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Introduction to medical billing services

Looking for a way to make your medical practice more efficient? A medical billing service could be the answer. These HIPAA-approved, professional services companies can take over your entire billing process: submitting claims to claims clearinghouses, following up on rejected claims, and tracking your accounts.

Medical billing services can take on a wider range of services, too. From collections to scheduling and other practice management services, medical billing companies can provide all kinds of administrative help to medical practices large and small.

Hiring a billing service should have a net positive impact on your revenues: the reduced costs and increased collections should more than compensate for the fees you pay. In addition, the less time your medical staff has to spend dealing with billing and insurance issues, the more time they can dedicate to working with patients.

This BuyerZone Medical Billing Services Buyer's Guide will give you everything you need to know to choose the best billing services provider for your practice or office, including:

• How the process works
• What services you can expect
• How to compare providers
• How much you can expect to pay

Once you've got all the information, you can submit a free request for medical billing services quotes and we'll connect you with several leading providers.

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Benefits of medical billing services

The main reasons to choose a medical billing service are all centered on saving money. In the long run, hiring a billing service should lead to more bottom line income for your practice – even when you factor in the billing company's fees.

The most direct cost savings come from eliminating much of the time office staff spend processing your claims. When you consider the costs of a full-time employee, including salary, health care, training, and insurance, you'll find it can be significantly cheaper to outsource your billing. Outsourced billing also allows staff members to focus on other activities.

Medical billing services can even do a better job than in-house staff in several areas. For instance, billing services constantly work to keep their staff up to date on changing codes and insurance regulations, which can reduce rejected and denied claims. Keeping up with these changes can be difficult for a busy practice.

Also, when claims are returned from the clearinghouse, medical billing services work to turn them around and resubmit corrected forms as soon as possible. In-house staff juggling several roles may not always be able to deliver this turnaround time.

In addition, medical billing services have a greater incentive to increase collections, since they're paid based on a percentage of the money they bring in. In-house employees are typically paid the same salary regardless of the amount they collect. Having a third party handle claims also provides some insurance against fraud or shoddy work, since both your internal staff and the billing provider will review every claim.

Finally, because they process high volumes of claims, billing services tend to get faster turnaround from clearinghouses than individual doctors: you may start seeing insurance payments in 10 to 14 days, instead of a month or two.

Are medical billing services right for you?
Medical billing services are useful for many different types of health care providers. On the small end, solo practitioners often don't have the time or the expertise to handle billing in-house: just keeping up with demands of building a successful practice is enough of a challenge. Larger practices, clinics, and hospitals may also see significant results from even a small percentage increase in collections, making a billing service worthwhile for them, too.

Not every health care professional is a good candidate for a billing service, though. If your volume of patients is low, it may be hard to reach a deal that makes sense for you and the billing service. For example, psychologists and chiropractors may only see 5 to 10 patients a day, and have relatively low reimbursement rates. For most billing services to cover their costs, they would have to charge a high percentage that would be unacceptable to these types of practices.

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How outsourced medical billing works

While each service may have slight variations, the general process of working with an outsourced medical billing service is fairly straightforward:

• You send patient information, insurance data, and diagnosis and procedure codes to the billing service.
• The service checks the data, completes the appropriate claim forms, and submits them to a claims clearinghouse.
• As claims are approved, explanation of benefits forms (EOBs) and checks are sent to you. Claims that are denied or rejected are returned to the billing company, which then corrects any errors and either resubmits them, or returns them to you.
• The outsourced medical billing provider delivers regular reports on your claims and payments.

Even if you want additional services, focus your evaluation first on these basic aspects of outsourced medical billing.

Communicating claims to an outsourced medical billing service
Medical billing providers can offer multiple ways for you to submit patient data and claim information:

• Paper-based – Mail, fax, or scan and email your paper-based claims to the provider. This may involve the least change to your procedures, but puts a more significant burden on the billing provider. Make sure the provider submits your claims electronically, even if you stick with paper.
• Email – The simplest method of electronic transmission – you simply type up the information and send encrypted emails to the billing service.
• Web-based – Log in to a secure web page – run by the provider or a third party – and enter claims and patient information directly into the billing system.
• Software-based – The provider installs billing software on your computers that you use to enter claims and get access to your data. It transmits data to the provider's system through a secure Internet connection.

