Outsourcing: One ASC's Experience When Harrisburg, Pa.-based Susquehanna Valley Surgery Center opened its doors to patients in May 2000, the founders thought that outsourcing billing would take at least one headache off of their minds. Unfortunately, the reality was somewhat different. Susquehanna Valley selected a relatively large, out-of-state outsource firm that specializes in ASC billing. The outsource firm would dial in to the ASC to do the billing, allowing Deb Leib, the ASC's administrator, to watch billing operations carefully. But in October, the ASC realized that something had gone wrong. Cash was coming into the ASC only in "bits and pieces," says Ms. Leib. What's more, many claims were being denied. That was likely because the outsource company wasn't familiar with Pennsylvania billing practices, she says. By the end of the year, "we were in a cash flow crunch," she recalls. As a result, the ASC decided to bring the billing operations for the 14,000-square-foot ASC in-house. But that decision posed an added challenge, because little space was available to accommodate billing. Initially, the ASC looked to hire a person to work in the ASC at night. But then another solution developed: having the biller work from home via computer. Now, not only does the full-time biller work from her Harrisburg-area home and dial in to the ASC's billing system, but another half-time biller, who does follow-up, works remotely from her Harrisburg-area home. What's more, Susquehanna located an experienced coder who works even more remotely - from her home in California. The result, after having brought billing in-house in April 2001, was a "total cash flow turnaround," says Ms. Leib. Now few claims are denied, and the ASC's cash flow has enabled dividend payouts to investors. - L.P.

There's comfort in thinking you can hand off the complex, labor-intensive billing and collecting process of to an outside firm. You just sit back and watch the dollars roll in while the outside firm does all the work, right? Unfortunately, as you might expect, the reality is somewhat more difficult and complicated.

In this article, we'll help you decide whether outsourcing your facility's billing is a viable option. To start, let's look at some of the big-picture issues you'll need to consider.

Better systems and skills
In one sense, your decision to outsource billing is no different from similar decisions scores of American businesses face all the time. You outsource because the outside firm offers better skills than you can obtain on your own, says San Francisco, Calif.-based consultant Nan Andrews Amish of Big Picture Healthcare.

What's more, because the outsource firm is more efficient and effective than your operation, theoretically you'll experience fewer errors - and ultimately, your billing will be more cost-effective.

You also may want to outsource simply because of growing complexity. Billing is "becoming so complicated, so complex, that getting pros to do it by outsourcing it is a really viable alternative," says Sherry DiDomenico, practice administrator at The Pediatric and Adolescent Medicine Centers of Philadelphia.

Major issues
Tempting as the idea of making your facility's billing someone else's headache is, outsourcing doesn't means you can literally walk away from the task. To the contrary, you'll need to stay closely involved.

If you use an outsourcing firm, you still remain responsible for the billing function, says Federated Ambulatory Surgery Association executive director Kathy Bryant. You can still be subject to charges of fraud, though you might place language in the contract to obtain damages that result from the billing company's actions.

Similarly, some facilities get lulled into a "false sense of security" that they no longer have to worry about compliance issues, notes Fort Washington, Md.-based coding and reimbursement consultant Lolita M. Jones, RHIA, CCS. "But ultimately, the facility is still responsible," she says.

What's more, don't think that handing off billing means that you automatically eliminate all your coding and reimbursement staff. You'll still need someone to serve as a contact person between the billing company and your office.

With these caveats in mind, here are some triggers, courtesy of Ms. Amish, that may signal a need to outsource billing:

• Your revenues decrease in spite of higher patient loads.
• You're convinced that your collection rates will be much higher with an outside firm.
• No one on staff is expert on coding and reimbursement.
• Your billing person is stressed out and constantly asks for more resources.
• You worry about billing.

Pluses and minuses
Like most everything else in health care, outsourcing billing has its good points and its drawbacks. In deciding whether such a setup will work for you, consider the following.

On the plus side, sending your billing function out of house solves the problem of finding and retaining qualified billing staff. Locating certified coders - by all accounts a significant challenge - becomes your billing company's problem instead of yours. And you obviously don't have to worry about ongoing education and development for billing staffers.

You may also eliminate some quality concerns. In a busy surgical facility, your coder may perform other functions, such as answering a phone at the front desk, says Judith English, vice president of Surgery Center Billing, LLC, sister company to Surgery Consultants of America, Inc., in Fort Myers, Fla. But coding takes concentration and interruptions can cause mistakes. Outsourcing coding and collections should help eliminate errors that can arise from such distractions.

Outsourcing also saves precious floor space. You'll probably capture the square footage you'd need for two workstations: one for a coder, one for a reimbursement person. Instead, you can devote that space to patient care.

One drawback involves a potential loss of control. Simply put, "You're not with them [your billing staff] every day," says Ms. DiDomenico. Unless you represent the billing company's biggest client, you may not get full-focus attention, says Ms. Bryant.

Related to that is finding out who, exactly, is doing the work. Billing companies have many different clients and may distribute their talent to meet the needs of those customers. The high-level people who made the sales call may not be those who will perform the work. Surgery Center Billing, though, retains a focus by having one team devoted exclusively to one surgery center, says Ms. English. The team typically consists of three people: a coder and two billers-collectors.

Checklist for success
To help guarantee a successful outsource solution, make sure that the billing company you choose has specific experience and training in outpatient surgery billing issues, stresses Ms. Bryant of FASA. Also look for:

• Track record. Ask for net revenue/procedure by payer (and put those numbers up against your current ones).
• Reasonable fees. You might pay a fee per claim or a percent of monies collected. Medorizon, for instance, has been paid on a percent of collections ranging from 1.20% to 4.75%, says president and CEO Timothy E. Tobin. The median is 2.5% to 3%, he says.
• Client referrals. Can the firm talk about turnarounds and success stories?
• How success is monitored. Can it reduce the number of days bills sit in accounts receivable, for instance?
• Type and frequency of reports. Can it provide both detailed and top-level reports?
• Experience and training of staff. Ask for copies of coding credential certificates of the staff that will handle your account, suggests Ms. Jones, and review that information each year to make sure skills levels are maintained.
• Record keeping. Does the firm have a systematic method for filing claims that allows it to resurrect data as needed?
• Auditing. Are there audits of bills and reports?
• Guarantees. Find out what the company will guarantee if it commits a major mistake.

More issues to check
Be sure to get a copy of the company's compliance plan, says Ms. Jones. Pay special attention to two risk areas, identified by the Office of Inspector General in a 1998 compliance guidance for third-party medical billing firms:

• Billing for services that aren't documented.
• Duplicate billing or unbundling (that is, assigning multiple codes when one or fewer codes would suffice).

What's more, make sure that the billing firm has access to the billing guidelines for the appropriate state. Ms. Jones finds this to be a "major disconnect." For instance, an outsource firm located in Florida working for an facility located in Ohio needs to obtain updates pertaining to Ohio. You might agree to make copies of those updates and forward them to its billing firm, or perhaps the firm can obtain the updates on the Internet.

Billers must know how to handle your specific case mix, says Ms. Jones. If your facility performs complex hand surgery, for instance, make sure the billing firm knows how to code those procedures correctly. You may want to make the surgeon who performs those complex cases available to the outsource company to ensure that the bills are accurate.

Finally, find out how often the billing firm reviews usual and customary fees, as low fees are quite common, says Mr. Tobin. Also ask whether the firm will help with managed-care-contract negotiations.

Louis Pilla ([email protected]) is a freelance healthcare journalist based near Philadelphia, Pa.