The primary argument against outsourcing billing services is its cost. It's no secret that billing companies make money by charging a percentage of what they collect. Depending on the vendor, that's typically 4% to 10% of your gross — not a small expense — but it probably pales in comparison to the cost of hiring, training and providing benefits to a business office staff that isn't billing and collecting everything that you're due. We learned that the hard way. Early on we handled our own billing and coding, but quickly discovered that we were in over our heads and needed help.

Recognizing the need
When we opened the ASC of Stevens Point (Wis.) in August 2006, we decided to employ the business staff of the clinic next door in our medical complex to conduct our billing. The staff was already billing for many of our physicians' provider fees, so we figured that the similar process of billing for our facility fees could be absorbed within their workload without the need for additional staff.

This arrangement seemed ideal, since the staff had an existing positive working relationship with the physicians. In addition, having the billing staff nearby meant we could quickly answer administrative and patient questions.

By the middle of the next year, however, it became apparent that this billing arrangement wasn't running as smoothly as we'd hoped it would. Key financial indicators, such as the lag days between services rendered and their subsequent posting and billing, were increasing, and days in accounts receivable began to climb steadily, month after month. Initial denials grew more common.

We became concerned over the staff's limited knowledge of modifier usage details, lack of consistency in collections and acceptance of payors' explanations of benefits instead of ensuring that their reimbursements met our contracts' language. It was evident that the staff wasn't entirely prepared to manage, and was frankly overwhelmed by, the added volume of billing issues our start-up facility generated, further exacerbating our lagging reimbursement.

An evaluation conducted a few months later by an independent consulting firm singled out our troubled billing operations and emphasized the need for significant change to improve our cash flow. We considered hiring more billing staff in order to address the backlog, but it soon became clear that finding qualified outpatient surgery coders and billers in our area would be a tall order, more so since we'd need enough to cover when volumes peaked or staff took time off. That's when we started giving serious thought to outsourcing our billing.

Outsourcing's advantages
One of the biggest advantages outside billing companies offer is that they specialize in billing. That's their niche, and that's all they do. In smaller surgery centers with limited business staffs, employees wear many hats and juggle many balls. The collector may also be in charge of medical records or answering phones, and may not have the time or expertise to quickly and thoroughly appeal denials, for instance. But outside services are staffed by specialists in all aspects of coding and billing, collections and appeals.

The undivided attention these companies give to billing means they also, by necessity, are on top of the latest regulations and changes governing the reimbursement process. As an administrator, you've got many competing focuses and priorities to manage, and ensuring compliance with new regulations may monopolize your attention away from identifying and correcting payment errors or other business tasks, leading to a cash flow crunch. In a time of economic uncertainty and complex, constantly changing reimbursement rules, assistance in interpreting state, federal and third-party payor requirements can be a lifeline for surgery centers.

Another advantage of an outside billing company is that they're sufficiently staffed to respond to your demands. You can establish timeliness and quality standards for an internal staff, but you may find they're difficult to maintain in the face of peak volumes, vacation days and staff turnover. These factors can leave you backlogged, which quickly impacts days in accounts receivable and, ultimately, your cash flow. To cover these shortfalls, you might be able to recruit and hire additional coders and billers to your business staff; but as I mentioned above, well-qualified candidates can be hard to come by.

A billing company's reason for being, however, is to be adequately staffed with experienced, certified professionals. They have the ability to reallocate staff to cover vacations and time off as well as to absorb acute jumps in volume to maintain consistent operations. Outsourcing your business operations to them can also help to reduce disruptions and the need for retraining caused by staff turnover.

Cost considerations
Yes, billing companies can be a significant expense, but take a clear-eyed look at the true costs of handling your business internally. Here's what to consider.

There's the cost of staff, which includes salary, benefits, training and continuing education. Even before that, you need to have an available pool of qualified candidates, which may be limited depending on your location. You need adequate office space for your billing staff and storage space for your records, either on site or leased elsewhere. The staff needs to be equipped with computers, a printer, IT support, current software and reference manuals. Finally, you need the agility and flexibility to hire staff against turnover or time off. An internal business staff doesn't come cheap, either.

For us, outsourcing our billing has worked extremely well. We've seen our days in accounts receivable decrease to an average of 38 to 44 days per month, and we haven't experienced any backlogs since contracting with them. Our relationship has been positive and rewarding: They've provided us with advice and afforded us the confidence that we're coding and billing accurately and completely. Our outside company is truly an extension of our facility and part of its success.