Web- and software-based systems provide more structured data entry and better error checking than other methods. They also allow better cooperation between your staff and the billing service and let you pull reports and review claims status as needed. To get the most out of an outsourced medical billing service, these two methods are by far the best choice.

The service should do a "scrubbing" pass on the claims before submitting them. This helps catch missing information and mistakes in diagnosis codes before the claims are sent to the clearinghouse, and is another contributing factor to improved payment rates.

Claim submission and follow up
One of the most important characteristics of a medical billing service is how well they follow up on claims that are initially rejected by the clearinghouse or denied by the payers. Since problematic claims take more time to troubleshoot for the same amount of money as a normal claim, it’s very important to learn how much staff and time a service will dedicated to pursuing unpaid claims. The expertise of the billing staff in resolving coding errors, insurance mismatches, and other common reasons for denied claims can also go a long way to help you increase your collections.

Ongoing accounts receivable work is another critical aspect of your evaluation, if you choose to outsource it. While you'll still collect payments in person for copays, coinsurance, and non-covered expenses, an outsourced medical billing service can take care of billing patients with outstanding balances. The service should have people and systems in place to track aging claims and take measures to collect on them. In some cases, the service will even turn to a collection agency.

Receiving EOBs and payments
You can handle incoming checks and EOBs from the insurance companies in a couple of ways. First, you can have them sent directly to your office. However, you then have a responsibility to get the information back to the outsourced medical billing service, either by scanning the EOBs or by entering the information back into the billing system.

A bank lockbox can be more efficient in most cases. With lockbox service, your payments are scanned and electronically delivered to your provider, then promptly deposited into your account. This speeds the availability of your funds and ensures that the billing service gets the information they need. In fact, the funds turnaround is often faster than if you were collecting and depositing checks yourself.

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Additional billing services

Many medical billing services offer more than just claims submission and accounts receivable work. Make sure you evaluate the benefits of extras, from in-depth reporting to practice management and other services.

Reporting
The quality and availability of reporting is another distinguishing feature among medical billing services. With detailed and comprehensive reporting, you can better adjust your billing practices to improve revenues.

As part of your evaluation, get sample reports from each of the providers you're considering. Compare how many options you have for sorting and filtering the information – is it easy to look at only the largest claims, or the oldest, or all claims for a single person?

Monthly overview reports should lay out your entire billing picture: the total number and value of claims submitted, paid, rejected, and still outstanding. The provider should also report on all denied claims and what steps they've taken to correct them, as well as those that have been written off or turned over to a collection agency. Finally, providers should offer an easy-to-read accounts receivable aging report so you can track how effective the service is at collecting on claims 30, 60, and 90 days after the claim was submitted.

If you use a web- or software-based connection to the billing service, you should be able to pull additional reports on your own at any time. Also, look for a system that lets you export data so you can do your own analysis.

Practice management and EMR
Some billing service providers also offer medical practice management (MPM) and/or electronic medical records software (EMR). These systems are important purchasing decisions on their own, so avoid making a decision based on convenience. However, using one provider for all your office software systems does simplify integration issues – and a completely integrated system is quite powerful.

For example, with an integrated billing, MPM, and EMR system, doctors can enter a diagnosis during an exam, and that code is automatically stored on the patient's electronic chart and forwarded to the billing service along with the relevant insurance and demographic information. To achieve the best level of integration, make sure the systems you choose use the industry-standard HL7 protocol.

More common than complete MPM or EMR offerings among billing services are basic practice management features that are built in to their billing system. The most common example is scheduling and appointment management: since the system needs to have demographic and insurance information on all your patients, including scheduling features is a natural fit.

Additional billing services
Some billing services offer other financial services as well. For example, medical financing, which is similar to factoring, can help you address short-term cash flow problems. Medical financing can provide a loan based on your expected receivables at a better rate than you'd get from a bank. Other providers may incorporate accounting features into their software packages, or provide an easy way to export financial data for use in a standalone accounting program.

Providers can also provide consulting and/or training to help you improve your coding and claims submission processes. They can combine their thorough understanding of your current operation with the experience of many other providers to recommend the best methods to reduce rejections or improve collections.

