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If you’ve never thought about whether your practice should outsource medical billing, pretend for a second that your most experienced billing specialist just put in her two weeks’ notice. After eight years, she’s leaving for a larger healthcare system, taking with her intimate knowledge of your payers’ requirements and the nuances of your specialty billing.
Meanwhile, three insurance companies recently changed their coding requirements, and your remaining team is struggling to keep up with the updates. And your aging receivables are climbing, plus you just discovered a batch of claims that should have been submitted weeks ago.
To make matters worse, your practice management software needs an expensive upgrade as soon as possible — one you’ve been putting off for months.
This perfect storm of billing challenges isn’t even a worst-case scenario, as practices around the country struggle with these issues and more all the time.
In other words, it’s no wonder many practices think about outsourcing medical billing to an experienced partner like Enshored. Across healthcare, medical billing has become increasingly complex, demanding more resources, expertise, and technological sophistication than ever before.
The numbers tell a stark story, too: 77% of healthcare providers report they wait more than a month to collect payments, with 74% requiring multiple statements just to collect a single payment. Despite the digital transformation in healthcare delivery, 75% of practices still rely on paper and manual processes for collections — leading many to explore medical billing outsourcing as a solution.
But never mind about our imaginary practice above. Think about your typical day.
How much time do you spend dealing with billing-related issues instead of focusing on patient care? How many hours does your staff devote to following up on rejected claims, updating patient information, or trying to keep up with ever-changing payer requirements?
For many practices, these administrative tasks consume valuable time and resources that could be better spent improving patient care and growing the practice — which is why more healthcare providers outsource medical billing services to specialized partners.
In this article, we’ll explore the financial realities of both in-house and outsourced billing services, helping you understand the true costs and potential benefits of each approach. Most importantly, we’ll also examine how to determine if it’s the right choice for your practice.
Medical billing has evolved dramatically over the past decade. Insurance requirements have become increasingly complex, with payers frequently updating their policies and requirements. Patient responsibility for payments continues to rise, making collection processes more challenging than ever.
Meanwhile, your team has to juggle these growing demands while staying current with billing regulations, coding updates, and payer-specific requirements. It’s no wonder that practices increasingly turn to outsourced medical billing to solve these challenges.
But the solution isn’t always obvious. While some practices continue to thrive with well-run in-house billing teams, others find that outsourced medical billing services provide the expertise, technology, and efficiency they need to overcome these challenges.
The key lies in understanding which approach truly aligns with your practice’s goals and budget.
When evaluating whether to outsource medical billing, many medical practices focus solely on direct costs such as salaries versus service fees. However, this oversimplified comparison overlooks crucial elements of the financial equation. To make an informed decision about medical billing outsourcing companies, it’s essential to examine the complete financial picture.
After all, the expenses associated with in-house billing extend far beyond basic payroll. Your practice incurs numerous often-overlooked costs related to staff expenses, technology and infrastructure, and hidden operational factors.
Staff Expenses
Beyond base salaries for billing staff and managers, you must account for comprehensive benefits packages that include healthcare, retirement contributions, and paid time off. Overtime payments become necessary during busy periods or when addressing backlogs. There’s also the ongoing need for training and certification, which ensures your staff stays updated with the latest billing codes and regulations. High turnover rates can lead to substantial recruitment and hiring costs, not to mention the expense of temporary staff during vacations or medical leave. Additionally, transitions within the staff can result in lost productivity, impacting your overall efficiency.
Technology and Infrastructure
Maintaining an in-house billing department requires significant investment in technology and infrastructure. This includes purchasing and updating practice management software licenses, claims scrubbing tools, and payment processing systems. Regular hardware upgrades and maintenance are necessary to keep systems running smoothly. Ensuring security measures for HIPAA compliance is not optional and can be costly. The physical space required for your billing department adds to your utility expenses, and there’s the ongoing cost of office supplies and printing.
Operational Costs
There are also several operational costs that aren’t immediately apparent — but that significantly affect your bottom line. Physicians often spend valuable time reviewing billing issues, which takes them away from patient care. Management oversight of billing operations demands additional time and resources. Regular compliance training is essential to stay abreast of ever-changing regulations. The process of correcting errors and following up on rejected claims requires meticulous attention. Administering patient payment plans adds another layer of complexity. Delays in billing can lead to bad debt and write-offs, while capital tied up in aging receivables represents opportunity costs that could have been invested elsewhere in your practice.
When considering the financials of outsourcing medical billing, ask yourself:
The answers to these questions will give you a clear picture of your current costs and potential savings. The lowest cost isn’t always best – consider collection rates, cash flow, and staff productivity.
If you’re leaning toward medical billing outsourcing, take this quick quiz to see where you are and what’s best for you.
Question 1: What are your billing operational costs?
Calculate your monthly billing costs (including staff salaries, benefits, software and overhead) as a percentage of collections:
Question 2: What’s your current claim denial rate?
Track your first pass denial rate over the past 3 months:
Question 3: What’s your average days in A/R?
How long does it take to get paid on claims:
Question 4: What percentage of staff time is spent on billing and collections?
All hours spent on billing-related tasks by clinical and administrative staff:
Question 5: What’s your collection rate?
Calculate the percentage of billable charges your practice collects:
Your Results
High Priority to Outsource (Mostly 3s and 4s)
If most of your answers are in the higher ranges your practice is probably struggling with billing operations. Consider outsourcing to a BPO provider such as Enshored. Denial rates over 5%, A/R days over 30, and high operational costs indicate outsourcing medical billing services could be a big help.
Consider Partial Outsourcing (Mix of 2s and 3s)
With some challenges in some areas, your practice may benefit from partial outsourcing. Consider starting with denial management or patient collections.
In-House Billing May Be Fine (Mostly 1s and 2s)
If you scored well across most areas, your in-house billing is probably working well. But before you sit back and relax, consider:
If the assessment suggests it might be time to outsource medical billing services, here’s a step-by-step plan to get started.
1. Collect Data and Set Goals
Gather your financial data to establish your baseline and set targets:
Then, set specific, measurable goals for your outsourcing project:
Short-term (First 90 days)
Medium-term (3-6 months)
Long-term (6-12 months)
If you need a benchmark, research suggests that outsourcing billing causes collection rates to increase to 95% (compared to 70% for in-house billing), A/R days decrease by 10-30%, billing errors go down by 50% or more, and operational costs dip by 30 – 40%.
2. Choose the Right Partner
Look for these key factors:
3. Execute the Plan
Outsourcing medical billing typically takes 3-4 months:
4. Prepare Your Team
Clear communication is key to a smooth transition. Schedule regular updates with your staff to discuss timelines, changes to daily workflow, new roles and responsibilities, and performance expectations.
There’s a strong financial case to outsource medical billing, but remember that partnering with a medical billing outsourcing company shouldn’t just be about cost savings. Outsourced medical billing can help you create a more efficient, profitable practice that better serves your patients.
Take care, though — outsourcing requires that you regularly monitor both financial and operational metrics and constantly communicate with your vendor. Staying actively involved in strategic decisions helps ensure your goals stay on track. Your team must also stay engaged throughout the process, so keep them involved and informed.
Most importantly, view medical billing outsourcing as an ongoing journey rather than a destination — continue evaluating and refining your approach so you can get the best possible results. By following the tips and action plan in this article, you’ll be well-positioned to hit your outsourcing goals — and create long-lasting improvements in your practice’s financial performance.
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