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Do You Outsource Your Billing?
Our online survey found that most facility managers would rather not hand off this critical function. Are they missing out on a good thing?
Dan O'Connor
Publish Date: October 10, 2007   |  Tags:   Financial Management

Born to bill. That's how they describe Kim Orwig, CPC, CPC-H, at the Indian Wells Valley Surgery Center in Ridgecrest, Calif. It is a term of endearment for a certified professional coder who takes great pride in helping her center get paid more and get paid faster for the 2,000 cases it performs each year.

By all accounts, including the bank's, Ms. Orwig is quite good. Ask Ruth May, RN, CASC, the director of surgical services at Indian Wells, about her coder of three years, and the accolades and adjectives come pouring out: Thorough. Detailed. Capable. Talented. Aggressive.

And, according to industry estimates, increasingly rare. The shortage of medical coders has risen to critical levels in some areas - as great as 30 percent nationwide - and sparked a $5 billion outsourcing industry that has taken root in outpatient surgery.

What about you? Who's managing the coding, billing and collections in your facility? If you're fortunate enough to have a certified coder with the pedigree of Ms. Orwig, bow your head and thank your lucky A/R days. But in the absence of a highly qualified and aggressive person, does it make sense to outsource this function to a third-party billing service that will keep 3 percent to 8 percent of what it collects?

We put that question to a panel of owners and operators. If you're like most of those who responded to our online survey, you'd much rather pay your own person $15 to $20 per hour than a billing company $200,000 to $300,000 per year. As you'll see, however, those numbers might not tell the whole story. As Caryl Serbin, RN, BSN, LHRM, the president of Surgery Center Billing, says, "Nobody does it as well as a billing company that does it right."

1 in 10 outsources
You might think that as facility managers juggle so many tasks, they'd have little time to pursue unpaid claims and collections and would gladly turn to outsourcing as a solution. But our survey found that only about 10 percent outsource now and only another 2 percent plan to do so later, both numbers somewhat surprisingly low. (Survey results are based on 99 responses to our Web-based survey, 49 from ASC-based readers, 44 from those in hospitals and six from those in office-based practices.)

"Billing and collections are key functions that determine the viability of any [surgery center]. It's too critical a function to give to others to perform," says William L. MacKnight, the managing partner of Physicians Health Resources in Dallas.

Donna H. Smith, the administrator of The Surgery Center in Oxford, Ala., hasn't been satisfied with the two outside billing companies she's used. "In-house coding and billing allows for more control, and employees take ownership in that task, especially when they see the end results on a weekly or monthly basis," she says. "Plus, I am able to detect problems much earlier than I could when outsourcing."

Even the few facility managers who outsource their billing are less than thrilled about it. Seven out of 10 said they'd prefer to bring billing in-house provided they could find a certified coder. "The only reason that you would want to outsource billing," says Ms. Orwig, "is if you couldn't find a responsible biller."

One director of a joint-ventured ASC pays a third-party biller 4.5 percent of what it collects for her center, which averages to $25,000 to $35,000 per month. Given the choice, from both a cost and control standpoint, she'd prefer to bring billing in-house.

"When they have a bad collections month, they don't have to answer to my board, but I do," she says. "When I want to run a report on our accounts, I have to call the company and have them send me a report, which sometimes takes two days."

The top reasons for not outsourcing were not wanting to relinquish control of this function (58.3 percent), having a great coder (56.9 percent) and cost (23.6 percent). Also contributing to the lukewarm reaction were concerns that some companies might be unscrupulous (19.4 percent) as well as objections from physician-owners (16.7 percent) and management companies (12.5 percent).

Hidden benefits
There's little gray area when it comes to using a third-party billing service. You're either for it or against it. Those who like it, love it, lauding such benefits as:

  • Lower A/R days. A telltale sign you should consider outsourcing: your accounts receivable or outstanding days to collect payment keep rising. A third-party biller should improve both your cash flow and net revenue. "How much would your daily cash collections increase if your days in A/R were 45 instead of 60?" asks Judie English, vice president of business operations for Surgery Center Billing in Fort Myers, Fla.
  • Space. Imagine turning 100 square feet of business office space into revenue-generating clinical space. "How much is square footage for two or three people in your business office, plus their salaries and benefits? What about turnover and absenteeism?" asks Ms. English.
  • Optimal coding. A 5-percent increase in coding optimization alone can help offset the cost of a billing service and have a tremendous impact on your bottom line. Most outsourcing firms charge you a percentage of collections, meaning they'll keep a portion of what they collect, usually between 4 and 6 percent, which can easily be a six-figure sum. A certified coder's average salary is $39,046 annually or $18.75 an hour, according to the American Academy of Professional Coders 2003 salary survey (n=3,299 certified and non-certified coders). An outsourcing company that collects $4 million a year and charges 5 percent will cost you $240,000.

