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Most articles on medical billing and RCM services open with a discussion about increasing revenue. Of course, that’s a primary reason to engage a service, and indeed, we’ll talk about that a little further down.
But we begin with an overview on how outsourced medical billing services can positively – and dramatically – have an impact on your administrative costs.
It’s no wonder the healthcare industry in the United States spends over $812 billion annually on administrative costs when your own in-house routines alone include:
Notice that the first seven steps are all needed even before patients arrive for their appointments. And, all thirteen steps don’t even comprise the entire list.
There’s on-arrival paperwork to be reviewed and then entered into the system. Insurance ID and/or driver’s license data to input. How about the entire process of compiling financial and operational KPIs, reports, analytics, and dashboards and reviewing them to determine strengths and weaknesses?
Back to the over $812 billion: according to a 2020 study by the Annals of Internal Medicine, that’s the amount spent every year on healthcare administration alone which equals nearly $2,500 per capita annually in the US.
As mentioned above, while the $812+ billion includes all administrative expenses, a sizeable portion of that cost is in filing and processing claims for medical and laboratory services reimbursements. So, whatever enterprise networks, medical groups, and laboratories can do to increase the accuracy and efficiency of the claims they submit will directly impact their revenue and profitability.
Medical billing and RCM services should support an effort to significantly reduce administrative costs:
Whether you’re part of a hospital or health system, a large medical group in any specialty or multiple specialties, a laboratory, an imaging center, or a behavioral health/substance use disorder setting, this guide will help you learn more about medical billing/RCM, how it works, and how it can benefit you.
🔎 Related resource: How Much Does Healthcare RCM Services Cost in 2021?
The phrase “revenue cycle management” and the RCM abbreviation can be a little tricky since there are actually two separate, distinct definitions for them. There are:
No matter your approach, RCM is essential for running the facility or setting and keeping it financially viable.
It’s not an overstatement that the success or failure of your setting will depend on how well your revenue flow is optimized and managed, as is the extent to which you can leverage the RCM company’s team of billers and EDI experts. Add to that the software and hardware you shouldn't have to buy unless a particular RCM company charges for that as well.
This e-book refers to the second definition of RCM: an outsourced service enabling you to (1) capitalize on dramatically better claims success and revenue and (2) capture patient balances, all with (3) reduced staffing and infrastructure.
Revenue cycle management was already a leading healthcare industry option before the 2020 COVID-19 pandemic, according to Statista. In a survey conducted in early 2020, 26 percent of healthcare leaders cited RCM as the most innovative technology service, with another 26 percent citing the same about telehealth and virtual care. (MedicsRCM provides solutions and options for both.)
A 2020 survey by the Center for Connected Medicine and KLAS Research revealed that 57 percent of health system executives expect continued innovation in revenue cycle management in the year ahead.
The same survey showed that healthcare executives are confident that RCM will help them solve their coding, billing, and accounts receivable problems.
🔎 Related resource: Medical Billing Services vs. Revenue Cycle Management: What's the Difference?
In a word, to consolidate.
For example, you might be pondering - or may even be certain - your revenue should be better. At the same time, you could be thinking you’re overstaffed and are paying too much for unintelligent, labor-intensive, in-house software.
In short, you need medical billing/RCM to capture as much revenue as possible, both from your insurance payers and patients.
You also need medical billing to reduce administrative costs by submitting accurate and complete claims the first time so you can avoid time-consuming requests for additional information and/or having to work denied claims.
What about improving patient relations by keeping them up to date on the status of their accounts and providing them with an easy way to pay their bills online? Mobility and engagement should be part of an medical billing service, enabling your patients to self-serve in so many ways making things even more efficient for you and your patients.
Administrative costs make up about 34 percent of total healthcare expenditures in the US, according to a 2020 study by the Annals of Internal Medicine. That's where the more than $812 billion is spent every year on administrative costs by providers and insurers.
Automating administrative transactions already saves the US healthcare industry $122 billion each year, according to the 2020 CAQH Index.1 But there is still room to save more. The CAQH Index found that if the US healthcare system processes all transactions through electronic systems, it could save an additional $16.3 billion every year. That's 42 percent of the $39 billion the industry currently spends each year to process transactions.
A recent study by the Kaiser Family Foundation (KFF) looked at claims data for more than 1,700 health plans offered under the Affordable Care Act (ACA) on HealthCare.gov. That study showed health plans denied an average of 17 percent of the total number of claims filed in 2019. Depending on the payer, denied claims ranged from zero to 60 percent of all claims filed.
