Radiology Billing: 
Inhouse or Outsource?

Radiology Billing: Inhouse or Outsource?
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Radiology Billing: Inhouse or Outsource?

Decisions, Decisions

In 2001, I wrote the first version of this article, which was published by the RBMA and remained on the ACR website for more than a decade.  I have frankly been surprised that it continued to circulate and be quoted for many years. It was updated in 2014 to reflect advances in technology and other industry/regulatory changes.  This update addresses what has happened since the last article. 

Pat Kroken, FACMPE, CRA, FRBMA

Decisions regarding billing and collections reflect some of the most important considerations any group can make.  Just ask the group that purchased a new computer system, found it really couldn’t handle hospital-based billing and dragged an ailing accounts receivable through yet another conversion at a time when cash flow was down. 

Or those who changed billing companies twice within a five-year period after selecting the low-cost option with big promises, only to discover the sizzle of the sales pitch didn’t match operational reality. 

The answer to the question of “inhouse versus outsource” remains the same—it depends.  Either option can be appropriate, depending on the situation and location of the group facing the decision.  The very reasons a practice has a successful inhouse billing department can also be the impetus for considering a change. 

Cost and Control

Over the years, radiologists have been willing to incur higher costs associated with inhouse billing due to a desire for control over their business operations.  With the rate of change in the healthcare business environment, control may be illusory, but physicians also utilize the inhouse staff for non-billing tasks and that must be taken into consideration when evaluating options.  

Salaries will represent the largest line item in inhouse billing overhead, especially when benefits such as the retirement plan or profit sharing are included.  In addition, the number of people needed for the inhouse effort will be impacted by technology and hearing “We need to hire more people” each year without a corresponding growth in procedure volume, can serve as an indicator of outdated technology.  The ability to automate many routine billing processes has changed the face of the industry and lowered the cost of doing business so updated technology is critical.

The moment of truth for many practices arrives with the realization the billing system is no longer adequate and it will require a substantial financial investment to update and modernize billing processes. 

  • Is this really necessary? 
    Probably, since the newer systems offer numerous features to enhance staff productivity and should ultimately require fewer people in the department. 

  • Will you really be able to reduce staffing levels at the rates promised in the software sales pitch? 
    Yes, but not right away—and it isn’t unusual for productivity to actually diminish in the beginning as staff members adapt to new workflow patterns while working down the old accounts receivable.

  • Will outsourcing the billing function reduce personnel and technology costs? 
    Yes, especially since most of the leading companies have already adopted newer billing platforms and maximized automation in order to remain market-competitive in their pricing.

Cost comparisons for inhouse versus outsourced options will almost always favor outsourcing.  On top of that, there are numerous other factors beyond cost when comparing billing company services, but that’s a different article.

More on Staffing

In addition to staffing costs, there is another important consideration and it varies by market area.  How difficult is it to hire and retain competent billing people?  It isn’t unusual for a radiology practice to have long term billing personnel but there can also be high turnover in certain positions. 

This presents a challenge to physicians who want to reward loyalty and must grapple with the fact Sally has worked for the group for more than 20 years so it doesn’t seem right to displace her to save money.  On the other hand, are physicians in the group making less each year while Sally still gets annual pay increases?

If the group has made the commitment to upgrade its billing software to maximize productivity and control costs, are we confident that Sally will be willing and able to make the transition?  My only comment here is that updating from a legacy system represents a huge, fundamental process change.  That change will ultimately allow the group to reduce overhead but it can be traumatic.  Sally may adapt and be a superstar or she may try to sabotage the effort because she was a superstar on the dinosaur system and thinks she can prove the new one isn’t any good.  Sally may have one year of experience repeated 20 times.  I have worked with several versions of Sally.

Doesn’t a billing company face the same workforce challenges?  Yes, they do.  However, they have a wider pool for recruitment since billing companies have used remote workers for a number of years and are not constricted by a tight labor market in a specific geographic area. 

A question to ask when screening billing company candidates should focus on how the organization trains and supports its employees.  This is even more critical since several of the companies with high visibility have over-relied on automation, so they minimize seeking and developing quality in their employees. 

There is a fine line between optimal automation and too much, with the over-automated companies performing at a lower level.

So let’s say the practice has determined they will save a substantial amount of money by outsourcing and want to pursue that option.  Are there other necessary non-billing tasks Sally can assume so you can retain her while outsourcing the billing function? 

An analysis of exactly which services are performed by the administrative staff can help isolate which are direct billing processes versus other tasks.  A team effort between the practice and billing company representatives may help address personnel issues.    

Quality of Management

Radiology groups often consider outsourcing when a long-term practice manager announces the intent to retire and there is not an obvious successor on staff.  As an industry, we do a poor job of succession planning and generally work as lean as possible so there are no “apprentice” slots in the management hierarchy.  And it is no longer enough to promote the billing supervisor who might have a solid grasp of the computer system and billing processes, but who lacks strong communication skills, problem-solving experience and the ability to develop key relationships, beginning with the hospital.  Life in radiology management has not only become much more complex, but it is also changing at a greater velocity and scope.

Today’s practice manager needs to be an informed, well-connected consultant to the physician owners.  Top managers in the country have cultivated a deep network of business relationships across a range of subject matter areas because it is no longer possible to maintain a solid level of expertise in all requisite areas. And recruiting top talent to replace a veteran manager is a daunting task, complicated by the fact learning the business of radiology requires on-the-job-training. 

Just hire an MBA or CPA?  These candidates may have a strong set of baseline skills and abilities, but in order to be successful they must also have a driving curiosity and the ability to learn the rules for an exceptionally complex business on the fly.             

