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In-House vs. Outsourced Medical Billing: Pros & Cons

These days, managing a medical practice is becoming very complex. More and more doctors and medical business owners are turning to medical billing as a financial solution. First of all, medical billing (also known as Revenue Cycle Management or RCM) is the most crucial part of running a medical practice, and also one of the most complicated. Second, medical business owners already have to keep up with new technology, government requirements, and financial assets – on top of caring for their many patients. Handling medical billing in-house can be extremely complex, overwhelming, and expensive. And third, learning how to properly bill and code for medical purposes is a complex skill many medical practices don’t have. Errors can lead to huge problems down the road!

Let’s discuss the differences between in-house and outsourced medical billing, so you can make a decision about which is right for your business.

In-House vs. Outsourced Medical Billing

There are several things to consider when deciding whether in-house or outsourced medical billing is right for your business. They include:

  • Age of your business
  • Size of your workforce
  • State of your practice’s finances

To set up an in-house medical billing system efficiently, the average medical practice needs to hire at least 1-2 properly trained medical billers and coders – per insurance provider. The practice also needs to make sure they can cover start-up expenses like payroll, purchasing the correct computer system and software, registration with a financial institution, storage equipment for record keeping, and billing/coding manuals. The practice also runs the risk of entrusting their entire revenue cycle to these employees. So they may want to invest money into the hiring process to assure it goes smoothly.

The medical practice also has the choice to outsource medical billing to a credentialed service provider. This is becoming an increasingly popular option. The medical billing industry is now booming with more expert medical billers and coders entering the workforce every year. When a practice partners with a medical billing company, they can be certain that they’re leaving revenue to the experts. Additionally, they can avoid costly start-up expenses, receive extremely prompt submissions of claims, avoid worrying about staffing, and remove stress from management across the board.

Pros and Cons

Depending on your medical practice, you may see the upside to choosing either in-house or outsourced medical billing. Let’s take a look at some of the commonly referenced pros and cons of each.

In-House Medical Billing

Pros:

  • Easier oversight over billing process

When medical billing is done in-house, you have direct control and oversight over financial processes.  You can simply walk down the hall to ask your staff questions and have them answered in real time. You can also have any billing changes implemented instantaneously. Monitoring your finances in person can lead to more accountability and transparency.

  • Utilize your own resources

Starting your own medical practice is no easy feat! Surely, it took a substantial investment to get it off the ground. Maybe you already have the means to handle billing in-house, and you’d rather use your own hard-earned resources. For example, if you’ve already spent a lot of money and time on medical billing software and training your staff, it may not be worth the money to make the switch.

  • Flexibility 

When you handle billing on your own, you (more or less) can make the rules. On the other hand, when working with a third-party you sign a contract and locked in by those rules. If you want to make changes to your billing system down the road, it’ll be much more complicated.

Cons:

  • Cost 

The expenses you’ll incur in your staff’s salary, benefits, software and training often exceed the cost to outsource. Take a look at the numbers once you map out the two possibilities. The size of your business is usually the biggest factor.

  • Liability 

Medical billers have the stress of handling tons of insurance and security protocols. Make sure your in-house staff truly understands the repercussions of HIPPA privacy and PHI security violations, as they can be a huge liabilities to you. You have to keep a close watch to make sure they aren’t ignoring encounter forms, discarding superbills, or failing to appeal claim denials due to a lack of time or knowledge.

  • Support Issues

If you hire many billers to your administrative team, you’ll have to invest a lot of financial resources in payroll. But if you hire just 1-2, you’ll be challenged with their “time off”. When one of your billers gets sick, goes on vacation, takes leave, or quits, your operations and cash flow will be stalled.

Outsourced Medical Billing

Pros:

  • Productivity

Many doctors running a medical practice simply don’t have the time to hire, train, and manage an administrative staff. They’re busy enough taking care of their patients and handling other operational tasks. At the same time, patients expect undivided attention from their doctor.

  • Accuracy & Compliance 

Medical billing providers are experts in the insurance field. When hiring independent medical billers to work in-house, you risk low claim success rates. This can be seriously threatening to your revenue and your business. Reports show that medical billing claims are incorrect 10% of the time and it can impact revenue by 11%. If you hire an expert medical billing provider who specializes in avoiding these issues, you can avoid these risks and rest assured that your finances will be handled professionally. It’s the full-time job of the medical biller to make sure your practice is following legal insurance protocols. Plus, outsourced medical billing providers have the means to focus all their time on mending any rejected claims quickly, so you get your money. 

