Is it time for your practice to outsource?


Overhead costs are rising along with the number of complex, time-consuming government rules and regulations requiring medical practice compliance.

Both challenges call for you to take a hard look at your administrative costs and staff to determine whether outsourcing some functions makes sense. Outsourcing can eliminate the hassle factor, provide needed expertise and save you money.

stethoscope on dollar

Outsourcing back-office functions isn’t new. Practices have traditionally contracted for billing and payroll functions. But they can outsource many other functions, including transcription, payer contracting, employee benefits administration, information technology and call center services.

To decide whether outsourcing a particular task would be cost-effective for your practice, first determine the total cost for performing the task in-house. In addition to salary, include employee benefit expenses, Social Security, unemployment and other taxes, equipment, supplies, printing and postage, as well as office space used. Training costs and fees – for example, for billing clerks and clearinghouses – may also figure into your total cost.

The next step is to determine the costs to you if the task is outsourced. As with in-house costs, the total cost of outsourcing may include more than just a flat fee. In the case of billing services, for example, you may need to factor in a higher payment for an increase in collections due to the expertise of their coders.

Aside from the cost perspective, in-house expertise and how well a task currently is being performed should be considered.

“Lack of time and lack of knowledge” are two reasons to consider outsourcing, says Thomas J. Ruberg, CPA, CHBC, of VonLehman & Co., the Ft. Mitchell, Ky., affiliate of CPAmerica International. As an example, he points to integrating billing and collections with an electronic health record.

“There’s a whole new learning curve because you have to modify your processes,” Ruberg notes.

Other issues may factor into the decision: Is employee turnover high? Do you have the technology needed? Will work flow be disrupted by a complex task, such as ICD-10 conversion?

When selecting an outsourcing service, consider the following:

Experience. Choose a firm that has been around for a while and is familiar with your specialty. The latter is especially important if you outsource billing.

Reputation. Get references from prospective firms, and ask them about their experience – especially issues critical to you. You might ask whether the service returns phone calls quickly or how many days are outstanding for accounts receivable.

The prospective service will always put its best foot forward, so Ruberg recommends asking the references for the names of other practices using the service.

“By taking it one level deeper, you find out a little bit more,” he says.

Qualifications. Ensure that personnel who will be handling your account have the necessary expertise for the job. For example, look for certified professional coders when hiring a billing service.

Terms and conditions. Clearly delineate your expectations and ensure that benchmarks are included in your contractual agreement. “Ask for a sample contract,” Ruberg says. “You don’t want any surprises.”

Monitoring performance. You must be able to determine whether the service is meeting set benchmarks. Require the firm to provide monthly progress reports, if appropriate.

Fee structure. For some functions, a flat fee works best. In other functions, like billing, a percentage of collections is more advantageous to a practice. It ensures that the practice is not paying for claim submissions that are not paid and provides an incentive for the service to go the extra mile to get the claim paid.

Outsourcing is not for everybody. The biggest negative is loss of control, Ruberg says. “You can tell an employee what to do,” he says. “With a contractor, you have to fit their mold.”

Your contract should include an ability to terminate the agreement with notice should it not work out.

“You always need to know where the back door is,” says Ruberg.