Won’t a billing company face the same leadership challenges?

Yes, and evaluating the quality and depth of the billing company leadership team is an essential part of considering a change.  I have a bias toward those organizations started by radiology practices and including people with experience actually managing a group practice. 

Not everyone on your account team needs to have this background, but there should be representation on the management team.  Why?  These leaders will better understand practice dynamics (beyond billing workflow) and can be more effective solving the types of problems a practice will face.  One thing we know is there will be problems since someone is always tinkering with our industry.

Inhouse vs Outsource Radiology Billing: Other Considerations

Let’s say the group plans to continue with the current experienced practice manager but looks to outsource billing functions.  How would that work?  The billing company team should provide valuable resources to assist the practice manager in areas difficult to manage when they are piled on top of a full workload, including for example:

Compliance:

Compliance plans for billing and HIPAA are mandatory and at the same time, new regulations seem to crop up daily.  It is usually easier to head off compliance problems than to deal with them after the fact. 

With that said, compliance issues can boil beneath the surface and almost always pop up at inconvenient times.  The billing company compliance plan should demonstrate how that organization functions within a compliant, ethical framework, but the billing company compliance officer can also serve as a resource to the group’s administrator when something goes awry.  (Note:  the group will still need to have its own compliance plans but the billing company will cover critical processes under their area of responsibility).

One of the valuable functions the outsourced organization can provide includes assisting physicians with accurate (compliant) documentation to ensure they are paid for the work they do while functioning within regulatory guidelines. When screening billing companies it will be important to establish the compliance officer has demonstrated experience in the area and not just checking the boxes with a title. 

MIPS:

Successfully navigating the nuances of MIPS can seem like a fulltime job—and it is.  It is exceptionally difficult for a practice manager to keep up with this responsibility when it is layered on top of a long list of other duties.  

MIPS represents its own set of challenges, beginning with the fact many radiology measures have topped out and/or been eliminated and Qualified Registries (QRs) are restricted to a declining list of national measures.  (Note:  A Qualified Clinical Data Registry, or QCDR, can offer additional measures by nature of its structure). 

The billing company should be able to discuss client performance in the MIPS program as well as what is in place to support MIPS for its clients now and in the future. 

It has become harder to qualify for incentive payments and financial penalties have increased.  MIPS continues to evolve and become more complex at the same time penalties increase each year for failure to participate.  

When screening billing companies, compare their experience and successes regarding MIPS, as well as their plans to adopt new requirements.  This is an area of increasing financial importance marked by wide variances in billing company knowledge and capabilities. 

In the end, the practice administrator and billing company should work closely together to ensure success for the group and many successful relationships exist. 

Conclusion

Whether to bill inhouse or outsource to a billing company has never been a simple decision, nor is there one right answer.  It is not a decision to be made lightly and there are “you get what you pay for” consequences with either option.  The goal is cost effectiveness rather than “cheap” so it takes homework to determine whether costs are within market-competitive ranges and are appropriate for the group.

Since the past can be a decent predictor of the future, it is reasonable to conclude the complexity of the healthcare business environment will only continue to evolve—and quickly. 

Economic and regulatory forces push toward new payment mechanisms, control of imaging costs and expanding regulations.  Mandatory accreditation and compliance programs have upped the ante in terms of managing documentation. 

Hospitals have become less loyal in their relationships with radiologists.  And we are in the business of managing a high volume of relatively low-paying procedures so we cannot be cavalier about denied claims, charge capture or secondary insurance payments. 

What does this mean in terms of management demands?  It is more immediately obvious on the inhouse side, especially if the group is facing the retirement of a trusted administrative leader.  It can be difficult to find a practice manager with the requisite skills and experience across a number of areas—and who has the ability to develop and maintain key business relationships.  There is a cost for this level of competence and it has become more difficult to assume a highly competent lead tech can manage the entire group.  This isn’t to say it can’t be done, but expectations must be scaled accordingly because there will be intense demands on this person to learn even the basic business skills required.  In fact, the inability to hire top management talent is often the reason a group with a pretty solid inhouse billing operation will look to an outsourced billing company to fill functional gaps. 

As with many business solutions, it is virtually impossible to rule out emotion and work strictly with cold hard facts.  The decision to keep or change billing methodologies is difficult and, unfortunately, there are no risk-free options.  It is important to gather and analyze facts, discuss potential risks and rewards of the alternatives and take the time to review core capabilities. 

The focus should be on “value added” rather than the cheapest outsourced option.  Rock bottom pricing can result in harvesting only the low-hanging fruit.  Just as quality is important to your physician colleagues, it pays off in business operations as well.  Remember, the best radiologists in terms of credentials, skills and world class service can quickly be undermined financially by a poor billing/collections effort, whether inhouse or outsourced.

And finally, if interviewing billing companies, you will eventually narrow the field to only a couple of contenders.  If all things are equal in terms of services offered, which one feels like the partner you’d like to do business with for the next decade?  There will be a difference in company personalities that goes beyond the sales pitch so you need to work with the organization that feels most compatible to your practice.     

 

Patricia Kroken, FACMPE, CRA, FRBMA,
has an extensive background in radiology practice management and directs education and corporate communications for MSN Healthcare Solutions

She worked as a consultant for radiology practices, billing companies, software developers, and hospital radiology departments for 20 years before joining MSN.

She is a regular contributor to the RBMA Bulletin and a frequent speaker on topics related to radiology practice management. 
Pat can be reached at pat.kroken@msnllc.com
or 505-856-6128

headshot of Pat Kroken Director of Education and Corporate communications, MSN Healthcare Solutions