To Outsource or Not to Outsource

Many physician practices, health care facilities, and other health care providers periodically wonder about outsourcing their medical billing and coding. For smaller practices it may be the easiest choice when compared with the alternative of hiring another employee. Larger operations may be looking for ways to cut costs and therefore consider sending their medical billing and coding work to a third party. What this question really comes down to is, it it better for business to outsource or to keep this as an in-house operation.

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Determining what is better for business is a source of contention. In the short term outsourcing may save large healthcare facilities money by reducing their payroll expenses. However when evaluating a long-term business plan some additional issues are worth considering.

When dealing with a third party, long-term reliability can definitely be an issue. Because the medical billing and coding field is constantly changing and adapting to new laws and regulations, especially in recent times, companies specializing in this field are subject to market forces. This means costs may be cut at the expense of quality and there are always the other possibilities of mergers or bankruptcies.

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Speaking of mergers, this highlights another issue present when dealing with companies that are even in more static fields: changing management. Third-party companies can always experience a change in leadership that affects business, fall victim to other hidden internal issues, or want to renegotiate a contract.

Liability lawsuits are another issue that has recently arisen. A new Health Insurance Portability and Accountability Act (HIPAA) rule stipulates that contracting medical billing and coding professionals are now liable for violations of HIPAA made by their hiring agency, and vice versa. Shortly before this new law took affect, a high-profile case involving a third-party contractor in India received media attention when it was discovered that through a firewall security lapse, confidential patient data had been made available publicly for just over seven weeks, a blatant breach of HIPAA. Of course, outsourcing to an overseas foreign company poses many additional questions that will sidetrack the main discussion here.

Smaller healthcare practices may find hiring a billing and coding professional can be cheaper than outsourcing to a third party who may charge more because of a relatively smaller volume of work. Having a low rejection rate is also much more important for smaller operations because recouped charges often represent a greater percentage of overall revenue. That said, whether the billing and coding is done by an individual or a clearing house may be secondary as long as insurance payments are coming through.

However not to present a one-sided viewpoint, there are also many benefits to outsourcing; there would not be so many agencies specializing in this otherwise. A small or medium-sized healthcare facility which treats patients for a wide variety of ailments can benefit from the expertise found in a large billing and coding agency where employees specialize in an equally wide variety of reimbursement codes. This range of knowledge may not be available among the several in-house billing and coding professionals.

For particularly small practices, medical professionals may prefer to let a completely separate entity handle the business portion of their service, leaving them to focus on patient diagnosis and treatment.

And for any practice or facility that considers expanding its employee workforce, there is always the stubborn question of payroll taxes, employee healthcare, and pension plans. Hiring a third party to do medical billing and coding can take a bite out of the total number of employees and reduce long-term expenses.

So in conclusion, there is no right answer to this question. Different business models will point in different directions, and these will even change from the short to long term. Deciding whether or not to outsource medical billing and coding really depends on personal opinion or group consensus.