Patient Billing Services vs. In-House Billing: A Complete Cost Comparison

Almost all healthcare practice owners have the option of either deciding to outsource their medical billing or not. What influences whether this is answered positively or otherwise has a great deal to do with the practice and the provider. Some physicians want to hold all collections inside themselves and in-house, while most would just as soon contract that billing service outside. To choose the best alternative for you, it is crucial to carefully evaluate the requirements of your practice.

The right selection varies depending on several factors, including the age of the business, the size of the local labor market, and the nature of the business economy. In addition to clinical services, billing, and revenue cycle management are factors that are very important to your project. Your income depends on them, so the decision to do these services should not be taken lightly.

Therefore, it is important to carefully evaluate your practice’s costs, staffing, and volume meter before deciding. First of all, you need to be clear about the pros and cons of both in-house and patient billing services.

According to the Journal of Medical Practice Management (2018), outsourcing billing achieves an 80% first submission payment rate versus 68% for in-house billing.

Understanding In-House Billing

In-house medical billing is the operation or management of medical billing and coding inside a healthcare facility (such as a hospital or medical practice) with the internal staff and resources.

In-house medical billing is normally associated with software and technology used to generate bills, handle claims, collect collections, and yield payer denials.

Costs Involved in In-House Billing

1. Staff Salaries and Benefits

• Investment in hiring the billing specialists or coders staff salaries & benefits Apart from salaries, there are also hiring costs such as benefits and other incentives.

2. Training and Certification

• Every day, the billing team needs to be continuously trained on new medical codes or payer regulations changes. Upkeep of this kind comes with a price.

3. Billing Software and Technology

• All functions require billing software (and therefore ongoing costs to purchase, install, and maintain, especially with higher-level functionality such as analytics & claims management)

4. Office Space and Equipment

• the office space needed for the billing personnel, computers, and communication systems

5. Hidden Costs

• Revenue loss from inexperienced staff or improper workflows can also compromise revenue just as much as an error and denial in cost due to a human mistake.

Advantages of In-House Billing

• Control: Direct oversight of billing processes.
• Immediate Access: Instant access to billing data and adjustments.
• Customization: Ability to tailor processes to the practice’s specific needs.

Disadvantages of In-House Billing

• High fixed cost.
• Time-intensive management.
• Risk of inefficiencies when staff come and go.

Understanding Patient Billing Services

Patient billing is a service that involves sending the billing process to a third-party company that provides revenue cycle management. These companies are good for insurance verification (prior authorizations), claims submission, and following up on the whole file from billing to collections.

Expenses Which Are Incorporated in Billing Outsourcing

• Service Fees
  The common fee structures in billing companies are where they take a percentage of the billed revenue.
• Installation & Integration Fee
  Some of the companies may also require you to pay them an upfront fee for connecting your system to their services.
• Miscellaneous Costs
  Extra charges may be charged for extra services such as Patient Identification or handling certain accounts.

The Benefits of Patient Billing Services

• Cost Savings: A service eliminates the costs that would otherwise be incurred to pay salaries, train, and purchase software for the staff.
• Expertise: The possibility to turn to experienced professionals who follow the current legislation of the sphere.
  Efficiency: Sustained and faster claim processing and fewer denial rates.
• Scalability: Perfect for practices in their early stages or for practices that experience changes in the number of patients.

Drawbacks of Patient Billing Services

• Less Control: Lack of direct supervision of the billing processes.
• Potential Hidden Fees: Some of these providers may have very intricate tariffs.
• Dependency: Reliance on an external supplier for the key service.

Patient Billing Services vs. In-House Billing: Cost Comparison

1. It differentiates between the fixed costs and the variable costs.
However, implementing in-house billing has also its downside because some specific costs are fixed. Such costs are the personnel’s wages, office overheads, and licenses or subscriptions to software which do not alter with the number of patients treated.

2. Staffing and Operational Costs
In-house billing involves many people who are hired to deal with the task, and this leads to more expense. Outsourcing, however, takes all these in one basket and charges you a service fee for the whole thing.

3. Revenue Impact
Quite obviously, efficient billing has an impact on what is the most important number for any firm, its revenues. The outsourced billing companies tend to have a higher claim approval status which could also make the practice get more income. On the other hand, in-house teams may experience the problem of collecting funds for the organization, particularly where they are not adequately trained or have the necessary tools.

4. Technology and Maintenance
The direct expenses are incurred with the storage of billing software and hardware in-house. Outsourcing does away with these costs because billing companies utilize their IT infrastructure – most of which features sophisticated analytics and reporting capabilities.

5. Hidden Costs and Risks
Again, intermediate payments are not without their risks; employees may make mistakes, the employer may reject a payment term, or employees may be absent or have turnover. Outsourcing minimizes these risks given that the service is constant and expertise is gained in the process.

Key Considerations for Your Decision

Consider the following factors when deciding between in-house costs and outsourcing.

• Practice Size and Volume
  Small practices with limited billing needs may benefit from outsourcing, while larger practices with complex billing processes might prefer in-house teams.
• Budget Constraints
  Assess your practice’s financial capacity to support fixed costs versus variable costs.
• Desired Control and Customization
  Practices prioritizing control and customization may lean toward in-house billing.
• Revenue Cycle Performance
  Evaluate your current claim approval rates, denials, and collection times. Outsourcing may improve these metrics if they are below industry standards.
• Scalability Requirements
  Growing practices may find outsourcing more adaptable to fluctuating patient volumes.

Patient Billing Services vs. In-House Billing

Whether to choose in-house or outsourced billing, majorly depends on factors like usability, cost, and efficiency. In-house billing provides increased internal control and potential return on investment but also involves increased costs and personnel challenges. In contrast, outsourcing is more cost-effective, transparent, and consistent but can lead to financial mismanagement and hidden costs. Finally, the selection follows the specific needs of the practice and available resources to ensure the best possible results.