The Pros and Cons of In-House vs. Outsourced Medical Billing for Healthcare Practices

Thu Jun 20, 2024 by Evercommerce

Many medical practices today need help with timely and consistent billing. Since billing has a direct effect on revenue, some choose to outsource billing to a third party.

Learn the importance of efficient billing. Read about the pros and cons of in-house versus outsourced billing.

Decide whether or not to outsource medical billing in your practice with key points you should consider. And get tips you can use right away as you formulate your decision.

The Impact of Efficient Billing in Healthcare

If you manage a medical practice, efficient billing is essential. Time-wise, getting insurance claims and patient bills out the door should be a financial priority.

When you stay on top of accounts receivable, you protect your revenue streams to avoid dry periods. You don’t want to be dipping into your reserves to cover overhead and payroll.

Furthermore, timely billing benefits your patients. For example, if an insurance claim is denied, they have time to appeal it or budget for the shortfall. They won’t be caught by an unexpected expense many months after an appointment or procedure.

That brings up another aspect of efficient billing: accuracy. You don’t want insurance submissions denied because of errors or omissions. This delays payment, again slowing down income. So, medical billing needs to be done meticulously as well as punctually.

A2 - Nurse using iPad and Laptop.

The Pros and Cons of In-House Medical Billing

Many medical practices use in-house billing, which has been traditional for many generations. This approach has advantages and disadvantages.

The pros of in-house billing include:

Your clinic has control over the process from start to finish.
You can use staff for this as much or as little as necessary, including pulling them for other tasks if needed (workforce flexibility).
If there is a question about an invoice or claim, the provider and medical records are right there to answer it.
You know your level of data protection and privacy compliance.
If a patient has a question about a bill, they can speak directly with their doctor’s office.

However, the pluses of in-house billing are often portrayed in a perfect world. In reality, there may be multiple cons to this method, such as:

Human errors
Poor coding practices
Risk of overburdening your staff

The last point is a sore spot for many healthcare practices, especially smaller offices. In small clinics, staff may be performing double or triple duties. They may handle accounts payable or payroll in addition to accounts receivable.

In the smallest operations, the biller may double as a receptionist or scheduler. This can leave little time to devote to billing. As a result, you can see an uptick in errors or late submissions.

What if the healthcare providers themselves frequently get interrupted to handle billing matters? Or worse, they take on primary billing tasks themselves. They have less time to give to patient care, which has downstream consequences like:

Decreased patient satisfaction
Poor online reviews for the practice
Increased risk of treatment errors
Unsatisfactory morbidity and mortality
Reduced income due to fewer billable hours

FROM ONE OF OUR PARTNERS 2023 Guide to the Medical Billing Process + Infographic

The Pros and Cons of Outsourcing Your Medical Billing

Because of the abovementioned issues, many practices have turned to outsourced medical billing. They use a third-party company to handle this part of the practice. The advantages to outsourcing include:

More provider time for patient care
Ability to allocate staff for other tasks
Reduced errors with dedicated billers
Potential for cost savings
Improved revenue efficiency
Use of new billing technology without buying it

How does outsourcing medical billing save money? First, practitioners and other staff can devote their time to patient care, ultimately generating more revenue.

Additionally, some clinics don’t have to worry about hiring one or more full-time medical billing professionals. They don’t just avoid the cost of a salary. They save money on benefits and training expenses, too.

With increased revenue efficiency, outsourcing can be a smart move for clinics to stay in the black.

There are potential disadvantages to outsourcing your medical billing, though:

Lack of control over the billing process.
Patient dissatisfaction with third-party representatives.
Potential for errors or noncompliance depending on competency.
Worries about patient data and healthcare record privacy.
Reduced flexibility about billing tasks and staffing.
Variable costs and hidden fees that affect budgeting.

Third-party medical billers typically charge a percentage of the payments they collect. That means the cost of outsourcing can vary widely from month to month.

Also, some third-party billing companies may require additional fees. Some charge for membership, startup, legal concerns, or upgrades. This can further exacerbate budgeting unpredictability.

In the next section, let’s explore some of these considerations in more detail.

A3 - Medical equipment on dollar bills.

