Medical Billing: Partnering for Success

Written by on September 29, 2017 in Features - No comments

If you have a private practice chances are high that you’ve at least considered outsourcing your revenue cycle management functions at some point in time.  You’ve likely asked yourself questions like; Would it make my practice more profitable? Would it make life easier?  Would it free up my time to do the things that I really want to do? Yes. Yes. Yes. In the end, the question becomes do you want to treat patients or deal with insurance companies?  Is there really a choice to be made?

In the past 10 years the “administrative simplification” of HIPAA has made the medical billing process extremely difficult and more so for the majority of small medical practices. Yet even as cumbersome as medical coding and billing has become, we aren’t at the end of the tunnel yet.  The average time and resources to process a claim throughout the full revenue cycle can be surprising.  The 2013 American Health Association (AMA) National Health Insurer Report Card (NHIRC) reported that, for Medicare alone, 46.8% of claim lines were the source of a disclosed claim edit (or processing “rule”) applied due to CPT, NCCI, CMS Publication 100-04, ASA Relative Value Guide or payer-specific edits.  Medicare’s payer-specific edits alone numbered 3,009,536.  That’s a lot of edits to keep up with.  Additionally, the 2013 NHIRC says that 2.0% of Medicare claim lines had an undisclosed claim edit applied which resulted in zero payment for the lines.  Essentially physicians are now required to be technologically knowledgeable, meticulous, AND psychic.  And this is ONLY Medicare.  There are 7 other commercial carriers which make up the NHIRC that have their own payer-specific edits, estimated around 780,000 if you’re keeping count.

A qualified third party billing company typically embodies the efficiency, productivity, technical and operating skills through technology and staff to master the “rules” that carriers utilize when adjudicating claims.  Certified and expert staff, continuous education, compliance and active involvement in the billing industry will set apart a qualified third party billing company.

If these aren’t reasons enough to outsource your billing, there are many others that a practice might consider worthy in deciding to work with a third party billing company to enhance their revenue cycle management:


❏     Increase Collections
❏     Reduce Labor Costs
❏     Reduce Overhead & Technology Costs
❏     Complexity of Coding & Billing
❏     Increased Patient Confusion & Financial Responsibility
❏     Control Billing Costs
❏     Compliance/HIPAA
❏     Optimize Coding
❏     Access Technology
❏     Billing Expertise
❏     Patient Satisfaction

While this list might seem exhaustive, I promise you it is not, and each of these bullet points could be expanded.  Ultimately, there are many personal and business reasons why a practice might choose to outsource and you have to determine what those reasons are for you.

Ask Questions

If you do choose to investigate third party billing companies, there are more questions to consider than just “How much does it cost?”

❏     What does the price include? ie. A/R Follow Up, Denials, Appeals, Postage, Coding Review, etc.
❏     What certifications does the company/employees hold?
❏     What trade associations are they active with? ie. HBMA, AAPC, EDPMA, etc.
❏     Do they support your medical society or specialty association? ie. AAFP, AAP, ACEP, etc.
❏     Is the company experienced in your specialty/state?
❏     Do they have a compliance plan?
❏     Will you have a dedicated team?
❏     Will they bill off of your practice management system or theirs?
❏     Do they carry Errors & Omissions (E&O) Insurance? Cyber Insurance?
❏     How do they keep their/your employees up to date on industry changes?
❏     What’s their philosophy on patient balances and helping patients who call? Does that philosophy mesh with yours?
❏     Do they have references?

Sure, this article is about billing, but most billing companies also offer consulting, bookkeeping, payroll, coding and auditing, provider enrollment, training, human resource management, ICD10 implementation.  How hard is it to find one or two employees that encompass that wealth of knowledge?  And how much would it cost you to pay them a salary and benefits vs. using the services only as you needed them?

I realize that everyone hates the dreaded sales pitch and I encourage you to speak with a representative, not necessarily the salesman, of the billing company.  The manner in which that conversation flows, as well as resulting follow up and follow through, could be a major indicator of what you can expect if they are your chosen billing company.


In order to price appropriately, expect that a reputable third party billing company is going to have questions for you.  There are some companies that charge a flat percentage of collections regardless of EMR, location, form of documentation, specialty, volume, financial mix, historical charge and collection data, etc.  There is no way to know the true cost of processing a claim without having some knowledge of these variables.  Depending upon speciality and volume, some companies may require a feasibility study in the form of a chart audit.  If a company is offering you a very low, flat fee without asking questions, some things could be at play.  One option is that some practices are subsidizing the true claim processing cost of their peers.  For example, the average collected amount on a Plastic Surgery claim is going to be much higher than that of a Family Practice claim, yet in a flat-fee scenario they are both paying 4%.  Who is paying the brunt of the cost?  Is there that much work involved with a Plastic Surgery case that it necessitates that they pay a substantially higher fee? The other option is that perhaps FULL revenue cycle management is not included as part of the price.  ie. working denials, appeals, etc. or maybe there are other fees that are added on such as postage or clearinghouse fees.

To further illustrate. please review the table below showing example collection amounts.

Company 1

Company 2

Billing Fee



Monthly Collections $50,000 $45,000
Billing Fee $3,500 $2,700
Net Cash Flow $46,500 $42,300


At first glance it might seem like the best choice is the lowest percentage.  However, consider that you might not be comparing apples to apples. The difference between a full-service and a a bargain-bin billing company can be astonishing. Disparities in technology, employee knowledge, process efficiencies, etc. could lead to huge differences in the total amount collected. Choosing the cheaper option could result in lower collections and a resulting decreased net cash flow.  Sometimes paying more for more is better than paying less for less!

Regardless of the direction you decide to take, do your due diligence. Make it a point to ask the right questions and to take the time to analyze the answers that you receive. Hard work and patience in the selection process can pay huge dividends in long run, both in the profit of your practice and the relationship with the billing company that you select.


It cannot be stressed enough that your relationship with a third party billing company should be PARTNERSHIP.  A partnership that must be built on trust, transparency, ongoing communication and follow through.

It isn’t a matter of simply handing over the reins. The revenue cycle starts inside of the practice, and unless you are outsourcing the front desk and/or coding processes, the practice bears the responsibility of:

❏     Accurate Demographics
❏     Eligibility Checking
❏     Collecting copays, coinsurance and deductibles at the time of service
❏     Documenting appropriately
❏     Coding according to documentation

To reference the 2013 NHIRC again, consider that 14.0% of Medicare’s allowed amount for a service is patient financially responsible.  Aetna comes in at 22.0%.  The chances of collecting that money increase exponentially when your front desk is proactive and effective in asking for and collecting patient due amounts.

Both the practice and the billing company must be timely and thorough in all communication.  As with any collaboration, you work in tandem to reach common goals. A practice cannot take a hands off approach once they decide to utilize a billing service, otherwise, the partnership is doomed to fail.

In the end the decision to outsource your billing, or any part of your practice for that matter, can be difficult. You have put a lot of time and energy into your business and it is understandably hard to hand over responsibility to someone else. Ultimately it comes down to what it costs and what you can afford. Specifically, how much does it cost, in both time and money, to handle the administration side of your business? And how much can you afford to spend on the areas of your practice that don’t directly benefit your patients? Essentially, do you want your time to be consumed by words like manage, appeal,  and adjudicate, or by words like practice, treat, and restore?

By Michelle Durner, CHBME
Applied Medical Systems, Inc

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