The KFF study took an in-depth look at a subset of providers and found that among denied claims:
A medical billing system could have easily prevented every one of the reasons identified in the KFF study. And by prevented, we mean proactively in advance of claims being submitted (as with MedicsRCM’s Denial Preventer®).
A goal of revenue cycle management is to ensure healthcare providers are reimbursed for their services quickly and accurately, whether by a health plan or other payer or payments from patients themselves.
Industry estimates say that most medical practices collect only 60 percent of their accounts receivable, which means that they are leaving up to 40 percent of their possible revenue on the table. Medical billing should remove any entanglements in the entire reimbursement process to help maximize your revenue stream.
The most advanced medical billing services use artificially intelligent systems (AI) to identify and resolve potential problems before submitting claims. That helps eliminate delays when payers request additional information, file appeals, or re-file denied claims. Rev Cycle Intelligence says using better processes and technology could prevent 90 percent of claims errors.
If you want to be reimbursed quickly for the care you provide, you must bill insurance companies rapidly and accurately the first time for that care. You also need to follow up quickly when payers request additional information or question a claim. So unless you’re engaged with a capable medical billing/RCM company, you and your staff must manage these drudgery-laden stages of claims processing:
And within each stage are several steps your office must complete accurately to submit a successful claim. If you handle these yourself, you’ll need the in-house staff and technology, assuming it’s available. A solid, outsourced medical billing service takes this off your shoulders and runs it into the end zone for you.
Your front office staff should gather information about patients, including patients’ demographic information, why they seek medical care, and their insurance information. Your RCM system can verify coverage and eligibility, determine coverage, and estimate the patient's financial responsibility.
Better: Your medical billing service provides access to a portal enabling patients to schedule appointments, self-serve on entering/editing demographics and insurance information, completing forms online in advance, texting reminders to patients about completing information, perform eligibility verifications up to four times prior to appointments, and supports interactive reminder texting for appointments and balances due driving patients to pay with their devices, and an on-arrivals kiosk and scanning to simplify intake.
Health plans may require prior authorizations for specific procedures other than for primary care visits or emergency conditions. Staff time getting “prior auths” can be extraordinary but needed when necessary to avoid denials, often involving expensive procedures or tests.
Better: Your medical billing service has an option for automated prior authorizations in several specialties, offloading that time-consuming effort into a clean and accurate electronic transaction.
Charge capture data contains information about the services you've provided to patients. That information is transformed into a claim and submitted to insurance for reimbursement. If that data is inserted manually into your billing system, there’s so much possibility for keystroke errors, not to mention the time it takes to do that.
Better: A medical billing service’s automation platform should support two ways to quickly get charge data into their system for submitting the claim. One method involves an EHR, whether it’s your existing EHR interfaced with the medical billing company’s system (the company should be amenable to this) or using the medical billing company’s EHR assuming they have one. The second way is to use an electronic superbill, again assuming the medical billing company has one.
Either method ensures data needed for billing is captured the moment the encounter is completed, not manually (with errors) hours later.
Claims should be carefully checked for errors by your in-house coding/billing team in a process known as scrubbing before they’re submitted. It’s tedious, time-consuming, and still prone to have errors.
Better: On the other hand, a medical billing company should be able to quickly assure claims are coded correctly through software with artificial intelligence (AI) that checks for errors on the fly, returning alerts when something is awry before those claims are submitted. (MedicsRCM supports a nearly 100% success rate on first attempt clearinghouse claims.)
When you submit a claim, the first place it goes to is to a clearinghouse. The clearinghouse checks your claim for errors and, if it finds any, will reject your claim and send it back to you for correction. When the claim is error-free, the clearinghouse forwards it to the health plan or payer for processing and payment.
During the adjudication stage of the RCM process, health plans or payers will review your claims, decide if they’re valid, and either schedule payment or deny your claim. Payers will generally use an electronic file format to notify you if they’ve accepted or denied your claims.
There are several things you should do if your claim has been denied. The first is to see why the claim was rejected and if errors or missing information can be corrected. If Medicare denied your claim, you could follow Centers for Medicare and Medicaid Services (CMS) rules to resubmit the claim for reconsideration. If a private insurer denied your claim, you could follow that insurer's appeals process to have the claim re-evaluated,
Better: A medical billing company should support all of this, removing the burden from your in-house staff, especially since presumably, the medical billing company won’t derive any revenue themselves on denied claims unless or until they’re corrected and quickly resubmitted. And even better is if real-time claim tracking is available enabling the medical billing company to see how submitted claims are progressing allowing them to get a jump on possible problems. By the way, you, as the medical billing company’s client, should have access to claim tracking as well, so you are also clued into your claims’ status. (MedicsRCM supports this.)
