Medical Billing Articles

Why outsource?  Take a look at these articles to help you decide:
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RELINQUISHING CONTROL OF IN-HOUSE BILLING
By Nicholas Restuccia, CPA

In an effort to curb runaway costs, many practitioners have begun to explore the outsourcing of traditional office procedures. That is, hiring service bureaus to perform office procedures that would normally be done by in-house personnel.
How common is outsourcing? In a recent survey of businesses with less than $5 million in sales, 53% of the respondents said their companies now outsource one or more traditional office procedures. The most popular areas for outsourcing are payroll, patient billing, administration of employee benefits and maintenance services. Service bureaus can perform these functions more efficiently and economically because they are specialists in these areas.

Why outsource? Outsourcing each of these office procedures will save money, but the major benefits of outsourcing are clearly found when it is applied to patient billing. Practitioners fail to realize the extensive costs associated with in-house billing. This can be a very costly form of neglect. Most practitioners have hired one or two clerks to do the billing. They think that doing so insures that the billing is done accurately and efficiently and that the practice retains greater control over the procedures. Let’s examine each of these assumptions.

CONTROL: Many practitioners are reluctant to let a third party assume responsibility for their billing. They think they will lose control over their receivables. The truth is most practitioners have already lost control. With the bureaucratic intricacies of co-pays, disallowances, charge backs, deductibles, insurance company holdbacks and duplicate payments, who really has control?

SPEED: Practitioners instinctively fear that using a service bureau will slow down the billing process. They think a lag in billing will create a delay in collections, thereby creating the dreaded cash flow problem. However this does not have to be the case. Most medical billing services invoice within 24-48 hours of receiving the documents from the practitioner. Therefore, cash flow should not be impaired. In fact, most practitioners report that the opposite is true. Gross billings increase and the accounts receivable time is shortened because the billing service is paid on an incentive basis. The higher the gross billings, the more the billing service is paid. In-house staff, who are paid a weekly salary, may not be as motivated.

EFFICIENCY: Medical billing services are more familiar with coding than the practitioner’s own billing department. They are cognizant of the latest trends in coding, while relying on office staff to be well versed in the latest coding techniques is unrealistic, naive, and can adversely affect profit. Service bureaus also have more sophisticated hardware and software than the typical physician’s office because of the volume of transactions they handle. Since computer hardware and software are constantly changing, the in-house staff and their computers must be constantly updated. The practitioner must pay for all the hardware and software updates, as well as the expensive “learning curve” while the employees struggle to master the new techniques and programs.

COST: Some practitioners think that using a service bureau is more costly than doing the work in-house. This depends on what you include in the term “cost”. When compared to base payroll costs, the billing service charge is more expensive than in-house billing. But beware! Hidden costs are incurred when in-house people do the work. The following analysis can help illustrate how savings can be obtained through outsourcing: Assume that a medical practice is billing $1,000,000 per year and needs three billing clerks to handle this level of activity. Service bureaus traditionally charge 5% to 9% of gross billings for this kind of service. So the cost of billing for this practice would range between $50,000 and $90,000. If one billing clerk earns between $22,000 and $25,000 yearly salary, three would cost the practice between $66,000 and $75,000. This figure represents the base cost of payroll. Payroll taxes, which include the employer’s share of social security, and federal and state unemployment taxes, add approximately 10% to the base cost. Fringe benefits, which include pension and profit sharing plans, medical insurance, disability insurance, educational reimbursement, sick pay and personal time off, and add another 10-30% to payroll cost. In sum, the cost of payroll could jump to a range of $79,000 to $105,000 when these additional charges are added. OTHER EXPENSES: What about other expenses? In-house billing clerks need space in which to work. Assume the billing clerks occupy an area that is 150 square feet of space. If you are renting space for $15 per square foot, you are paying an additional rent of $2,250 just for those employees. This is just the base cost. Usually there are additions for increases in property taxes and maintenance services. Additional costs include utilities and office supplies. Postage is an expense which is commonly overlooked. Some service bureaus, but not all, include this in the cost. These expenses increase the cost of doing business and reduce your bottom line. Finally, when you have someone performing an in-house function, that person needs supervision.

If you hire an office manager to supervise the billing staff, you must still monitor the office manager. This will take away from the time you have to see patients. Outsourcing the billing function allows the practitioner to be more focused on the core business, providing patient care. Using a service bureau may not be the answer for everyone. A neurosurgeon might have a relatively small number of patients and corresponding caseload. But before you dismiss the idea of outsourcing completely, figure out how much it is costing you to do the billing in-house. You may be in for a surprise.
Nicholas Restuccia, CPA, is a partner at Rizzo & Restuccia PC., a CPA firm in Saugus, Massachusetts.
Relinquishing Control of In-house Billing
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Justifying a Billing Service
by Flo Murray
When would an outside billing service be justified instead of in-house personnel? The focus of this article is to get you to look at your current billing situation and assess if you would benefit from switching to an outside billing service.

