Connections for Success



Should You Outsource Billing?
Greg Koelling

Deciding to handle your billing in-house or to hire an outside billing company is an important decision with significant implications for your practice’s long-term financial health. It is a good idea to look at all of the pros and cons to ensure your decision is the right one.

Compare the Costs

Typically, a billing company demands a 6%-9% commission on all money they handle. In other words, if your practice earns $1 million in business annually, the billing company would take $60,000-$90,000 of that amount. Bringing billing in-house can reduce these costs to around 3% of your take, or $30,000 out of $1 million in business. So, this might seem like a straightforward decision that saves $30,000-$60,000 annually, but keeping billing in-house is not that simple. One hard truth is that unless someone on your management team has a fundamental understanding of coding, billing and collecting, it would be better to outsource. The additional cost can be balanced out by the additional revenue that the billing company’s expertise will help generate.

Look at the Potential Drawbacks

Billing companies generally charge a setup fee that ranges from $500-$3,000. This acts as a disincentive for physicians interested in switching to a competing billing company because they will have to pay the fee again. In addition, billing companies usually use a contract that locks the practice into a specific contractual period. The contract generally specifies that you can only break it if you are dissatisfied with the company’s services and can prove that the company is not meeting industry standards. However, this can be challenging because industry standards are not well established or easy to prove. Furthermore, many billing companies set up a system where checks are sent directly to them instead of the physician. The billing company then distributes the money after it draws its fees. Obviously, you need to trust a billing company to be transparent concerning its control over your funds. If trust is lacking, it can complicate the relationship. The most common complaint about billing companies is that they sometimes fail to chase the money. Since they are paid on a percentage, their time and energy tend to go into handling bigger customers and claims.

Consider the Possible Benefits

Handling billing yourself can be complicated and the requirements are constantly changing. Keeping billing in-house requires you to hire at least one person possessing the necessary skill set. That person would need to be educated on billing and stay current on billing procedures, coding changes and modifiers. Regularly obtaining continuing education on billing practices is critical. A good, professional billing company can streamline your billing processes and eliminate a lot of headaches. Billing is not taught in medical school, and it is not something you can easily pick up because there is too much at stake to wing it. You need to compare the expenses of hiring a billing company with the costs of training and employing people to perform in-house billing.

Stay Aware of the Issues

Regardless of your billing decision, you will always have billing responsibilities. You have to ensure that the information sent to the billing company is accurate. Additionally, if a patient calls with a billing problem, you are the one who is ultimately responsible for resolving the matter.

Sidebar: Steps to Consider When Hiring a Billing Company

  • Determine whether the billing company is familiar with your specialty.
  • Ask if you have to purchase software that integrates with the billing company. Inquire about software installation, troubleshooting and upgrades.
  • Find out whether the company will have access to your accounts and whether you will be able to review the accounts as they stand with the billing company.
  • Decide the parameters of the billing company’s role. Your contract has to specify the details concerning claim submissions and collection processes.
  • Set a method for keeping track of what the billing company is doing. Ask if you can audit your own records, whether by request or via an online access system.
  • Find out what the billing company’s average day in receivables is. This tells you how long the average claim goes before it gets paid and is an indicator of the company’s ability to collect claims.
  • Fully understand the billing company’s contractual termination requirements.
  • Determine whether the company outsources services or performs everything in-house.
  • Ask if the billing company’s staff are certified coders and billers and if they have continuing education practices to stay current on changes in coding and billing.

For more information, contact Greg Koelling at [email protected] or call him at 312.670.7444. Visit to learn more about our Health Care Group.

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