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Comparing medical billing software

In most cases, you'll be using a software system provided by the vendor to enter information and get reports. This includes both web-based systems and software that runs on your computers. Here are some factors to consider when evaluating medical billing software.

Who owns the medical billing software?
You'll find that some billing services develop their own applications, while others license the software from a third party.

Companies that own their own systems have the advantage of being able to control the future of the system. Your requests for improvements and bug fixes are more likely to be heard, and you can be sure that the software will continue to be supported and upgraded as long as you stay with the service.

On the other hand, services that license their platforms from a third-party developer can be more focused on actually running the billing for their clients and getting claims paid, since they don't also have to do software development.

If you choose a billing service that licensees their software from another developer, make sure you do some investigation of that company, as well – be sure that they a strong customer base to keep them in business for the long term. Note: one quick way to evaluate a company is to track the history of releases; continuous improvements can be a good indicator of support.

Web-based vs. local software
You'll probably encounter two types of medical billing software: web-based and local software. Web-based systems, also known as ASP solutions, require you to log in and enter your information through a web site, while local software runs on the computers in your office. Since a central part of medical billing is transmitting protected patient data to the provider, both options must meet stringent HIPAA security requirements.

Running your software locally may increase the burden on the staff that maintains your computers, but vendors should offer considerable technical support if needed. Using a web-based service means that you won't be able to access your information if your Internet access goes down.

Both options can provide secure, reliable medical billing. Unless you have internal IT staff with a strong preference for one method or the other, it's best to keep your options open.

Usability
When evaluating billing providers, make sure you get a hands-on demonstration of the software you'll use to enter your claims information. When comparing different software clients, there's no substitute for actually sitting down and entering the information yourself.

See how easy it is to enter and find information. Try your most common tasks – entering a typical bill, looking up an individual patient's claims status, or reviewing your oldest claims. Are the commands and buttons intuitive and easy to find? Can you undo mistakes or retrace your steps easily?

It may help to have one of your billing staff go through this part of the evaluation. They're more familiar with the process and are in a better position to evaluate the system’s usability.

Security
The application you choose must include security measures that meet HIPAA standards and ensure patient confidentiality.

• SSL is a standard method for communicating securely over the Internet as well as a HIPAA requirement.
• Multiple access levels give you the ability to allow different staffers varying amounts of access: billing clerks, for example, could be allowed view-only access to diagnoses and procedures.
• Change logs keep track of what information users access and/or edit, which can be essential if security is compromised.

For even greater security, some medical billing software systems allow you to restrict access by time of day or IP address, meaning only certain computers would be allowed to access the data at all.

Infrastructure
Whether you enter claims through a web client or local software, your critical billing information and confidential patient data is all stored on the provider's computers once you transmit it. Ask about the type of infrastructure they have in place to see how safe it will really be. Among the important safeguards they should have are regular offsite backups, physically secure computers, backup power, and redundant servers.

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Choosing a medical billing service

Deciding which medical billing service provider to work with is more than a matter of checking features off a list and comparing prices. You'll be entrusting this provider with a central component of your practice's success – in some ways they become an extension of your own office. It's critical to choose a company that you can work with closely.

A good starting point is looking for providers with significant experience – including familiarity with your type of practice. You don't want to be the only chiropractor among your provider's clients, for example. This ensures that the service understands the codes and procedures that apply to your specialty.

Nor do you want to take a chance on a provider who's just getting into the business. Make sure the provider you work with has a track record of successful billing. More specifically, verify that they're familiar with the insurance companies you work with most and have experience in the states you cover.

Because they handle personal health information – protected information under HIPAA – all medical billing services must be 100% HIPAA compliant. They're covered through a "business associate agreement" that allows you to send protected data to them.

Also, verify that the provider can handle the newer National Provider Identifier (NPI) system, which assigns a unique 10-digit number to all health care businesses for use throughout the insurance system. The NPI system is already being implemented, and every health care provider, insurer, and clearinghouse is required to use it to by May 2008. While the rollout of NPI may face ongoing delays, your billing provider should be ready for it.

