In-House vs. Outsourced Billing Operations: Which Is Best?

In my nearly 20 years of practicing medicine as both a healthcare provider and medical practice owner, medical billing has proven to be one of the most complex and crucial components of my business.

As the management of medical practices evolves with the introduction of new technologies, government requirements, and financial limitations, owner-practitioners constantly find themselves having to decide which operations methods will both save expenses and generate revenues. And of course, medical billing is one of those operations.

Regardless of whether you keep your billing operations in-house or outsource them, your first concern should be your professional medical coding practices. The overall effectiveness of your billing operations begins and ends with your billing and coding knowledge. If you fail to spend the 10 to 20 hours it takes to learn how to bill and code for profit, not much else matters.
That said, which of the two most common billing scenarios benefits the physician-practice owner most? Let's look at the options.

In-house Billing

Depending on the size of your practice, the average in-house billing department consists of one or two trained billers per one to three providers. Payroll expenses aside, the start-up costs of an in-house billing department will include: equipment (like computers and software), registration with a clearinghouse, additional space for records storage, and reference materials such as annual coding books or courses.

At the outset an in-house billing team may seem like an administrative burden and increase in overhead, but the advantages to having your billers in-house may outweigh those factors.
For example, with an in-house billing department you have close watch of the pulse of your day-to-day billing operations. Questions can be addressed in real time, and changes can be implemented immediately. In-house billing also allows you to have more control over your accounts receivable.

I’ve often seen billing companies fail to pursue an outstanding balance because there isn’t enough money in the collection process for it to be worth their effort. However, if you have hundreds of patients with outstanding balances of a low dollar amount that's money you want to capture. You can avoid this issue when your billing staff is in-house.

Outsourced Billing

Outsourced billing is typically a good fit for practice-owners who don’t want to manage an administrative team. All of the day-to-day billing functions are handled off-site when your billing functions are outsourced, and a reputable medical billing company should have a team of well-trained certified billers versed in the nuances of billing and sending claims.

In some cases, large medical billing companies are the best option for smaller practices simply because some specialized medical billing tools and technologies are cost prohibitive.
Although outsourced billing companies enable practice owners to be less concerned with the claims process and records retention, problems arise out of the fact that these billers are removed from the day-to-day operations of your practice. As a result, claims are often submitted incorrectly and coding is billed incorrectly, which ultimately hurts your bottom line.

From the cost savings perspective, remember that the savings you may gain from outsourced billing functions is offset at some level by the fees charged by the outsourcing company. The average cost by a medical billing firm ranges from 5 percent to 10 percent of your practice’s collections.

Be sure to evaluate the percentage you are paying and see if it is comparable to the cost of an in-house billing department. Also, always negotiate for a lower collection percentage as your volume of collections increases. There is a lot of flexibility in this industry and these small contractual modifications could have a significant impact on your personal revenue.
I’ve found the most important factor in deciding between in-house or outsourced billing to be that of your management style. If you like to have your hands in the heart of your practice in-house billing is probably the best option for you. And if you prefer outsourcing, be sure you can gain access to the information you will need to make quality decisions that affect the profitability of your medical practice. 

Adam Alpers, DO, is a family-practice physician in private practice in Ocala, Fla. A medical coding expert, Alpers also helps other physicians learn how to maximize their insurance reimbursements and writes heavily on the subject at his blog medbillingncoding.com.