"Although this fee seems high, you have to consider how much it costs you to bill and if it's right for your facility," says Ms. English. "Is your coding optimized? What are your days in A/R? Each day's delay in receiving your reimbursement makes that payment worth even less given the time-value of money."

  • Access to certified coders. A coding firm can invest the resources to ensure its coding compliance is up-to-date. "Medical billing is getting increasingly complex. Payers are in the business of not paying. To combat that, we need to have folks who don't just enter data but also monitor rules and regulations and ensure you're complying with those rules," says Jonathan Doctor, CEO of PracticeXpert, a service company that handles billing for 300 docs in 26 states.
  • Worry- and hassle-free. Much of the appeal of outsourcing your billing is ridding yourself of the headache and aggravation of managing these complex tasks. Some companies offer such a full range of services - coding, billing and collecting - that you can wipe your hands clean. Surgery Center Billing, for example, will arrange with your transcription service to receive the operative notes at the same time you do. After coding from the operative notes, the company will send out bills, follow up on them and post payments through an encrypted Internet connection. The company will also evaluate and renegotiate your managed care contracts.
  • Peace of mind. Knowing that you're complying with federal regulations and never being without a coder are often-overlooked benefits. Just ask Debbie Hay, the vice president and chief operating officer of the Surgery Center Southwest in Dallas. Her coder was ill for a couple of weeks and her fill-in didn't know the coding and billing system. "If your coder goes on vacation or suddenly quits, what do you do? And what kind of audit process is in place to check their work? Those are two real concerns," says Lisa Rock, president of National Medical Billing Services.
  • Personalized attention. Some say that since they began outsourcing, their coding gets a more focused and higher level of attention than it did before. Experts say you should insist that your billing company assign the same coders to your center for the sake of continuity and comfort. "Find an experienced company that is small enough to see you as its No. 1 client," says Ms. Hay. "It should know your contracts forward and backward."

Grilling Your Billing Company

' How will the billing company ensure that it applies the billing guidelines specific to each payer for your facility? For example, some of your payers may not accept bilateral modifier '50; they may instead require that the codes be listed twice on the bill.

' How will the billing company ensure that it applies claims-processing edits specific to each payer for the ASC? For example, some payers don't apply the unbundling edits to their claims, or they modify the edits by applying some and omitting others.

' Will the billing company provide you with a current copy of its billing compliance plan? Such a plan was recommended by the OIG in the Nov. 30, 1998, Federal Register.

' Will the billing company provide proof that its personnel have received training in coding and billing and that they are credentialed (if your facility requires the use of credentialed staff)?

' What internal system does the billing company use to monitor the quality of its staff's work? For example, does a manager perform random audits of a small sample of claims on a regular basis?

' What documents must the billing company use to fulfill its contract? For example, must it have access to or copies of the operative reports, pathology reports or supply invoices when it bills?

- Lolita Jones, RHIA, CCS

If you do outsource
Some tips if you outsource:

  • Negotiate a one-year term that won't automatically renew.
  • Be firm on reports you would like to see monthly/daily.
  • View and approve the company's software program (avoid DOS-based software).
  • Know where the billing service's responsibility ends. Does it appeal claims once? Twice? How aggressive is it in resolving contract disputes?
  • Be sure the billing service and accounting service are on the same page as far as how financials are recorded.

Outpatient Surgery Reader Survey: Why You're not Outsourcing Your Billing

Our Web-based survey was designed to understand how surgery center owners and operators feel about using a billing company. Survey results are based on 99 responses, 49 from ASC-based readers, 44 from those in hospitals and six from those in office-based practices. Here's a look at two key questions.

Do You Outsource Your Billing?



No, but I plan to do so shortly


No, and I don't foresee our doing so


Why Don't You Outsource?

I don't want to give up control of this critical function


I have a great coder


It costs too much


Some companies might be unscrupulous


Our physician-owners would object


Our management company would object


I don't know where to turn for help


SOURCE: Outpatient Surgery Reader Survey, July 2004, n=99

Turning to the experts
In the end, the decision to use a billing company might come down to answering yes to most, if not all, of these questions. Does your coder submit claims within 24 hours of surgery? Is she aware of your state's prompt-payment laws? Are secondary insurance claims and patient billing current? Is she aware of the OIG billing requirements and HIPAA constraints on patient confidentiality? Are you billing electronically with the code sets required by HIPAA?

"We have a fabulous biller/ coder who takes her job very seriously," says Ms. May. "If that were not the case, and we were not collecting what we should, outsourcing is definitely something we'd consider."