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In-House Medical Billing vs Outsourced Billing

When managing a practice’s revenue cycle, choosing between conducting the process in-house or trusting an outsourced third party to handle your billing is often contentious. Strong feelings and arguments are directed towards either side. However, there is a common understanding that making the best-informed decision in this area is crucial for assuring your practice’s financial well-being.  

The revenue stream can be thought of as the vital lifeblood of any business. For your practice, it doesn’t just keep the lights on and your professionals employed; it assures that patients are receiving comprehensive and effective care that keeps them coming back. While any practice owner intimately understands the connection between patients and revenue, the importance of choosing the correct billing process and the factors to consider may not be as clear-cut. 

Choosing the best way to handle a practice’s medical billing as a function of revenue cycle management (RCM) can make all the difference when it comes to properly billing your services and getting paid correctly. At its core, the choice usually comes between control and resource allocation. 

Pro-in-house practice owners essentially prioritize control above all else. This means they place high importance on monitoring first hand their billing process from start to finish. At the same time, the pro-outsource crowd doesn’t want to get lost in the complex minutiae of billing management and would instead hand it off to trusted professionals with the proper management oversight on a macro level. Their practice can then focus its resources on patient care and other vital aspects with the potential to improve revenue. 

Practice size is also essential in determining the best fit, with smaller operations usually finding outsourcing to be a better use of their limited resources, particularly time. To determine your answer to the complex question of in-house medical billing vs. outsourced medical billing, it's best to consider your options against these three vital factors: control and communication, margin for error, and cost.

Control and Communication

One benefit of in-house medical billing and revenue cycle management is the high degree of control it allows for. Since the practice directly oversees its billing, necessary adjustments in the billing process can be quickly detected and adjusted with precision on a more fluid basis. This helps your practice bill more efficiently by promptly adapting to changes, also providing the freedom to change aspects of the process to be more effective where possible. 

Your relationship with the medical billing staff also influences this degree of control. In many cases, the staff responsible for in-house billing will already be deeply familiar with how the practice is run. As a practice owner, this makes them much easier to communicate with to ensure billing is conducted in a fashion that suits the practice's needs.

Another benefit of in-house medical billing is the close proximity between the practice and billing staff, which streamlines communication. Any billing-related issue or inefficiency can be sorted out much easier when they’re just a walk down the hall (although many staff in this area require at least a hybrid work scenario). That makes the transfer of information quicker and allows it to happen organically. 

In regards to outsourced medical billing, just because a third-party company is handling your billing doesn’t mean you don’t have much agency over the process. With a reputable vendor, the process comes with all the transparency you need between your practice and the company chosen for revenue cycle management. 

It’s a part of your RCM provider’s responsibility to communicate with you regarding the data and details of your billing operations. For even greater insight, you can request comprehensive performance reports to provide you with the necessary information about the execution and management of your billing operations. This can help you better understand the financial picture of your practice without the need to manage an in-house medical billing team.

While agency, transparency, and control are still relevant factors of outsourced medical billing, the degree of control you can exert is less hands-on than in-house medical billing. In many ways this is an advantage; as for example it allows a better allocation of time and effort elsewhere, which can help increase efficiency. However, practice owners may see this lesser degree of control as a downside. 

Outsourced medical billing and full-service RCM companies have experience-tested and predetermined methods to execute their billing responsibilities. That typically guarantees high accuracy, efficiency, and compliance with industry regulations. 

Margin for Error

One of the biggest considerations to make when choosing how your practice is going to handle its medical billing and overall RCM is weighing the potential for error. The detriments of billing errors are well understood, but if you’re looking to nearly eliminate the possibility of them occurring, outsourcing is the way to go. This is because any outsourced medical biller or RCM company’s highest priority is to manage your practice's billing-related affairs with the highest possible degree of accuracy, organization, and professionalism.

For outsourced medical billers, managing RCM is their full-time job, meaning the reputation and success of their business is staked on their ability to conduct their responsibilities in an organized, responsible way. They also have a higher degree of time and resources to direct towards your billing, meaning mistakes rarely slip by undetected. This also greatly decreases the likelihood of common in-house errors due to short staffing and being distracted by patients. 

