While providing the best patient care is essential to any medical practice, the revenue stream keeps the lights on, staff employed, and the practice in good financial standing. Without that strong revenue stream, a medical practice won’t be able to uphold high standards of patient care, invest in the best technologies to provide the most effective treatment or hire the most qualified staff.
This makes choosing how to conduct the medical billing side of your practice critical, mainly will it be handled in-house or managed by a third-party revenue cycle management (RCM) company that specializes in this function.
This is often a contentious topic with discussion dictated by strong feelings on either side, but a common understanding persists between them: making the best-informed decision possible is integral to ensuring the financial well-being of your medical practice.
While practice owners on the pro-in-house side of the spectrum place vital importance on monitoring all the details of their practice’s billing process from start to finish, those on the pro-outsourcing side are more focused on using their practice’s resources in other ways that could help conduct services more efficiently and increase their revenue while overseeing on a macro level, an RCM company to handle their billing.
The numerous variables associated with each make choosing in-house or outsourced billing difficult. Understanding them in detail is essential.
Here are the pros and cons of in-house and outsourced medical billing and revenue cycle management functions to determine what best suits your practice.
Pros of In-House Medical Billing and RCM
- The high degree of control
- Organic, immediate flexibility
- Closer relationship with billing staff
- Less likelihood of communication breakdowns
The main benefit of in-house medical billing and revenue cycle management is the high degree of control it provides. Since the practice directly oversees its billing, adjustments or improvements in the billing process can be quickly detected and adjusted precisely and immediately. This helps your practice bill more efficiently by promptly adapting to changes. It also provides opportunities to better optimize your billing efficiency with the freedom to make those changes when necessary swiftly.
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, its priorities, and how it is usually conducted. From the perspective of a practice owner, this makes billing staff much more accessible to communicate with, ensuring billing is performed in the way that best suits the practice's needs.
Another benefit of in-house medical billing is the proximity between the practice and billing staff. This is mainly considered a pro because it streamlines the communication process. If a billing-related issue or inefficiency arises, it can be addressed in an easier and more proactive way when the billing staff is merely a trip down the hall. Nowadays, many staff in billing positions work in a hybrid or remote capacity, but regardless of that, this closeness makes the transfer of information more expedient and organic.
Cons of In-House Medical Billing and RCM
- A smaller pool of employees that might not have access to all the latest developments affecting reimbursement
- Employees are difficult to hire, train, retain, and replace
- Practice is accountable for any billing errors
- In-house billers are often dragged away from their primary purpose: getting claims paid correctly
For smaller practices, in-house billing staff usually consists of a single staffer or a small handful of employees. This may be all a practice needs during a typical day, but the once delicately balanced workflow immediately suffers when one is out sick, on leave, or quits. This is because a smaller pool of employees now shouldered that same amount of billing work, meaning they’re all responsible for more work than before.
Also, while having dedicated employees knowledgeable about your practice is great, finding replacements for those employees who know your specialty and software can be difficult. Medical billing is a high-demand occupation, and your practice doesn’t want to be short even one in-house RCM staff member. This can be a serious detriment to getting paid correctly and timely, as it can put large amounts of vital information in the hands of too few employees to manage the task properly.
Another factor to consider is accountability. If any In-house medical billing errors occur, financial or otherwise, responsibility is placed squarely on your practice's shoulders. This is a significant drawback, no matter how well-staffed your billing department is. Conversely, outsourced medical billers engage in frequent training and auditing to ensure that your practice earns the most money possible while minimizing the possibility of errors.
Cost is also a major factor in in-house billing. You may not be paying a third-party company for their services, but you are paying to support a full-time billing staff and whatever technology they need to facilitate their job. This makes the opportunity to cut those costs through outsourcing all the more tempting and advantageous. In-house billing expenses include everything from training staff, acquiring the billing software, keeping the technology up to date, and educating them on current regulation changes as they arise.
There is also an opportunity cost related to the time and energy that in-house billing consumes when those resources are better directed in other areas. While dedicating some time and energy to the billing process can be useful—for instance, it may help make RCM more efficient—providing for your patients is the number one priority. Losing sight of that likely leads to patients migrating to other providers and, thus, fewer services to bill in the first place.
Pros of Outsourced Medical Billing and RCM
- Moderate degree of control and transparency
- A hands-off approach means resources can be focused on patient care
- Proven, streamlined methods for the most efficient billing possible
- Guaranteed legal and regulatory compliance
- Typically net cash flow positive in the long term than in-house
Critical to the priorities of the in-house crowd, it’s important to remember that just because a third-party company handles your billing doesn’t mean you can’t have agency over the process. Provided your outsourced RCM comes from a reputable vendor, the method offers all the necessary transparency. Effective communication between your practice and its RCM provider regarding billing operations is part of their job. Performance reports and other essential information concerning denial trends should be provided regularly. Meetings about managing your billing operations can be requested anytime if that isn't enough. This ensures an accurate look at your practice's financials 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; 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 often have predetermined methods for executing their billing responsibilities. This typically guarantees high accuracy, efficiency, and compliance with industry regulations. This is largely because managing RCM is their full-time job and the main priority of their business.
This means their business’ reputation rests on their ability to conduct the most responsible, efficient, organized, and error-free billing possible. Outsourced RCM companies also have a greater array of resources to allocate towards your practice’s billing and the time to ensure mistakes don’t slip through the cracks. Every process step is optimized to generate the most revenue without the distraction of patients in house and the risk of short staffing.
Simply stated, outsourced RCM companies are the utmost experts on billing procedures and legalities, an education they’re always continuing as each client only improves their billing proficiencies. This makes them second to none when it comes to adherence to governmental rules and regulations, compliance requirements, and responsible follow-up procedures. This event informs how RCM companies conduct the billing process, employing the most streamlined, efficient strategies and procedures possible for a given practice.
One potential drawback of outsourced RCM can be a higher upfront cost. However, despite this initial barrier to entry, 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 not to mention the improved gross revenue stream that should result from proper attention to getting paid properly for all your services! Some RCM companies have flat fees per chargeable medical encounter, while others may charge a percentage of your cash receipts. However, the result is less costly in the long run than in-house RCM.
Cons of Outsourced Medical Billing and RCM
- A lesser degree of control may be a point of contention
- Hidden/obscure fees and other potential contractual discrepancies
While agency, transparency, and control are still relevant factors of outsourced medical billing, the truth is your agency and control over the RCM process is lesser in many ways when compared to in-house. From a particular perspective, this is an advantage since this means resources and time can be allocated elsewhere in ways that could even help increase your practice’s efficiency. However, if maintaining a high degree of control over billing is a significant priority, the loss of control is something you may miss and could be considered a downside of outsourcing.
Like any contractual service, hidden fees can be an unfortunate reality of outsourced billing agreements. Negotiations between the RCM company and the practice are commonplace, and it is essential to set terms and realistic expectations and understand the total cost of the service. As with any agreement, especially one as valuable as your billing, it’s always essential to ensure you’re partnering with a reputable, trusted vendor and to stay as informed as possible before an agreement is signed.
Conclusion
When choosing between in-house and outsourced medical billing, a wide variety of variables are at play that extend beyond just resource allocation vs. control; the cost, margin for error, and ease of communication must be weighed considerably against each other. Understanding the pros and cons of each can make these attributes much more straightforward and uncomplicated to compare.
However, amid this discussion, the process of coming to your practice’s most fitting conclusion always goes the same way. Better practices mean a stronger revenue cycle and a stronger revenue cycle means your practice's continued operation and improvement.