Rapid changes in the industry, including automation, outsourcing and new workflow processes, have made it difficult for healthcare billers to keep up and gain the tools they need to succeed in the new healthcare marketplace. The key in any industry is to make a margin (the difference between cost and revenue). Companies that fall short inevitably fail, yet many of the companies that operate in the healthcare sphere do not use data in ways that ensure success and identify areas for improvement.

In the medical billing industry, companies have searched far and wide for this margin. During the last 10 years there has been considerable use of business process outsourcing (BPO) firms that handle various parts of the billing process overseas, according to the Healthcare BPO Market forecast, which shows that healthcare provider outsourcing has the highest growth rate of 31.9% from 2011 to 2016.

While some companies outsource these services, others handle everything in-house and some have a mixed model.

Many years ago, some basic data entry tasks were outsourced to India. Next came offshore call centers in Costa Rica and then information technology (IT) consultants from China. For those practices that outsourced the function, billing became a worldwide effort. Now we see entire billing platforms that are based internationally with editing, coding, credentialing, call centers and denial management.

Services offered

Some billing companies are trying to become a one-stop shop for clients by providing public accounting, IT, internal auditing and practice management services. But practices should consider all of the issues before they outsource.

The negatives include a fear of security breaches, a loss of autonomy over day-to-day activities and a loss of collected revenue as BPOs build their knowledge databases.

One practical example of how you can weigh the pros and cons of outsourcing — and how you outsource — is illustrated by Barry Howell, FACMPE, MGMA member, chief executive officer, Arlington Orthopedic Associates, Flower Mound, Texas, in his ACMPE Fellowship paper “Physician Practice Information Technology: Outsourcing vs. In House.”

Howell shares his group’s experience weighing the pros and cons of outsourcing IT functions and provides the following advice to colleagues: “Besides the cost of outsourcing versus [a full-time-equivalent (FTE)], there are many other potential costs such as exposure to risk, lack of staff and physician productivity, lack of proper utilization of technology, and opportunity costs for other staff serving in an IT role.”

Howell’s group opted to hire an FTE and realized the return on investment for that decision within six months. He shares specific costs for the IT vendor ($4,500 to $6,000 per month) while the on-site cost is $3,500 per month for the IT manager “with many projects completed that would have cost significantly more if outsourced.”

The outsourced IT solution cost the practice $80,000 on average, whereas the on-site cost $42,000 annually. Having a full-time IT expert allows for greater opportunities to leverage the technology and ultimately provides better patient care.

On the plus side, many billers have built great relationships and have educated their BPO partners in the correct processes to produce correct results. The direct outcome of this is the billing services get a quality service at a greatly reduced price.

In the past, companies specialized in getting claims out the door and receiving explanations of benefits. But today’s companies are scanning documents and getting payments electronically. Some billing companies have outsourced their statement mailing, self-pay call notices and accounts receivable (A/R) work.

As we look to billing companies of the future, data must be added to this mix. If more practices move toward true accountable care organization (ACO) models, they will need to know their data to determine cost, revenue and actual margin per procedure.

While attending the 2014 Healthcare Billing and Management Association conference in Naples, Fla., I spoke with several billing company representatives who noted their companies are beginning to “repatriate” their outsourced work. When discussing outsourcing, one professional noted several metrics that help determine whether revenue cycle management services should be outsourced to a global delivery company, including scalability, cost and cultural fit.

  • Scalability: Partnering with a solid global vendor allows a billing company to pursue, manage and sustain the needs of much larger, more profitable provider clients that would be cost-prohibitive without this type of model.
  • Cost: A billing company could ostensibly charge a more competitive (lower) contingency rate to clients while making a higher profit. These net margins, or Cultural fit: There must be a good fit, or at least a cultural integration, for this type of business model to make sense for a billing company. In other words, a billing firm should understand the complexities of the BPO relationship and be willing to educate and learn as the business transitions.

Data matters

As we move from a volume-based medical world to one that is value-based, medical billing companies of the future must have industry-specific knowledge; solid client retention; practice management processes; and the ability to understand how a practice finds margin per case, per episode of care or bundled payment. It will be tied directly to the practice’s business intelligence and practice financials.

Business intelligence will be a key linchpin for success, which requires data related to cost and margin on client dashboards. Once we truly achieve a value-based model, practices will need distinct margin data for each type of service provided. As payers consolidate and bundle payments, groups that know exactly how much it costs to do certain procedures and tests will have a huge advantage over practices stuck in volume-based thinking.

Transformation

Medical billing companies in the future will need to provide solid data metrics to clients and be able to monitor their clients’ profits, which necessitates software and hardware to track billing and procedures, unit costs, overhead and profit by case (Figure 1). In short, they’ll need analytics.

These companies will have client managers to interpret and communicate changes and track client margin. Their practice managers will be transformed into margin managers, who have expertise in charge capture processes to track procedures done by an ACO; managed care negotiations to negotiate good rates per procedure; and auditing to ensure all procedures performed were paid and to show margin per case.

The billing component will also change. Billers will no longer be required to have large armies of workers sending claims and posting payments; they will have a much smaller team of data and margin specialists tracking data and adjusting utilization to keep costs down.

Using this model, it may be that these new streamlined billers will themselves be more profitable, allowing them to develop margin-friendly dashboards to track utilization and costs per test as well as return on investment per procedure instead of days in A/R or gross dollars billed.

This focus on margin for the client through a solid management process delivered via margin management will be key for the billing company of the future to be successful.