Medical Billing In-House Vs Outsourcing

April 27, 2012 by  Filed under: Management 

Cost is an important (although not the only) factor when deciding whether to outsource your medical billing and collections. Following is an example of some of the dollar factors you can use to decide if it makes sense including the comparison costs/revenues via in-house or outsourced medical billing and collections.

This practice has the following characteristics:

• Two medical billing specialists

• Three primary care doctors

• 20,000 insurance claims filed each year

• $2.5 million billed per year

In-House (IH) billing costs (salary, healthcare, taxes, office supplies): $118,000

Outsource (OS) billing costs (follow up time from staff, 5 hours per week): $4,000


IH hardware and software (practice management, hardware maintenance): $7,500

OS hardware and software (maintaining computer connection with OS firm): $500


IH claim processing (clearing house fees): $3,600

OS claim processing (7% of amount collected): $122,500


IH % of billings collected: 60% $1,370,900 (after admin costs)

OS % of billings collected: 70% $1,623,000 (after admin costs)


IH collections costs: $129,100

OS collection costs: $127,000


IH net revenue: $1,241,800

OS net revenue: $1,496,000


In this scenario, outsourcing medical billing and collections would actually increase the bottom line by $254,200 or 20%.

Other Factors

While cost can be a compelling, even the driving factor in outsourcing medical billing and collections, there are several other aspects of your business to consider:

• If you are implementing an EHR system, it may improve costs by improving efficiencies in your office. Conversely, if you decide to outsource and already have an EHR, you must make sure your medical biller has compatible software for it.

• If you are not especially technically savvy, or do not want to perform all of the tedious work involved in following up on claim denials, hounding your patients for collections or other administrative chores, it might be best to outsource.

• Business can really be impacted by high turnover. There are killer costs related to on-boarding and retraining (which means you might have to hire a trainer). But the most damaging issue might be inefficient processing of the bills and claims. Any slowdown in claims processing can strangle your cash flow.

• If you are a new provider, it may also be a good idea to outsource. It can provide a welcome relief from the day to day stresses while you build your practice.

Partnering up with a medical biller is not always the answer. A lot of due diligence needs to be done to determine the best way to process billing and collections.

McLaughlin founded RMK ( ) in 1980. With two employees and a few small accounts, he developed the business that has collected and processed more than $100 million in debt collections since its inception.

The business focuses on medical billing, revenue management, accounts receivable management, collections, subrogation, revenue enhancement reviews, and billing office-staffing analysis in addition to its full collection agency service programs. RMK clients include major hospitals, medical clinics and providers from all over the US.

Contact Ronald McLaughlin for more information about RMK’s medical billing, coding and revenue management services.

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