Medical billing services: What you don’t know can hurt you

Tags: practice management, reiner, billing, business

Medical billing services:
What you don’t know can hurt you

By Bradley K. Reiner
Practice Management Consultant, Reiner Consulting and Associates

Many physician practices have fallen victim to troubles stemming from the decision to outsource their medical billing. Although my role is not to criticize medical billing services, I have seen enough problems over the years to determine that practices must be careful when hiring these entities. Not very long ago, no one knew what a billing service was and what purpose it served. Now you can find too many of these companies offering to “file your medical claims cheaply.” Before you hire a billing service for your practice, let me give you some critical recommendations.

Why have billing services become so popular? It could be that it’s just so simple to start a billing service. Many advertisements circulate in medical and non-medical communities urging budding entrepreneurs to “start your own medical billing company from the convenience of your own home.” They go on to say that you can register for a seminar and within a few weeks a person with no previous medical knowledge can begin filing claims on behalf of physicians.

This is frightening. Typically billing services charge a flat percentage of collections, anywhere between 6 percent and 12 percent. If a billing service charges 10 percent of collections and a practice receives on average $40,000 a month, a billing service can gross $48,000 a year on one client. Two or three practices and the work-at-home entrepreneur is set.

On the flip side, why are so many solo and small-group practices using billing services? It’s pretty simple. First, qualified staff are hard to find. I have recruited for many practices looking for billing people and it is hard to find someone with the background and experience needed to run an effective billing department. Second, some doctors want to move billing out of their office. They feel it’s an added stress to have this function performed internally and farming out that department frees space. Easy, right?

Don’t assume that moving the billing out of the office is a good thing. Keeping billing internal is the best choice, but sometimes that may not be feasible and a billing service may be the only option.

Many doctors have the preconceived notion that if a billing service does everything, then they have no responsibility. The money rolls in and the doctor doesn’t have to be involved. Don’t believe it! If you don’t continually monitor your billing service, the results could be disastrous. You have to review reports and ask questions regularly to ensure they are doing the job you are paying them to do.

My business associate and I were called to Dallas by a radiologist who suspected that something was wrong with his billing service. He had a large volume of Medicare patients in his practice and sensed his collections were too low. We performed an audit on the billing service to determine if he had reason to be concerned. The results were astonishing. We found a number of problems including modifier usage, incorrect claim filing and wrong CPT codes. We also found incorrect charge amounts to Medicare. The billing service had not updated its Medicare fees and was billing an amount lower than the Medicare allowable. Over the last year the practice had lost almost $20,000 because the billing service failed to do something as simple as updating its fees annually. By the time we caught the mistake, it was too late for the practice to file an appeal.

What can you do if you have a billing service? Perform an audit at least yearly to see that the contractor is billing appropriately. You can do this by requesting 25 claims along with the explanation of benefits, EOBs. Check that the billing service billed for the code you said to bill. In addition, make sure:

  • modifiers are used correctly or as instructed,
  • duplicate claims are not filed routinely,
  • medical necessity issues are researched,
  • appeals are appropriately filed and timely,
  • the insurance plans pay according to your contracted rates,
  • claims are filed timely, and
  • prompt pay issues are adhered to.

If you see a problem or are considering a billing service for the first time, ask these questions.

  • How do you handle denial EOBs? What are the most common errors you receive?
  • How do you work accounts receivable? What is your process?
  • Do you have a compliance plan for the billing service?
  • What background does your staff have in billing?
  • How soon after you receive the superbills do you post and balance them into the system?
  • Do you send monthly statements? How many statements are sent? Do you call the patient to discuss any outstanding balances?
  • Do you use a collection agency? How are accounts submitted to the service?

Make sure the billing service is sending the following monthly reports.

  • Your current aged accounts receivable broken down by patient, insurance and total.
  • A revenue and activity report detailing each code billed and the number of times it was billed.
  • A monthly summary of charges, payments, adjustments, refunds and bad debt.
  • Your gross and net collection percentage. Gross collections in family medicine range from 50 percent to 60 percent where net collections should be as close to 100 percent as possible.
  • Your accounts receivable ratio, showing how many days on average it takes for your claims to get paid.
  • Credit balance report.
  • Summary of adjustments and adjustment types.
  • Outstanding claims report.

It is important to have monthly meetings with the billing service to go over the reports. This can be either by conference call or face-to-face meetings, but the idea is to communicate any concerns or issues that need to be addressed. I would recommend having the reports a few days before the meeting to review them so you can be prepared for any questions that you need to ask.

This information is vital in determining if your billing service is doing all it can to help maximize revenue for your practice. It could make a huge difference.

Billing services can be helpful to many practices, but periodic monitoring is essential. Don’t be fooled by the cost and the convenience.

Bradley K. Reiner, formerly with Texas Medical Association, is now owner of Reiner Consulting and Associates.

He can be reached at (512) 858-1570 or e-mail at