The main reason many doctors choose to do their billing in-house is because they feel they have better control. This is certainly true if someone inside the practice truly understands billing, collecting and tracking. If that person has done it for many years, has experience with the hundreds of different scenarios you run into every day, and has the time to coordinate and focus on getting paid for all claims, then keeping the billing inside may be the right decision. If the practice is also profitable with the current in-house billing department expense, the billing should probably be done inside. A doctor’s take home pay is directly related to overhead, and in-house billing expenses can be a high percentage of overhead.

If you stay with inside billing it is recommended that you have a support network of some sort: the annual H. J. Ross hotline, CCA hotline, or other doctors’ billing departments that you can call in time of need. If your billing, department has no outside resources to fall back on, the ability to collect on certain accounts is limited by your office person’s experience.

If you think things are running smoothly in your billing department, but you never ask about any one patient’s individual account,you have no clue whether things are running smoothly. When the billing manager is not accountable to anyone else (the doctor, doctor’s spouse, the accountant, etc.), you depend solely on that person to make sure everything is handled timely and efficiently.

I know a doctor who thought he had a very efficient billing department, but he was unaware that his billing manager had plans to leave his employ. As she neared her last two months of commitment to the doctor, she stopped sending the billing out! To the doctor’s dismay, he was unable to get paid for approximately $10,000 in claims the managed care plan refused to pay because of missed deadlines. This costly problem occurred because the doctor depended upon the billing manager, who was not accountable to anyone else for her work. In other cases, doctors have had billing managers for years without problems,  because they take pride in what they do and would never consider leaving without helping to hire and train their replacement. If no one double-checks your department from time to time, you really can’t be sure. Even if you use an outside billing service, you do not really gain any control unless you have someone check their work as well. Though switching to an outside service will not necessarily give you better control, it can provide some of the following benefits:

You don’t need to worry about your biller quitting and leaving you high and dry.
You don’t need to worry about retraining if your in-house biller leaves.
You don’t need to worry about the transition on problem accounts from one biller to the next.
You don’t need to worry that a new biller will ask you to make an investment in the software that he or she uses.
You will have more space, time and energy to treat patients.
Not being able to argue with an insurance company on the phone where patients can overhear.
You will gain the expertise of the billing company’s many years of service to your industry,
assuming you choose a billing company with this sort of experience.

You should see no break in your service or cash flow, as long as you choose a billing company that is dedicated to providing excellent service and has the expansion capabilities necessary to grow with your business.

You will save many expenses associated with inside billing.
To assess whether you will save money by switching to an outside service, you must compute the cost of doing the billing inside and compare that to the cost quoted by the outside service. Your inside costs include: payroll labor hours; payroll labor overhead; postage; paper; computer support; billing program support; telephone bills; and any other direct costs you can associate with doing the billing. You should also consider an alternate use of the billing department’s space, such as having an extra massage room or renting it to an associate who works on a percentage.

Consider your own time and energy expended on hiring and replacing personnel. Consider who trains the new staff person and the time it takes a new person to get comfortable with your office and procedures. Your in-house personnel should attend seminars that keep them updated on industry changes, but that can be an added expense.

As you can see, some costs are not easy to compute mathematically. Sometimes the situation is black and white, and you can save a lot of money by going to outside billing. In other cases where expertise rather than money may be the issue, you may not see a direct savings. However, a good billing service will pay for itself with its knowledge and experience, and may be able to collect more than your own in-house staff. This is particularly true in offices where a single staff person supports the doctor. That person is expected to answer all phone calls, do all the paperwork management, and perhaps even assist in therapy occasionally. If a doctor’s volume is only 30 to 50 patient visits per week, using an outside service may not be cost-justified. However, the cost of a service handling
that volume of billing might be as little as $400 per month. If the billing service has the kind of expertise you need, then justifying that expense is very easy to do, because they will easily be able to collect an average of $400 more per month than your inexperienced in-house biller. Your in-house staff person would then have more time to help you with recalls, screenings, etc.

I have heard horror stories about billing services. There are good and bad services everywhere, just as there are good and bad employees. However, I have heard many more horror stories associated with in-house problems: drawers full of problem billings that went untouched and are now uncollectable due to insurance policy filing requirements; personal injury cases that went unpaid because no one had a tracking system for following up on the old cases; workers’ compensation cases that no one in-house knew what to do with – cases that were easily collectable by someone with the proper experience.

Once you look at your billing situation, you will probably have a better sense for how things are running. You might consider bringing someone in to help assess your department. Many billing services have people who will do that for you. If they take over the billing, they should help you make a good transition. Knowing how your office runs will be the key to their helping you get your billing out in a timely and efficient manner with as little stress to the practice as possible.
http://www.dynamicchiropractic.com/mpacms/dc/article.php?id=31627

Justifying a Billing Service
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Risks of Off-Shoring
From the San Francisco Chronicle, by David Lazarus
“Your patient records are out in the open… so you better track that person and make him
pay my dues.”