  • Increase Revenue

It is fairly well-known that outsourcing medical billing can save medical practices money. In addition to the money you save on in-house start-up costs, you can also save money on administrative salaries and benefits, software, supplies, and equipment. Plus, medical billing service providers work on your behalf to maximize your revenue. They go to bat with insurance companies to make sure you get the best rate for your services.

Cons:

  • Less oversight

When handling medical billing processes off-premises, you’ll have less direct control over management and sometimes, less knowledge of how insurance claims are being handled. For instance, if you have a quick billing question, you will have to schedule a phone call rather than walk down the hall. Some doctors prefer to “pass the headache” to a well-trained third-party, but others may not.

  • Variable Cost

Medical billing companies usually get paid a small percentage of your practice’s total revenue (usually between 5-10%). So it can be difficult to budget your monthly expenses. During slow months, you will obviously pay less to the medical biller, but in busy months, you will pay more.

  • Communication to Patients

When your billing is handled by a third party, you won’t have immediate access to patient billing records. If one of your patients has an insurance or billing-related question, you may not have a specific answer right on hand.  To avoid patient frustration, you’ll want to set up a communication protocol with your service provider. That way, you’ll be covered if any patient issues were to come up.

5 Reasons to Outsource Medical Billing

As mentioned earlier, many medical practices are now outsourcing their medical billing needs. Why? The short answer: third-party medical billing companies are designed to maximize revenue for your medical practice. Think of them as your lawyer. They go to bat for you against the insurance company, fighting for every penny they can get you per claim.

They are experts at medical coding and will educate you on services that you may not even realize you should be claiming. There are definitely perks to having a loyal in-house medical billing staff. But especially if they’re also handling other administrative work, it’s unlikely that your staff has the time and effort required to successfully negotiate claims, code services appropriately, follow up on unpaid claims and stay current on changing medical codes and insurance requirements.

1. You will make more money. 

Most medical practices find that after switching to outsourced billing, their total revenue increased anywhere from 10% to 30% within the first year. This is because the medical biller knows how to utilize the medical coding system in a way that maximizes revenue for the healthcare practice. Additionally, when a claim is denied or goes unpaid, the company puts in the sweat required to make sure you get paid properly for the service you provide.

2. It will free up internal resources.

Many times, especially in smaller practices, a family member or friend is handling the medical billing. However, it takes a lot of time and constant training to stay ahead of the current medical coding requirements and changes within the industry. Take the burden off your staff and let them focus on other essential administrative tasks!

3. You don’t have to stress about it. 

When you outsource medical billing, you are passing off the complex responsibility to a trustworthy and knowledgeable source. You no longer have to handle questions or concerns about insurance claims. Plus, you no longer have to worry whether you are getting paid (at the best rate) for the services you provide! Medical billers are experts at insurance claims and manage complex finances for a living. You can rest assured your revenue is in being managed in good hands.

4. They are highly motivated to increase your revenue. 

As mentioned earlier, medical billers make their money based on a set percentage that the doctor gets paid for each service. The more money they can help you earn, the more money both of you will make. It’s a true partnership. On the other hand, an in-house biller is likely paid hourly or by salary. Realistically – they’ll be less motivated to get you the best rate. In fact, most of the time in-house billing claims are accepted at the insurance rate without an attempt to negotiate the price. This is usually because the staff doesn’t have the time or know-how to negotiate a better rate.

5. They are experts in their field. 

doicaMedical billers have been professionally trained to master all of the specific codes and services within your specialty. For example, say there’s a surgical procedure that can be handled financially in a couple of different ways. They will inform you of the fee structure for each so that you can decide which is the best option for your practice. Additionally, they are working with several different practices in your field. So they often find new ways to code services in order to get you the most money for that service. Many medical practices now consider these kinds of “work-arounds” necessary to take a more aggressive approach with insurance companies, as they deny more and more claims. You should get paid for the service you provide, just like everyone else. Let them be the experts so you can focus on what you do best: helping people.

The amount of money you can save by outsourcing your medical billing processes varies depending on your business. At 360Connect, we help medical practices find the best medical billing solution for their particular needs. Connect with us by answering a few questions, then we put you in touch with our top medical billing suppliers. Plus, we’re always a free, zero-obligation service!

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