In-House Medical Billing Software vs Outsourced Billing Services

Key Takeaways

  • Expenses of the in-house medical billing software are much higher than the outsourced billing services. The former includes costs such as overheads, staffing expenses, hardware, and more; which is absent in outsourcing services.
  • The only way to know the effectiveness of in-house medical billing software vs outsourced billing services is to compare them with industry benchmarks such as net collection rate, days in A/R, etc.
  • A billing service company is likely to have an effective privacy plan in place, which covers guidelines on state and federal rules, industry trends, and payers’ requirements, and offers assistance for audits as well.

To manage the revenue cycle, maintain financial transparency with patients, speed up the billing process, and secure all transactions, healthcare facilities choose either in-house medical billing services or outsourced billing services. Both billing services have their pros and cons, however, it is essential to check which one fits you the best. In today’s time, medical billing software is rapidly increasing at a CAGR of 10.5 percent. The rise in duplicate claims and lack of transparency in transactions is compelling facilities to adopt billing software services. Let’s look at their differences in detail.

In-House Medical Billing Software vs Outsourced Billing Services

There are four overarching aspects to take into account while comparing in-house medical billing software and outsourced billing services. These are listed below:

1. Cost of Services Provided

For in-house medical billing software, the cost of services includes opportunity costs, quantifiable costs, and the time required to manage billing operations. Additionally, it is recommended to evaluate fixed and variable costs as it helps healthcare facilities and clinics to prepare a budget. An apples-to-apples comparison is sometimes difficult to make as every medical billing services company quotes differently. One may offer an all-inclusive package, whereas the other may charge separately for elements such as refund process, reimbursement, claims processing, etc.

Healthcare providers need to understand their preferences and patient needs before deciding to outsource or manage in-house medical billing software. The type of expenses to consider for in-house medical billing software are:

  • Hardware required for the billing system.
  • Expenses of IT staff such as cost-per-hire, payroll, and employee benefits.
  • Ongoing expenditure of practice management software to keep track of patients’ balances.
  • Direct costs such as statements, EDI, etc.
  • Expenses associated with training, referrals, documentation, etc.
  • Taxes, benefits, annual increments, bonuses, and other costs associated with IT staff.
  • Overheads such as utilities, space, supplies, transport, etc.
  • Software expenses such as disaster recovery, communication channels, firewalls, data encryption, privacy, etc.

Outsourced billing service companies quote according to the percent of net collections. Healthcare software  companies state an amount after analyzing healthcare providers’ procedure mix, payer mix, and volumes. This is because billing services costs are proportional to patients. Between in-house medical billing software vs outsourced billing service, the latter is less expensive than the former. This is because costs revolving around IT staff, overheads, and disaster recovery are nullified.

2. Performance of In-House vs Outsourced

Costs can be evaluated only when you’re aware of the effectiveness and what a medical billing company can achieve. If an outsourced medical billing service can offer very little as compared to the effectiveness of an in-house medical billing software, then the latter is a preferred choice. The only way to know of sure the performance of both is to compare them with industry benchmarks such as net collection rate, days in A/R, etc.

Furthermore, the in-house billing team completes the procedure for processing insurance claims in six to seven stages, whereas a billing services company completes it in half the time. This shows the level of performance offered by the two types of services. The billing process generates financial information that defines the revenue cycle of hospitals and clinics. So, they must have confidence in billing operations: in-house or outsourced. Every facility needs to employ experienced IT staff to manage billing software and create accurate financial reports.

3. Privacy Concerns

The Affordable Care Act mandates healthcare providers who leverage Medicare benefits to establish a compliance program. For in-house medical billing software, healthcare practitioners must follow a compliance program to assure that claims are submitted on time and there’s no chance of error. Compliance with billing software ensures the privacy and security of ePHI (Protected Health Information). Developers are required to include HIPAA rules and regulations during medical billing software development. Factors to consider for the utmost privacy of ePHI are:

  • Internal auditing and monitoring of billing operations.
  • Check whether all compliance standards are met.
  • Appoint a compliance officer.
  • Develop a corrective action in case of offenses.
  • Conduct staff training and education on healthcare privacy standards.

Healthcare providers, clinics, and hospitals working with outsourced billing services are also required to follow compliance regulations. A billing service company is likely to have an effective privacy plan in place, which covers details of the billing procedures. A billing services company provides additional guidelines on state and federal rules, industry trends, and payer requirements, and offers assistance for audits.

4. Miscellaneous

Other aspects differentiating in-house medical billing software vs outsourced billing services are:

  • Control Over Billing Process: In-house billing software offers clinics and hospitals more control over their financial procedures. They can access reports in real-time, hold emergency meetings, ask questions, and manage downfalls quickly. All changes in the billing processes can be adjusted swiftly and care facilities can keep billing transparent. However, with outsourced billing services, the vendors are accountable for all the operations, and the in-house hospital staff has less control over it. Even during emergencies, they have to wait for the outsourced company to solve them.
  • Record Keeping: Outsourcing billing services help with filing and record keeping. Often healthcare providers find it difficult to organize their financial records. The reasons are they have to spend time with patients and document ePHI. So, there’s no time left to organize billing files. Outsourced billing teams are trained in data organization, unlike an in-house team. So, they are an asset. With well-organized billing data, providers can find what they want anytime.
  • Hidden Costs: Every outsourced billing service comes with hidden costs, which are less likely to be found in an in-house medical billing system. Healthcare facilities must consider reviewing outsourcing policies in detail and know about the hidden expenses beforehand. Some of the hidden costs include the cost of management and coordination, time spent on setup, disaster recovery, and backup, unplanned logistics, cash flow, etc.

Which One to Choose?

The in-house medical billing system is an ongoing process and has a maintenance plan in place. The system consists of staff to monitor regulations, compliance, and revenue. They also help in avoiding fraud and data breaches. Whereas, on the other hand, medical billing companies are experts in their fields. They alleviate the burden on revenue cycle management. Compared to an in-house team, they maintain coding certifications from associations such as AAPC (American Association of Professional Coders), RCC (Radiology Coding Certification), AHIMA (American Health Information Management Association), and more.

Several healthcare facilities prefer outsourcing over in-house as it is inexpensive and a medical billing services company is well equipped to handle financial operations. Arkenea, a healthcare software development company offers IT outsourcing services for healthcare providers, care facilities, and clients who need experts in the field. If you’re looking to outsource, then connect with Arkenea and we will help you by providing the best-in-class services.