Researching software? Our FastStart Consultation will get you started quickly and save you weeks of research.How To Evaluate Medical Billing Services
Market Analyst, Software Advice
on 4/26/2010
We recently penned a post, “Should You Outsource Your Medical Billing,” which compared outsourcing the revenue cycle management process to managing that function in-house with medical billing systems. Assuming you go for the former option – outsourcing – this post will help you make the right choice of medical billing service companies.
How can a provider tell the difference between a fly-by-night medical billing company and one to which they can hand overtheir patient’s medical information with confidence? If a physician knows what criteria by which to judge a medical billing service, they’ll be able to select a company that will significantly decrease their time spent on billing issues and increase their time spent on patient care.
To choose correctly, a provider will need to evaluate these five key criteria when choosing a medical billing company:
- Level of service;
- Industry experience;
- Use of technology;
- Pricing model; and,
- Capacity to take on new clients.
What Functions Will a Billing Service Perform?
Before getting into the selection details, let’s quickly review how a billing service fits into the medical billing process. A medical billing company will be able to take over most billing functions in a provider’s office.
To see a substantial benefit, a provider needs to select a medical billing service that performs at least these functions:
1. Claim generation and submission;
2. Carrier follow-up;
3. Payment posting and processing;
4. Patient invoicing and support; and,
5. Collection agency transfer services.
These functions are the “guts” of medical billing. Following up with insurance carriers and pursuing denied claims are two areas where medical billing services typically excel versus a provider’s in-house staff.
Other services that may be offered include credentialing, medical coding, transcription, insurance eligibility verification and appointment scheduling.
Naturally, as the number of services increases, fees will increase. A provider will want to strike the proper balance between cost and service by honestly evaluating their own capacity to perform these functions.
Criteria #1: Level of Service
In addition to the basics of medical billing mentioned above, there are more details a provider will want to be clear on before choosing a medical billing service. Here are some important functions that a provider and billing service should delineate before they enter into a partnership:
| Function | Possible Issues |
|---|---|
| Pursuing denied claims | Will the service pursue denied claims or will the provider have to? If they do pursue denied claims, a provider will want to know what procedures the company has in place to do so to ensure they aren't being paid lip-service. |
| Billing follow up | If a patient doesn't pay their bill, who follows up? Many medical billing services will correspond with patients regarding billing issues, which for many providers is a necessary function to outsource. |
| Complying with regulations | By handing over a patient's medical information to a third-party, a provider becomes responsible for the third-party's compliance with the Health Insurance Accountability and Portability Act (HIPAA). The billing service must protect patient privacy to the same degree that the provider does. |
| Reporting and analysis | One of the other benefits of a medical billing service is that they're going to have business insight that a provider doesn't. Will the service provide feedback about how to improve the practice? Or just send a one-page financial statement each month? |
It’s important that a provider and a billing service agree on the level of service before they get started. If the right level of service isn’t chosen, a provider won’t reap the full benefits of outsourcing their medical billing.
Criteria #2: Industry Experience
When a provider evaluates a medical billing service’s experience, they need to look beyond the number of years the company has been in business. Experience includes not only time but also familiarity with certain specialities. Billing certification plays a key role here as well.
Billing procedures will vary by medical speciality, so a provider will want to choose a billing service that is familiar with their specialty. Experience with billing to Medicare and Medicaid will be a huge plus, in any speciality.
Choosing a service with staff members that are certified by the American Medical Billing Association (AMBA) is important as well. The AMBA offers a Medical Reimbursement Specialist certification designed to promote professional medical billing.
The certification implies that the recipient is knowledgeable in the areas of:
- ICD9, CPT4 and HCPCS Coding;
- Medical Terminology;
- Insurance claims and billing, appeals and denials, fraud and abuse;
- HIPAA and Office of Inspector General (OIG) Compliance;
- Information and web technology; and,
- Reimbursement.
Even with a certified staff, the proper procedures and technology will need to be employed to maximize benefits of the provider/billing service relationship.
Criteria #3: Use of Technology
Software for medical billing is allowing billing services to accomplish more with less. However, just because a company is using sophisticated billing software doesn’t necessarily mean they’re going to do an efficient job. They need to have the proper procedures in place to take advantage of everything the billing company software offers.
Most importantly when it comes to technology, a provider will want to know about a company’s information sharing, data security, recovery procedures, data backup procedures.
Here are some potential technology issues in those realms that will need to be addressed:
- How will superbills and claims be shared?
- How does billing service fit with the provider’s electronic health record (EHR) strategy?
- Does the service have an integrated EHR?
- How does the service ensure data security?
- What are the disaster recovery procedures?
- Where and how is backup data stored?
- Will a provider need to install and maintain software or access the system online?
- Is the technology HIPAA compliant?
Choosing a medical billing service company that employs technology in a way that effortlessly bridges the gap between provider and biller can mean the difference between profit and loss. By choosing a medical billing service that integrates with a provider’s EHR (or provides their own EHR), that gap can be closed even more.
