contract is expired.
If a medical practice has only used either in-house employees or outsourced help for billing and coding, it is difficult to know whether the other option would be more financially rewarding. Just like there are always good and not-so-good employees, coding and billing companies run the gamut in terms of quality. The key to making this decision is to be informed of the pros and cons of both options and to understand which makes the most financial sense for the practice.
