Practice Economics
Should You Do Your Own Billing?
Outsourcing does have its advantages.
BY MARK E. KROPIEWNICKI, J.D., LL.M.

Traditionally, practices tend to handle billing in-house, but outsourcing this function to a billing company may be a more efficient and less costly alternative.

This month, I'll compare the costs and benefits of in-house vs. outsourcing.

Practices that bill in-house have the advantage of controlling all aspects of the billing and collection process. They also avoid paying fees to a billing specialist.

But using a billing company does have specific advantages. These include:

• The billing company's fee is typically all-inclusive. There are usually no hidden costs, such as fees for postage or for transmitting insurance claims.
• The billing company hires, trains, and supervises its staff.
• The billing company usually is responsible for maintaining and upgrading all computer hardware and software.
• You'll no longer need to provide office space for a billing department.

MAKING THE CHOICE

But what's best for your practice?

If you don't want to get deeply involved in billing technology and feel you can work well with a reputable billing company, then outsourcing could be the answer. If your practice has the staff and necessary routines in place, keeping the billing in-house may be preferable. Regardless of which option you choose, your practice must provide the appropriate staff training to ensure compliance with all fraud and abuse regulations, and with the Health Insurance Portability and Accountability Act (HIPAA).

A billing company will usually offer you a standard agreement. Have your attorney review the contract and make any necessary modifications. The following services should be fully described and included in the agreement:

• bill all third-party payers
• bill all of your self-pay patients
• collect from all payers
• produce monthly reports showing charges and payments by billing class
• provide support services, such as follow-up letters and phone calls
• post payments received
• produce a collection analysis report and a summary aged trial balance
• deposit payments from all payers in the bank, as directed by the practice.

COVER ALL CONTINGENCIES

Your agreement should also cover a number of other areas, including:

• Term. The agreement should specify a set term, usually 1 year. Either party should be able to end the agreement with advance written notice of 60 or 90 days.
• Fees. Billing companies usually charge a percentage of collections received, normally about 7 to 11%. The fee should never be based on billings.
• Delinquent accounts. Your practice must have the right to determine when accounts are delinquent and how and when overdue accounts will be given to a collection agency.
• Indemnification. The billing company will ask your practice to indemnify it for any liabilities due to acts or omissions by the practice. It's a good idea to ask for a mutual indemnification by the billing company if your practice incurs liabilities.
• Rights upon termination. If the agreement is terminated, how long must you pay the billing company's fees for already initiated claims? It's also necessary to transition existing accounts and agree on a method to handle payments received after the termination date.

Before making a decision on who's to handle your billing, interview several reputable billing companies to get as much information as possible. Realize that you shouldn't base your final decision entirely on cost, but on how much you want to be in control compared to the benefits of having billing outsourced.

Mark E. Kropiewnicki, J.D., LL.M., is a principal consultant with The Health Care Group, Inc., and a principal and president of Health Care Law Associates, P.C., in Plymouth Meeting, Pa. He regularly advises physicians and practices on their contracting matters and business law obligations. He can be reached at (800) 473-0032.