A woman in Pakistan doing cut-rate clerical work for UCSF Medical Center threatened to
post patients’ confidential files on the Internet unless she was paid more money. To
show she was serious, the woman sent UCSF an e-mail earlier this month with actual
patients’ records attached.

The violation of medical privacy – apparently the first of its kind – highlights the danger of
“offshoring” work that involves sensitive materials, an increasing trend among  budget conscious U.S. companies and institutions. U.S. laws maintain strict standards to protect patients’ medical data. But those laws are virtually unenforceable overseas, where much of the labor-intensive transcribing of dictated medical notes to written form is being exported.

“This was an egregious breach,” said Tomi Ryba, chief operating officer of UCSF Medical Center. “We took this very, very seriously.” She stressed that the renowned San Francisco facility is not alone in facing the risk of patients’ confidential information being used as leverage by unscrupulous members of the increasingly global health-care industry.

“This is an issue that affects the entire industry and the entire nation,” Ryba said. Nearly all Bay Area hospitals contract with outside firms to handle at least a portion of their voluminous medical-transcription workload. Those firms in turn frequently subcontract with other companies.

In the case of the threat to release UCSF patient records online, a chain of three different subcontractors was used. UCSF and its original contractor, Sausalito’s Transcription Stat, say they had no knowledge that the work eventually would find its way abroad. The Pakistani woman’s threat was withdrawn only after she received hundreds of dollars from another person indirectly caught up in the extortion attempt.

The $20 billion medical-transcription business handles dictation from doctors relating to all aspects of the health-care process, from routine exams to surgical procedures. Patients’ full medical histories often are included in transcribed reports. While it’s impossible to know for sure how much of the work is heading overseas, the American Association for Medical Transcription, an industry group, estimates that about 10 percent of all U.S. medical transcription is being done abroad. For two decades, UCSF has outsourced a portion of its transcription work to Transcription Stat. Kim Kaneko, the owner of the Sausalito firm, said she maintains a network of 15 subcontractors throughout the country to handle the “hundreds of files a day” received by her office.

One of those subcontractors is a Florida woman named Sonya Newburn, whom Kaneko said she’d been using steadily for about a year and a half. Kaneko knew that Newburn herself used subcontractors but assumed that was as far as it went. What Kaneko said she didn’t know is that one of Newburn’s transcribers, a Texas man named Tom Spires, had his own network of subcontractors. One of these, apparently, was a Pakistani woman named Lubna Baloch.

On Oct. 7, UCSF officials received an e-mail from Baloch, who described herself as “a medical doctor by profession.” She said Spires owed her money and had cut off all communication. Baloch demanded that UCSF find Spires and remedy the situation. She wrote: “Your patient records are out in the open to be exposed, so you better track that person and make him pay my dues or otherwise I will expose all the voice files and patient records of UCSF Parnassus and Mt. Zion campuses on the Internet.” Actual files containing dictation from UCSF doctors were attached to the e- mail. The files reportedly involved two patients. “I can’t believe this happened,” Kaneko said. “We’ve been working for UC
for 20 years, and nothing like this has ever happened before.” The files in question were quickly traced to Newburn, the Florida woman, who typically handled about 30 UCSF files every day.

An emotional Newburn said in an interview that she’s as much a victim as Kaneko. “I feel violated,” she said. Nevertheless, she said she’s taking responsibility for what happened, even though she said she explicitly told Spires not to send any work overseas. “What he did was despicable,” Newburn said. Spires could not be reached for comment.

Newburn said she contacted Spires as soon as she learned about Baloch’s threat and obtained a number to reach the Pakistani transcriber at her home in Karachi. “I spoke with her,” Newburn said. “She was very upset but said she wouldn’t have really released the files. So I said she had to take back the threat.” Newburn agreed to pay a portion of the money Baloch claimed she was owed – about $500 – and Baloch said she would tell UCSF that its files were safe. On Oct. 8, UCSF received a second e-mail from Baloch. “I verify that I do not have any intent to istribute/release any patient health information out and I have destroyed the said information,” she wrote. “I am retracting any statements made by me earlier.” The problem, however, will not go away so easily. “We do not have any  evidence that the person has destroyed the files,” acknowledged UCSF’s Ryba. Moreover, how can UCSF or any other medical institution prevent something like this from happening again? Should legislation be passed barring U.S. medical data from going overseas?

“I don’t know the answer to that,” responded Amy Buckmaster, president of the American Association for Medical Transcription. “We don’t say that outsourcing is a terrible thing. We say that it needs to be disclosed.” UCSF has reached the same conclusion. Ryba said the medical center is revising its contracts with transcription firms to require up-front notice of all subcontracting.

At the same time, she accepts that with a growing percentage of transcription work being exported abroad, there will always be a chance that something like this could happen again. “We’ll have to live with this risk on a daily basis,” Ryba said.

David Lazarus’ column appears Wednesdays, Fridays and Sundays. He also can be seen regularly on KTVU’s “Mornings on 2.” Send tips or feedback to [email protected].
Risks of Off-Shoring