Criteria #4: Pricing Options
When dealing with practices whose revenue is in the millions of dollars, the cost savings between pricing models can be in the hundreds of thousands of dollars.
There are three pricing options offered by medical billing companies and we’ve broken them down in the table below:
| Description | Pros | Cons | |
|---|---|---|---|
| Percentage-based | The service will charge a percentage of collections or they will charge a percentage of gross claims submitted or total collections. | The success of the billing company is tied to the success of the practice. | Small claims may not be pursued as aggressively due to lower payoff. |
| Fee-based | With this model, the billing services charges a fixed dollar rate per claim submitted. | This model is potentially more cost effective. | Less incentive for the billing service to follow-up on denied claims. |
| Hybrid | With this model, the billing service charges on a percentage basis for certain carriers or balances and charges a flat fee for others. | This model is potentially more cost effective. | Less incentive for the service to follow-up on certain claims. |
Percentage-based models are most common on the market today. Fee-based models are the next most common option with the hybrid option appearing with less frequency. Many billing companies offer two or three of these options.
Criteria #5: Capacity to Take on New Clients
Finally, a provider will want to get into the nitty gritty of a medical billing company’s performance to evaluate whether the company has the capacity to take them on as a client. Remember, much of the payoff in hiring a billing service comes from the pursuit of denied claims and fee collection. A billing service that doesn’t have the capacity to effectively follow up with outstanding bills will provide minimal benefit.
Determining capacity involves collecting a number of metrics about the company’s performance, including:
- Years in the business;
- Number of employees and reporting structure;
- Number of clients by specialty;
- Gross number of billings; and,
- Number of claims processed annually.
Knowing this information will help a provider determine the level of service a billing company will be able to provide to their practice. Getting even more detailed, a provider will also want to delve into a number of “quality” metrics about billing companies. These include:
- Average number of days in A/R by specialty;
- Coding, submission and follow-up delay metrics;
- By what percentage they’ve been able to increase revenues for existing clients; and,
- By what percentage they’ve been able to reduce payment delays.
How a medical billing service performs on each of these metrics will significantly affect a provider’s bottom line.
Need a Cheat Sheet?
Download our free guide (PDF) to evaluating medical billing services and keep it handy during your search.
11 Page PDF)Software Advice’s Director of Business Development Samarra Davis contributed to this article.
I have been a F/T department manager of a billing department for an acute care hospital, I have managed physician practices and now own and operate a medical billing company so I know both sides of the fence. Experienced, dedicated, investigative, most importantly Communication are key to any successful outsourcing company. If outsourcers are not communicating regularly with their clients there are areas of the medical billing cycle that will fall short of success. CPT codes, ICD-9 codes, changes in insurance coverages and policies, documentation issues are all areas that I monitor regularly because they are the heart and soul of how to get a claim paid timely and correctly. Medical billing is more than a “data entry” job and this is what Physicians and Hospitals must identify within their own practices, is your staff educated and knowledgable in all aspects of billing or are they just entering and submitting and hoping for a bulls eye! I do consultant work for physicians looking to analyze their practice needs and I find more often than not, that internal billing staff are left to fight the war on claims issues alone, doctors are not trained in billing, coding, insurance contracts, documentation etc. these areas are where you find your problems. I am not biased to any one choice, outsourcing or keeping your billing in house. I think that what Chris has outlined is a great starting point, whether you make the choice to outsource or keep your billing internally. Software is another key item, I utilize a practice management software that I provide to my clients that allow them access to their accounts receivables on a real time basis 24/7. The program offers scheduling, automatic eligibility, claims editing, claims scrubing, electronic ERA, Electronic EMR, every function you need to run a smooth practice all in one software. This allows me as a Medical billing company to stay conncected with my clients as though I was right there in the office at all times.It provides great reporting, daily, monthly etc. It allows me to verify information prior to sending out claims which reduces denials, my current denial rate is less than 2%, and expedites reimbursements by 38% reducing the days in A/R. Ask this question when reviewing billing companies: How many payers does your software vendor or clearinghouse contract with to submit claims electronically? My current software uses a clearinghouse which contracts with every payer that accepts electronic claims, not all software vendors have this same agreement and you will find yourself sending 20% or more of your claims via paper, this can take up to 45-60 days to be paid, submitting electronically can return payment to you in 20 days or less, most importantly if the claim is rejected electronically you are notified within 24 hours, via paper 45-60 and then you add another 45-60 after you have returned the corrected claim now your aging is over 90 days. Something to ponder when searching for the Perfect outsourcing firm. As a medical billing company I limit my business to how many clients I take on at one time due to the critical time frame of EDI enrollments, and the entire transition must be smooth and painless for all parties making sure not to skip a beat in the current collection process for the physician, this afterall is their bread and butter.
April 28, 2010 @ 1:51 pm