6 Questions to ask an Outsourced Billing Partner RCM

6 Key Questions to Ask an Outsourced Billing Provider

Written by Mark Droste – revenue cycle leader with over 20 years of experience in hospital, laboratory, pathology, and physician services.

🕘 6 minutes

Outsourcing medical billing is a popular option with immediate benefits. However, how you choose a capable outsourced billing provider and the reasons why, needs careful consideration. Below are the essential questions to ask based on perspectives from both the client and billing provider.        

1. Does the outsourced billing journey make sense to your organization?

  • Is the cost to collect high for the current level of effort?
  • Is the revenue target falling short or challenging to maintain on an ongoing basis?
  • Is expertise and or staffing a constant struggle for revenue cycle management?

Reflecting on what my old AR director once told me, “The billing department is the ATM of a business. It must be in good working order for the company to thrive”.

If you have justifiable reasons to outsource billing, the next step is to determine the scope of the project and the level of control you wish to maintain, share, or delegate. This will guide your comfort level for the duration of the engagement. The level of involvement of the billing provider creates variations of service models to address client requirements and what to expect from an outsourced billing provider. Only some vendors offer flexible configuration options.

2. Does the outsourced billing provider offer different service levels?

Determining what is required to achieve revenue goals based on operational profit/loss self-assessment is essential. This will drive the service level model best matched to your needs and price point.

Examples to consider: 

  • Full outsourced – typically, the billing provider performs most of the department’s functions.  
  • Special project – often, a backlog is so challenging that a billing provider can come in and provide the expertise and labor to tackle the project.
  • Interim – new business must start somewhere, setting up a new department and getting in-house staff trained, workflows established, and applying practical experience minimizes trial and error with startups. 
  • Legacy system work down – replacing a billing system vendor is prevalent, and the billing department may want to focus their effort on the new system leaving the old receivable on the legacy system to be worked by the billing provider.   
  • Supplemental support – sometimes, you need additional support for a multitude of reasons.   

3. How does the outsourced billing provider divide the work (job functions)?

It would help if you and the outsourced billing provider worked together to develop an operations roadmap to define which entity is responsible for each job function. 

Once you decide on how the work will be divided internally and externally, a clear understanding is necessary for both entities to work toward a common goal. A workflow mapped out with expectations, roles, and responsibilities is a must. What are the touchpoints managed by the client and the billing provider? The revenue cycle has many moving pieces that often depend on each other. For example, registration, insurance eligibility checking, prior authorization, coding, claim submission, denials, payment posting, patient statements, call center, and bad debt collections are a few that come to mind.

How a billing provider or client manages each role can make or break the engagement, here are some items to consider:

  • How will the billing provider organize and prioritize the claims to work?
    • A good understanding of the roles and responsibilities coupled with a flexible queue management system puts this in front of the client and billing provider.
    • Another benefit is that it clearly identifies the highest value claims based on your financial priorities, payer requirements, and time sensitive tasks.
  • How are day-to-day communications handled?
  • Will they supply a dedicated manager as a designated point of contact?
  • Identify job functions you are hesitant to share and list them in the operating agreement.

4. How will the billing provider measure performance and communicate?

Best practice would be to:

  • Mutually set clear performance goals for both parties.
  • Regularly scheduled meetings to talk about success, needs improvement, and items of concern.
  • The billing provider should let you know where you stand with crucial information updates. For example, “Green, Yellow, and Red” alerts highlight the good, the bad, and the ugly.   
  • The billing provider should be first to notify you of noteworthy positive and negative trends.
  • Industry best practice indicators should be mutually agreed upon and closely followed to monitor trends and patterns.
    • Disagreeing over what constitutes a negative indicator after the fact is not a good starting point. Establish acceptable ranges before the engagement begins.    

5. What level of financial reporting is supplied by the outsourced billing provider?

What is the billing provider’s data strategy? Ask for report examples prior to the engagement.

  • Financial reports, including KPI reporting, consisting of daily, weekly, month-end, and annual reports.
  • Know where your receivable resides with open balance and aging. Waiting for month end is not acceptable from an operational perspective. There are significant areas where an insurance claim may be parked with many subcategories (reasons). Focusing on the significant area gives the client a clear picture where the claim resides without getting paralyzed by the detail. Example of significant areas:
    • Not Billed
    • Billed
    • Follow-up
    • Denied
    • In Process with Payer
    • Pending Payment Posting or Patient Statement
  • Will they analyze the data on your behalf?
  • Will they present trends and patterns with an explanation and improvement plan if unfavorable.  

