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In an effort to focus more of their time and energy on what they do best — namely, practicing medicine — a growing number of physicians are outsourcing their administrative and business functions to increase efficiency and collections while lowering costs.
"The benefits of outsourcing are cost containment, though not necessarily reduction, the ability to focus on the core business, and the ability to get resources like skilled labor in areas where there is a shortage of resources," says Howard Lackow of Reston, VA-based outsourcing consultants Transition Partners Co.
"Health care is trying to reduce costs, and one way to do that is to find more cost-effective and efficient ways of providing the services that are not core to health care," Lackow notes.
Hospitals have been outsourcing everything from janitorial and cafeteria services to building and grounds maintenance and emergency department staffing for some time, but individual medical practices have been slower to adopt the concept.
Besides billing and collections, other functions that can be easily outsourced include credentialing and managed care contract paperwork, payroll, accounting, and photocopying functions.
Observers say new technology will permit many more functions to be outsourced. The Internet, for instance, will increasingly be used as a way to send and receive all kinds of information, such as referrals, claims, and radiology results.
Many medical groups also use an application service provider (ASP), which can provide services like web hosting, physician practice management software, and billing software. Physicians can rent the technology from the ASP, which keeps costs down and ensures access to current technology.
"Even groups with as many as 50 physicians don’t have the in-house resources and talent it takes to set up, fix, and tweak a state-of-the-art information system," says Lawrence Benson, president and CEO of Practice Partners, an ASP in Toledo, OH.
There are also companies organized to handle recruitment, development, discipline, and payroll for physician offices. "A physician can lease the entire office staff, setting up criteria for the [type of] people they want," says Benson.
"Indeed, you do it because it is cheaper to give that function away than pay the expenses of advertising job openings, training new employees, and being involved in other traditional human resources functions," he maintains.
For instance, San Jose, CA-based Electronic Health Information (EHI) helps physicians with chart assembly and completion, coding, file room management, and retrieval and release of information. EHI can place full-time staff in a physician’s office who also can manage files or the front desk. You also could have an EHI staffer visit your office once a week to perform these services.
If you are considering outsourcing, make sure you do your homework before signing a contract. Here are some tips from OutsourcingCenter.com on finding the right vendor and on writing a contract that works for you:
• Talk with other practices. Just like finding a good plumber, mechanic, or doctor, one of the best ways to locate an outsourcer who is right for you is to ask your colleagues in other practices about their experience and if they could recommend someone.
• Check their regulatory history. Given today’s regulatory climate, it’s especially important to ask vendors who will be dealing with billing and coding matters about the percentage of their claims for clients that have been rejected for things like upcoding. Also check whether they have ever been involved in a fraud audit and what the result was if they were. It’s best that you have a written compliance plan the vendor can review and be expected to comply with; this provides an added layer of legal protection should any future questions arise.
• Go over contract details. Make sure your contract with the outsourcer specifies exactly what is expected — how fast bills will be collected, for example — and any penalties, including terminating the agreement, should it fail to deliver.
• Ensure access to data. Make sure the practice will always have direct access to its own data. A good way to do this is to keep data on your own internal system while permitting billing companies to dial into your office’s computer network to do their work.
• Hammer out payment terms. There are different ways to pay for different outsourced functions. For billing services, many outsourcing experts recommend a flat fee plus a percentage of collections. Practices typically pay somewhere between 5% to 10% for billing, with an average of around 8%. However, your cost will vary depending on the type of claims common to your practice, the marketplace, and state regulations.
Coding costs range from $2 to $5 per transaction. While you can expect to pay between 75 cents and $2 per patient, some firms charge by the page for record scanning and transmissions services.