Overall approach
The provider should give you a good sense of their overall approach to the billing process. Some stress the technological advantages of their software, while others emphasize the expertise of their staff in resolving denied claims. Choose a provider whose strengths complement your needs.

Ultimately, the success of their collection efforts depends on the quality of the entry work your staff does: if you don't give them good data to start with, their job becomes much more difficult. They should work to help improve the coding and processes on your end, as well as offer detailed reports that can streamline your collections.

Billing service expertise
The provider's billing specialists will heavily influence the overall success of your outsourced billing. Find out what training the service provides for their staff – top-notch providers offer continuous education to keep their employees on top of changing codes and insurance regulations.

Ask how the service is set up: some will offer you a dedicated account manager who will manage all your interactions with the service; others have specialized teams dedicated to handling specific parts of the claims process like denials.

Also, inquire where the staff is located: outsourcing to countries worldwide is common in medical billing. Outsourcing can reduce your total costs, but make sure the education, training, and English language standards are as high for the outsourced workers as they are for US staff to avoid any drop-off in service levels. Read more about offshore outsourcing.

Checking references Ask the billing services for references to practices similar to yours in size and specialty. While you're sure to be referred to very satisfied customers, questions like these can help you determine how good a match the service is for your practice:

• How long have you been working with this provider? What duties are they handling for you?
• Overall, how satisfied are you with them as a billing provider?
• Have they complied with HIPAA requirements to your satisfaction?
• How have your collections changed since you started working with this provider?
• What percentage of your claims are accepted on the first submission? And overall?
• How effective are they at pursuing unpaid claims?
• What's the best thing about working this service?
• How do you get information to them? Is the process intuitive and efficient?
• Do your patients notice any difference in billing or collections?
• Does your staff feel like they can count on the provider to resolve problems?
• What was the biggest challenge about working with this company?
• Do you intend to stay with this service for the long run?

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Pricing for medical billing

Medical billing services most often bill a percentage of the collections they bring in for your practice. This means that the amount they take in is completely dependent on their success: the more money they collect, the more they earn.

It's natural to try to get the lowest percentage you can. However, the real bottom line number for your business is your net income after you account for the billing service's fees: even though a better service might demand a higher percentage of your collections, their total collections can make up for that difference and still result in more income for your practice.

Keep in mind that one of the biggest differentiators between billing providers is how good they are at resolving denied claims and collecting on your outstanding accounts. Simply choosing the lowest cost option is unlikely to get you the best provider.

Example pricing
The percentage you pay can vary quite a bit, depending on a couple of factors. The most significant is the average volume and size of your claims. The more claims you bring in and the larger dollar amount per claim, the lower the percentage you'll have to pay. Surgeons, whose average claims run into the thousands of dollars, get charged less per claim than therapists who only get $25 to $40 per claim.

The total volume of claims is also important. A single psychologist who treats 20 or 30 patients a week will pay a much higher rate than a five-doctor practice that sees 150 patients or more. You'll have to work with the provider to estimate the total volume and average amount of claims you process to help determine your exact pricing.

The other major pricing component is which services you add onto the basic billing responsibilities. For example, including accounts receivable collections from patients instead of just claims handling can increase the percentage you'll pay. Faster turnaround of your claims or 24 x 7 support will also command a higher percentage.

Given those factors, the fees for medical billing services typically range from 4% to 8%, with most types of practices paying 5% to 6%.

You may also wind up paying additional set fees for patient statements, delinquency notices, data exports, and other activities. Make sure you get a full breakdown of all the costs associated with your account before you sign a contract.

Adding practice management software or electronic medical records packages can change how you're billed, in addition to how much you pay. Typically, those services are priced either with an upfront licensing fee or a per user monthly charge, independent of your collections activities.

Contracts
Billing services take some different approaches to contracts. Some prefer to put you on an auto-renewing 30- or 60-day contract. You may have to pay an upfront setup cost, but once you're up and running, you can use the service for as long as you'd like, and cancel any time with just 1 to 2 months notice.

Other providers prefer that you sign a longer-term contract: one, two, even three years. In some cases, the tradeoff is that the provider will assume the setup costs. This lowers your initial costs, but means you do have to commit to a longer time period. Be sure to weigh how comfortable you are with your purchasing decision before committing to a long-term contract.

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