Evaluating a billing service

Four key areas to look at when evaluating a billing service are:

Does it integrate?

Evaluating a billing service's product, staff, reputation, references and previous installations in other practices in your specialty are all critical. But you should also try to get an idea of how using the service might change your practice. Some practices discover that outsourcing billing doesn't save much time or resources after they make all the related operational modifications.

What is the total cost?

The average market rate for dermatology billing services ranges from five percent to seven percent of net collections.

However, these rates are dependent on a number of factors. First, you may be charged more - or less - depending on your accuracy and timeliness of disseminating necessary documents to the billing service. If your staff doesn't do a good job of entering registration data or fails to collect patients' co-payments at the time of service, then your cost of billing can be much higher than average market rates. Second, the billing service's rates might not include payment posting, charge entry, coding, registration, compliance tasks, accounting and reporting services. Finally, ask if you will have to buy or lease new hardware or pay for software modifications and upgrades to make the system work.

Because it is so difficult to benchmark billing service rates, you may be better off determining the menu of services you want and then pricing each vendor according to that menu. Don't become seduced by promises of low costs and high performance. Instead, pay attention to the many other factors that go into a system's actual cost besides the monthly fee or the percent of collections the service charges.

How does it perform?

It's important to establish performance criteria for your billing operation. At a minimum, monitor collections carefully. You also should monitor the days in accounts receivables (A/R), the percent of A/R over 90 days, and non-contractual write-offs. For the latter, make sure your service isn't unnecessarily writing off services or accepting underpayments on your behalf. At least once per quarter, obtain a sampling of the accounts processed and the denials on which the service is working.