6. Does the outsourced billing vendor have technologies in place to keep costs low, optimize their work for you, and increase your collections?

  • The answer to finding the right outsourced billing partner is not necessarily in just adding additional people to help. The right outsourced billing partner will have the right technologies in place to help your organization keep costs low, optimize productivity, and enhance your cash collections
  • Ask them if they utilize technologies that can organize and optimize the workload. Queues based on traditional configurations of oldest to newest by date of service, high low dollar account balance, or alpha split by last name should not be the only choice of standard configurations available. Flexible work assignment options create a successful formula especially when the client and billing provider are jointly working together.
  • How does the billing provider safeguard against potential timely filing issues? For example, registration is a first touch point with the patient. During this process expired insurance may be incorrectly assigned to the claim. The next step usually is insurance discovery which triggers a turnaround time period to identify the valid insurance and bill it. Why should this process be a priority? Once the valid insurance is identified, you are now working with their time schedule to submit the claim, resulting in a race against the clock to file the claim. Having the right process and technology assures the claim submission to the correct payer is not delayed.
  • Find out if they have technologies that can prioritize their team members work on the most profitable (and or most important) items for your organization.
  • Ask the outsourced billing vendor if they can provide reporting on their team members individual productivity and actions managing your revenue cycle.
  • Determine if they optimize patient account management for multiple dates of service so they can fix the items for example benefits eligibility or missing demographic data so they can file / refile multiple claims for that single patient all at once. This substantially reduces time, costs, and increases your cash collection potential.
  • Ask if they have technologies that can also help your own organization’s billing team members increase their own productivity, their own workflows, and their own claim adjudication.

Other questions to ask the billing provider

  • Compensation hourly rate vs. percentage of collections? Hourly rate is excellent if the outsourcing is partial as it is based on efforts. Examples would be a clean-up project, a posting project, a data entry role / project etc. If it is full outsourcing, a percentage of collections is preferred as the billing provider is sharing the risk with you as they are paid on results and not just efforts.
  • Is the billing provider offshore or onshore?
    • Onshoring is the hiring of U.S. based resources. These resources are in time-zone within the U.S. These team members are very familiar with the U.S. healthcare billing services industry as they are from this industry. Most team members come from healthcare organizations, health systems, and other healthcare billing verticals in the U.S. Most team members work remotely through a secure VPN connection with your organization. These team members, and their leadership, are easier to get ahold of, can fix problems quickly, and can provide a more seamless “work environment” for your organization. No data or intellectual property leaves the U.S. when utilizing these resources.
    • Offshoring is the hiring of non-U.S. resources. Some work U.S. hours and others do not. These services are less expensive than U.S. based resources. Some healthcare institutions prefer these resources, while others do not.
    • Understanding your organization’s philosophy on utilizing offshore or onshore resources is very important in this decision process.
  • Does the billing provider have compliance and cyber security policies and procedures in place with a dedicated person monitoring them?
    • Liability concerns, who is responsible for a mistake that may cause fines and harm to the reputation of your company.
  • How is quality assurance maintained?
    • How is the billing audited and how often?
  • Make sure you have a “divorce clause” in the agreement, this can be evoked if the billing provider is not performing to agreed upon service levels.
    • It saves on litigation fees if you need to break away from the billing provider for poor performance instead of waiting for the agreement to expire or taking legal action.
  • How are insurance rules and regulatory requirements monitored and handled?
  • Does the billing provider bring any additional bolt-on technologies to assist with the handling of medical claims? Are there any additional fees?
  • Does the billing provider offer a guarantee if they can increase net collections measured by pre-engagement baseline?
    • Often potential revenue is lost to write-offs from various billing scenarios that could be avoidable with an effective billing provider.

The most compelling areas to finding the right outsourced billing vendor relies in three things:

  1. The outsourced billing vendor must have the right technologies in place to keep your costs low and help increase cashflow. Otherwise, costs will be high and cashflow will not be where you need it to be.  
  2. They need to provide the right options of services that can help you be more nimble, and strategic, in how you attack your organization’s financial and operational needs.  
  3. Determine if they are a good fit and if they align with your organization’s philosophy and values.

Choosing an outsourced billing vendor can be challenging. Hopefully this overview will help provide a positive outline in your search for the right partner.

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