Key Considerations to Compare In-House vs. Outsource Medical Billing

Are you unsure if outsourcing your practice’s medical billing is right for you? Perhaps keeping it in-house is better. Here are some practical considerations to think about as you weigh the issue:

Budgeting and Revenue Flow

According to one body of research, third-party medical billing should increase your collection rate to 95% or higher. This is a solid jump from the standard 70% experienced by most healthcare practices.

Additionally, outsourced billing may shorten payment times. Practices report a 10-30% faster timeframe.

However, are you close to achieving that 95% and getting bills paid quickly? Outsourcing may not give you more of a boost. In that case, it’s probably not worth the money unless you face a personnel crunch.

Outsourcing can be a fantastic solution if you don’t have the staff to continue doing your billing in-house. Your practice’s staff can provide more time with patients, which benefits everyone involved.

Third-party medical billing may take some time to produce results. You’ll need to budget for the upfront cash outlay until you see a return on investment.

Practice Size and Staffing Concerns

Having more time to see patients isn’t the only staffing concern for some practices. Your staff may feel rushed to keep up with demands on multiple fronts. They can resent covering the front desk and ordering supplies while still handling billing.

Outsourcing your medical billing may be a way to improve employee morale and retention. It shows you take their concerns seriously and want to provide them with a manageable workload.

On the other hand, cutting personnel to outsource can be tricky. What if you try third-party billing, but it doesn’t work out? Meanwhile, you’ve let go of staff from your accounting department who probably won’t want to return. You need to weigh these decisions carefully.

Patient Satisfaction

Retaining patients is just as crucial as retaining staff.

Have you received numerous complaints from patients about their bills or insurance claims? Would a more accurate billing process reduce those?

Patients who get frustrated with billing issues may take their business elsewhere. In this scenario, it may be wise to outsource medical billing.

This is especially true if you struggle with medical coding accuracy, which most third-party services can take over for you. If you’ve had a lot of insurance submissions denied for coding issues, this is another sign of in-house billing problems.

Take a look at your patient demographics, too. Younger patients probably won’t think anything of dealing with a third-party billing agency. But seniors may be more attached to speaking with your regular accounting department or office manager of 20 years.

How would this affect your decision? On the one hand, older patients may need more handholding than a third party can provide. But on the other hand, an increase in Medicare patients usually points to more complicated and time-consuming billing.

Security and Compliance

In many cases, knowing a third party is taking care of your medical billing is reassuring. They must adhere to data protection and privacy laws. And that takes keeping up with regulatory billing changes in that area off your plate.

Of course, you need to be certain to pick the right billing service. It must be HIPAA-compliant and have the right cybersecurity controls in place. It’s worth researching whether they’ve ever had a data breach or similar problem.

Long-Term Goals for the Clinic

Finally, it would be best to consider your future practice goals. Will the number of providers increase or decrease? Will you be adding services for which providers need more non-administrative time?

Are you looking to expand locations or downsize? What new technology might you be adopting that would complement outsourcing your billing?

FROM ONE OF OUR PARTNERS Medical Billing vs. Medical Coding: Understanding the Differences

In-House vs. Outsourced Billing: Where to Start

The decision to hire a third party for your medical practice’s billing can have profound implications. Here are some final considerations to help you choose the best path for your organization:

Even if you’re not ready to commit to outsourced billing, it can be wise to explore services. If you’re ever faced with an in-house staffer needing long-term time off, you’ll have a solution ready.
Be sure to investigate pricing models for third-party billers in depth. This will help you avoid surprise fees and expenses.
Talk to your colleagues at other practices about their billing services. Do any of them outsource? Who did they hire? How is it going? Associations you belong to are another excellent source of referrals.
How do third-party billers you’re considering handle communications? Are they flexible about resubmissions? Will you have a point person for your account, or is it the luck of the draw when you call with questions?
What tasks do third-party billers on your shortlist handle? Do they also do coding? What about insurance pre-authorizations? It’s important to know what might remain in-house even if you eventually choose a third-party medical billing service.
Are you unsure what your patients will think? Survey them to find out. This may give you more direction as you decide.