Considering it’s their sole focus and specialty, outsourced RCM companies are the utmost experts on proper billing procedures, always continuing their education. Therefore, they’re the best at adhering to compliance requirements, staying current on payor and governmental rules and regulations, following up on rejected claims, and other aspects of the process with great accuracy. This also extends to how they conduct the billing process itself, as outsourced billers and full-service RCM companies have found the most streamlined, efficient procedures and organizational strategies possible, which they apply in a way that suits your practice best. 

When using in-house billing or full-service RCM, especially in smaller practices, in-house billing teams can often consist of only a handful of employees. If one is absent, on leave, or quits, the workflow can suffer because the same amount of work is relegated to a smaller pool of employees. Finding replacement employees who know your specialty and software may be difficult as this is a high-demand occupation!

This can be a serious detriment to the efficiency and effectiveness of your billing system, as it can put the task of managing large amounts of vital information in the hands of too few people. In-house medical billing also renders any errors that occur the responsibility of the practice, which can be a negative factor no matter how well-staffed your billing department is; if a mistake is made, your practice is the party solely accountable. Outsource medical billers engage in very frequent training and auditing to ensure that your practice is earning the most money possible.

Compared to outsourced medical billing & full-service RCM companies whose entire focus is managing your revenue cycle, conducting your billing in-house can lead to a considerably wider margin for error. This can be due to an array of factors, from understaffing to general employee incompetence or neglect. Well-run outsourced medical billers have more checks and balances in place to curtail human error, including both experienced certified billers and technological checkpoints to validate accuracy. 

Overall Cost

Conducting your billing in-house also means paying to support a full-time billing staff and whatever technology they need to facilitate their job, much like every employee of a medical practice. This makes the opportunity to cut those costs through outsourcing very appealing. These expenses include training staff, acquiring the billing software, keeping the technology up to date, and educating them on current regulation changes as they arise, all of which can get expensive over time.

Something else to consider is the time and energy that in-house billing consumes; could those resources be more lucrative if directed elsewhere? We’re all familiar with the phrase “time is money,” and when it comes to practice management, patients are crucial to the revenue stream. While dedicating some time and energy to the billing process can be rewarding, for instance, it may help you understand how to make your billing more efficient, providing for your patients is what’s truly important. Not putting enough emphasis on that could more than likely be detrimental. 

While it’s true billing is vitally important to the practice, not enough focus on the patient-care side of practice management will likely lead to fewer services and patients billed in the first place. This is because exceptional patient care is what keeps those patients coming back. It is always important for a practice manager to at least consider outsourcing as the whole practice may run more effectively.

For outsourced RCM companies, a higher upfront cost is commonplace. The understanding is that your practice pays fractionally more to save money in the long run that would otherwise be spent on the factors associated with hiring and maintaining in-house billing staff and operations. In addition, there may be multiple revenue opportunities that your in-house staff has been foregoing!  

Some RCM companies have flat fees per chargeable medical encounter, while others may charge a percentage of your cash receipts. 

Hidden fees can be an unfortunate part of any contractual service. While a negotiation to set terms usually takes place between the provider and the practice, closely read and retain the contract and ensure you’re working with a reputable vendor. Ensure charges aren't hidden in fine print or concealed through vague wording. Of course, this is a good practice whenever signing any agreement with another party, but especially considering the management of something as valuable as your billing. It’s always important to be as informed as possible about what you’re consenting to before any agreement is signed. 


Few things are more vital to your practice's financial viability than billing; the revenue cycle makes everything else possible, and therefore, continuing that cycle and choosing how that billing is conducted is just as important. When deciding between in-house medical billing vs outsourced billing for your revenue cycle, your main priority should be weighing the above factors against your practice's scale and needs. 

Suppose you’re operating a larger practice with the size, capital, and resources available to conduct billing in-house. In that case, the degree of control and flexibility it allows and the ease of communication can still make it an attractive and viable option despite the benefits of outsourcing.

Conversely, outsourcing allows you to spend more time and resources in other areas of your practice, especially patient care, which could, in turn, bring your practice more revenue. Outsourcing could also be a beneficial choice for medium-sized or smaller practices. Not only does it cost less overall and consume fewer resources, but the unparalleled organization and RCM-prowess of outsource companies can make costly errors and keep up with ever-changing regulations, a thing of the past!

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