🔎 Related resource: A Complete Walkthrough of the Healthcare Revenue Cycle Management Steps
When healthcare providers use an effective medical billing and revenue cycle management service, it benefits them and their patients at the same time. Providers benefit by saving time and money while they increase accuracy and improve revenue.
Health systems, medical practices, laboratories, imaging, behavioral health/substance use disorder facilities, and other healthcare providers use outsourced medical billing services to capture maximum revenue and lower costs. That's because an integrated billing and coding system as used by - or should be used by - a medical billing service can help providers achieve higher rates of clean (error-free) claims, reduce appeals, and lower expenses by automating time-consuming and labor-intensive billing tasks.
Patients benefit because the medical billing service you use should also have options making it easier for them to pay their bills online through a portal and using their iOS/Android devices. The medical billing company should have an option for automatically texting patients both interactive balance due and appointment reminders. Both text types can include a link to a payment portal to pay their bills and to reply to confirm or cancel their appointments. The messages can also include links to other tools such as online scheduling, forms completion, enabling patients to edit their demographics, and more.
But the benefits of working with the right outsourced medical billing company for patients start well before payments are an issue. Services might verify insurance plans and have automated prior authorization options before patients receive any tests or treatments in several specialties. As their client, you might even have access to a patient responsibility estimator so that patients will understand their financial responsibility from the start of their care and not incur unexpected bills after completing treatment.
It’s “sort of thought” that payers will try to find ways to deny claims and/or put off having to reimburse. Suppose you want to take the high road on that. In that case, even payers benefit when healthcare providers use medical billing companies to submit claims since those claims are presumably more accurate and complete than those filed manually. Payers can make the correct payments from the start and can do so with less infrastructure as well.
In the hospital world, Becker's Hospital Review says about 90 percent of denied claims are preventable. If an average hospital can prevent those denials by filing accurate claims, it could result in more than $5 million of additional revenue for an average hospital. The same could no doubt be extrapolated for medical groups in any specialty and for laboratories.
A medical billing vendor’s automation should automatically scan claims for errors before they are submitted and send alerts to providers when there are errors or missing information. That allows providers the opportunity to correct the mistakes or supply missing information before the claim is submitted.
And, their presumably intelligent software can help uncover patterns among denied claims helping to proactively avoid denials in the first place. (MedicsRCM’s Denial Preventer does that).
Similarly, a medical billing company should generate reports that provide its clients with information and insights they need to maximize their financial and performance indicators.
This helps their clients recognize trends among patient populations and identify areas in which patients have unmet needs. Enhanced data tracking, patient satisfaction reports, and cost control are all possible with medical billing systems and can help providers become eligible for top reimbursement rates for payers.
Finally, the medical billing company should enable its clients to view and compile any report or dashboard on demand and export them to Excel. This would be in addition to the reports routinely generated by the medical billing company and reviewed with their clients.
🔎 Related resource: 10 Ways Outsourcing Your Medical Billing Will Improve Your Medical Practice
One of the most important decisions you'll have to make is to continue managing your revenue cycle in-house or to engage an outsourced service company to handle it for you. Actually, another decision may apply to you: switching from your existing medical billing/RCM service to one that’s more comprehensive.
There are several factors you should consider as you decide what's best for you and your setting.
First, compare the cost of contracting your revenue cycle management to the cost of keeping it in-house. Most medical billing service companies charge a percentage of the revenue they collect. Their fee is usually between 3 and 8 percent of amounts collected but will vary, depending on the company you choose and the size of your organization.
But their collection percentage should by no means be the factor without considering the following:
But…then you must also consider:
So, to really decide as to whether outsourcing vs. having an in-house system is right for you, do the 15% test mentioned above, but then factor in a cost for the bullets also noted above.
You’ll probably be somewhat in disbelief as to the result when the potential increase in revenue and savings in infrastructure are combined.
There are many benefits to using an outsourced, including:
🔎 Related resource: In-House Medical Billing vs. Outsourced RCM: Which Is Right for You?
After reviewing everything suggested and presented above, you’ll probably at least want to think about working with an outsourced service that still enables you to have transparent access to all of your data, any time, on-demand.
Your staff is enabled to focus more on what they do best - providing healthcare - while your medical billing/RCM company works to ensure improved revenue and efficiency.
Once you’ve decided to engage, you’ll probably be ambitiously eager to do as much as possible from the start with your new medical billing service company. That’s commendable in terms of being “all in,” but no doubt, the medical billing company has an experienced implementations team with a manager dedicated to you. They should be versatile and flexible, but ultimately, you should trust their experience in getting you successfully into their service, since - perish the thought - an unsuccessful onboarding is terrible for both parties.
