How To Evaluate Medical Billing Services

By: on April 27, 2017

Update 2/28/2019: This article has been updated to remove outdated references to medical billing systems.

Medical practice owners have an important choice: handle their revenue management cycle process in-house with software or outsource it to a different company. This research can help providers evaluate medical billing service companies if they’ve decided that’s what’s best for their practice.

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.

A medical billing service will be able to provide assistance at nearly every stage of the billing process.

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:

  • ICD-10, 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.

Medical Billing Services Selection Guide

Our Best Practices Guide to selecting medical billing services will help you stay organized and make the right choice for your revenue cycle management.

You may also like:

Medical Practices Must Reduce Patient Wait Times—Here’s How

9 Must-Have Medical Software Features for Small Medical Practices

Patient Expectations for the Modern Medical Practice (Pt. 3): Patient-Friendly Billing

Get a FREE Custom Quote for 5 Leading Practice Management Systems