Amid the turmoil and uncertainty of healthcare today, it’s understandable that some laboratories and pathology groups are reluctant to consider shifting from internal billing operations to an outsourced revenue cycle management vendor.

The familiarity of internal billing -- coupled with an assumption that long-time personnel are fully capable of addressing the complexities of revenue cycle operations -- frequently results in groups standing pat when it comes to coding, claims and billing.

But as regulations become more complex and the pressure mounts from declining reimbursements, the importance of optimizing the revenue cycle cannot be overstated. Despite the best efforts of many internal departments, healthcare’s structural changes increasingly demand a more efficient, effective and resource-rich approach.

Here are four key reasons why internal billing may no longer represent the best solution for your pathology group:

1. Staffing Requirements 
A diverse, highly-trained team is essential to effectively manage the revenue cycle. Recruiting and keeping qualified personnel can be an enormous challenge.

To be effective, a billing team should include the following skill sets and/or personnel:

  • Manager of operations
  • Compliance manager
  • IT manager – hardware
  • IT manager – software and interfaces
  • Certified coder(s)
  • Client service managers
  • Financial analyst
  • Accountant

Including salary and benefits, the labor cost associated with these positions can easily top $750,000 annually. That means groups will need to continue to expand their revenue base in order to maintain margins while covering expanding labor expense, which typically can account for about 60% of revenues.

2. Labor Costs
Beyond fixed labor costs, groups facing hidden incremental labor cost increases due to the ever-growing administrative workload imposed on medical practices today. These tasks, which employees are required to address in addition to their regular work duties, include complying with mandatory initiatives like the Physician Quality Reporting System (PQRS), HIPPA, Meaningful Use, regulatory audits and annual CPT coding changes. Accommodating the many and often-changing requirements associated with these programs can require either added overtime or additional staff.

3. Compliance
The risk of accidental non-compliance involving protected health and financial data continues to rise, as does the potential penalties and financial consequences of a data breach.

As health information becomes more accessible and ubiquitous on the Internet, the risk of an inadvertent data breech climbs. Hackers targeting health and financial data pose a major threat to healthcare organizations of all sizes. Making sure that all systems are protected from constantly morphing attacks can be enormously difficult for organizations, especially smaller practices.

4. Continuous Investment
Continual investment in both personnel and technology is necessary to ensure that your organization collects all that they’re entitled to. Unfortunately, the complexity of the technology required to effectively manage coding, claims and denials is high and the cost of these systems can be too much for a small organization. Establishing an effective denial management process is especially important today, as denial rates climb to the 15-20% range.

Expert assistance
The decision to outsource billing is not an easy one. Concerns exist about displacing long-time employees. There are also risks of cash flow disruptions associated with the transition in billing operations. Nonetheless, laboratories and pathology groups must understand that the changing nature of healthcare provides an increasingly small margin for error. By turning over critical revenue cycle management functions to a qualified third party, groups will reduce risk while increasing their ability to concentrate exclusively on the provision of care.

Al Sirmon, CPA

About the author

Al Sirmon, CPA is a McKesson Business Performance for Pathology Consultant