Most newly-onboarded medical billing company clients are immediately concerned with three areas. These include the following, which can help get the most initial return. The service itself will probably suggest these as well:
Other areas the medical billing service will handle or enable you to cover:
Choosing a medical billing partner can be a lot like getting married. That's because both parties enter a relationship thinking they've made the best choice and that their partnership will work together for many years to come. But when things don't go as expected, splitting up can be expensive, time-consuming, and stressful for everyone involved.
How can you be sure you are choosing the best partner for your system or practice? Here are some things you can do to select the medical billing company that is best for you:
It would be best if you also got answers to the following questions about the way each medical billing service operator does business:
These aren’t “rude” questions. You need to know the medical billing company’s position on their software and on whom they are relying for service, support, and upkeep of the software they use.
In an ideal world, the software they use is produced, supported, and updated by them, and they can customize and configure it to suit their clients’ particular needs. It should also have decades of provenance in the industry. The medical billing company shouldn’t be beholden to any outside vendor who can shut them down at any time, which really means “shut you down at any time.”
Other salient points include (1) their ability to work with your EHR and vendor, labs, and other systems you might use daily such as G/L, hospitals, PACS, etc., and (2) that they provide and support their own portal, kiosk, texting, telemedicine. You don’t want to know an outside vendor can shut down their portal or telemedicine, for example.
🔎 Related resource: 5 Qualities the Best Medical Billing Companies Have
Because it works with sensitive patient data, the healthcare industry is under constant pressure to protect patient data, prevent fraud and abuse, and maintain compliance and accuracy. Revenue cycle management services can help providers comply with HIPAA regulations by themselves being HIPAA compliant.
It's common knowledge that the Health Insurance Portability and Accountability Act (HIPAA) prohibits healthcare providers from releasing patient health information without consent. HIPAA also requires healthcare providers, clearinghouses, health plans to use standard formats to transmit patient data electronically. That requirement is intended to protect patient data, increase electronic data interchange efficiency and generate cost savings.
So, check on the medical billing company’s HIPAA compliance, and make sure they provide clients with a business associate’s agreement which puts your mind at ease in terms of them committing to protecting your patients’ personal information safe.
Healthcare providers must protect data as well as for HIPAA compliance. The same security measures necessary for HIPAA compliance — hardware and software firewalls, data encryption, and other measures including not leaving patient paperwork open and exposed — can also protect your data from hackers or other intruders.
The healthcare industry has become a prime target for hackers who use ransomware and other tactics. Some of the country's largest healthcare systems have seen their entire computer systems shut down for days by these attacks.
Many healthcare organizations have developed strict security and compliance protocols to guard against attacks. Third-party RCM companies should be able to operate in alignment with your organization's requirements. In the best cases, your medical billing company can improve security and compliance.
So another part of evaluating a medical billing service must include asking who they use to host their cloud servers and then seeing the host’s SOC 1 and SOC 2 compliance reports. Both certifications show that the company meets or exceeds industry standards for data security, automation, and compliance in the healthcare industry.
Finally, be sure that each potential vendor has a strong recovery plan in place to protect your data should their system go down. Essentially, they must be performing data saves and backups non-stop.
🔎 Related resource: Healthcare System Security: Staying Secure in an Insecure World
Healthcare providers have a lot to consider when deciding about a third-party medical billing/RCM service company or continue processing their claims through a system based in-house.
When factoring in (1) enhanced revenue generally produced by a medical billing vendor who uses intelligent, rules-based technology often not available with an in-house system, and (2) the reduction in infrastructure/staffing costs that type of vendor can bring to the table, an outsourced solution will almost always prove to be a more cost-effective choice.
MedicsRCM supports maximized insurance reimbursements for its clients to the point where their revenue is often increased by 10% - 20% while supporting a nearly 100% success rate on HCFA, UB, workers compensation, and no-fault claims. Clients use our tools to capture patient responsibility balances, even in advance as allowable by the payer.
Together with our team of almost 300 billers, EDI experts, and analysts, and our rules-based, intelligent MedicsCloud Suite technology, our clients enjoy optimized efficiency making their increased revenue that much more significant.
And, the MedicsCloud Suite is available if in-house automation is preferred. Its financial and operational segment (MedicsPremier) and its MedicsCloud EHR operate as a single, unified solution. Either can also be deployed as needed. MedicsPremier on its own can be implemented on your server or in our cloud.
🔎 Related resource: How to Transition to Outsourced RCM Services From an In-House Setup