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Considerations When Outsourcing Revenue Cycle Management

Wednesday, May 15, 2019 9:00 AM

Financial Management, Practice Operations

Written by: Elizabeth Monroe

Elizabeth Monroe
Senior Consultant

As I travel the U.S. and perform operational assessments for ophthalmology practices, I see a growing trend for revenue cycle management (RCM) in smaller practices. In fact, more than half of the practices I am working with now contract with a third-party billing administrator. In those practices, physicians are still required to code their exams; however, the billing for physician services is completed by an outside company.

This third-party billing company will often remote into the organization’s electronic practice management (EPM) system to scrub claims, submit charges, post payments, and reconcile adjustments. These companies can also send statements to patients and help manage patient refunds. Though using a third-party billing administrator can be helpful, it is still important that you monitor the company’s work. To aid you, I have listed some important considerations for your review below.

Key Considerations

Develop billing staff internally. One of the primary reasons a practice hires a third-party billing company is because it does not currently have personnel with the appropriate skill set and training to manage billing functions in-house. Even when outsourcing billing functions, it is important to develop or hire someone in-house who is knowledgeable enough to manage the relationship with the outsourced company, as well as watch and manage its work. Meanwhile, the practice should develop staff members’ knowledge of RCM, with the goal of one day regaining subject matter expertise.

Complete an analysis of your billing operations. Even when you are using an outside billing company, it is important that your aging accounts receivables are within industry benchmarks. For this reason, all practices should complete an annual review of their billing department. The billing company should give you monthly reports and your aging accounts receivable should target these healthy ranges:

  • 40 to 60 percent: 0 – 30 days.
  • 15 to 25 percent: 31 – 60 days.
  • 5 to 10 percent: 61 – 90 days.
  • 5 to 10 percent: 91 – 120 days.
  • 10 to 20 percent: More than 120 days.

Watch patient credit balance reports. Additionally, the practice should request monthly patient credit balance reports from the billing company for review and processing. These reports will contain patient refunds — monies that the practice owes back to patients for various reasons. The practice will want to verify that the claims were processed correctly, the patients are owed the amount requested, and that a process is in place to send repayments back to patients. When it’s discovered that a Medicare patient is owed a refund, the pay back rule requires that the practice issue the refund within 60 days.

Pay attention to take-back letters from payers. When Medicare or an insurance payer believes it overpaid you for services, it may request that you return the funds or it can issue a “take back.” In this scenario, you can send the payment back to the payer, or the payer will automatically deduct the money from an upcoming check to the practice. The practice should always strive to pay back an overpayment or file an appeal and resubmit documentation. It is very important to work with your billing company to reconcile these overpayment letters.

Stay Focused

A practice should never take its focus off the day-in and day-out of billing and collection functions. Regardless of whether you use an outside billing company or keep your accounts receivable in-house, RCM is the life cycle of the practice’s cash flow. Having dedicated, diligent staff members managing the process will be important to running a successful department (and practice) — even if you choose to outsource your main billing processes to a third-party administrator.

YOUR TURN: What additional considerations should practices keep at the forefront when using a third-party billing company? We'd like to hear from you. Please leave your response in the comment section below. 

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