Medical Billing Service Selection Process

Yuval Lirov

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Over four thousand vendors of medical billing services offer solutions to medical practices nationwide in response to poor in-house billing performance and increasing regulatory scrutiny of billing processes. On one hand, such a large number of outsourced billing solutions ensure continued competitiveness in terms of both service quality and pricing. On the other hand, the lack of uniform service standards and metrics among the vendors, combined with their large numbers, makes the process of vendor selection difficult and error-prone. While the availability of a large vendor selection allows finding an alternative to unsatisfactory service, billing vendor-switching costs remain high, motivating extra effort and focus during the stage of vendor selection. This article outlines basic thirteen-step guidelines for an effective and efficient medical billing vendor selection process.

1. Scope of Services

Decide if you are looking for billing technology, billing service, or practice workflow solution. If you plan to manage billing in-house, you may only need a billing technology solution. In that case your next decision is whether you wish to own the technology or to rent access to it.

Complete practice workflow solution belongs to the other end of the spectrum of services and starts with appointment scheduling and includes electronic medical records, SOAP notes, and billing. Few vendors today offer such integrated packages as they require powerful vericle-like technologies used by trained and skilled personnel implementing rigorous and disciplined service processes.

A billing-only service belongs to the middle ground between the choices described above and may include coding, electronic claim submission, “scrubbing" (validation), payment posting, claim and payment reconciliation, followup, secondary submission, and patient billing.

2. Billing Model

Billing model selection is the second most important decision in your definition of desired vendor. What is the policy of followup process prioritization? Who decides on which claims to followup? Which of the following functions are automated: upfront claim validation, submission, reconciliation, and follow-up workload allocation?

3. Reporting and Transparency

Transparency is a critical aspect of outsourcing billing service because without transparency the service may not be reliable. To be able to observe every step of the billing process on a continuous 24 x 7 basis, reporting must be available using a secure HIPAA compliant connection over the Internet.

The ability to provide timely and useful reports depends on billing model (see above) and billing technology. Vendors that manage their own billing technology typically have better control of reporting capabilities in terms of scope, analysis, frequency, and transparency. At the minimum, the following features must be available:

  • Operational Report shows total claims and $ amounts submitted, paid, adjusted, written off, and failed. It allows breakdown by cpt, payer, referral, or a combination of such dimensions.
  • Denials Report shows the list of denied claims and a log of followup actions. By sorting it by amount paid, you can tell the smallest payment the billing service will fight for.
  • Compliance Report shows the potential for post-payment audit and itemizes compliance violations.
  • Reporting Frequency defines the data update intervals on existing reports and turnaround time for new reports.
  • Data Aggregation and Analysis must allow arbitrary data aggregation and drill-in. Export to Excel spreadsheets for further analysis is a very useful feature.

4. Certification

Request formal certification of compliance with basic regulatory requirements. Stay away from national vendors with New Jersey clients or New Jersey vendors without formal certification from New Jersey Department of Banking and Insurance.

5. References

Ask for a list of references owning similar practices. Are the clients satisfied with results, support, and changes over time? Can they quantify billing service quality in terms of Accounts Receivable over 120 days and underpayment reduction?

6. Billing Service Quality

Make a list of metrics used by the service. Focus on collections completeness and payment delay. Can the vendor quantify the differences between payers and between various CPT codes in real time? Does the vendor follow up every denial? What is the denial followup success rate?

7. Compliance

Consider two aspects of compliance, namely, your practice and billing service. Request to review a written compliance program for the billing service. Ask for its update procedure. For your practice, request an interface to a legal service specializing in post-payment audit risk management.

8. Communications Protocols

A disciplined vendor has a formal and simple process to report problems and track their resolution. Your practice must have a competent account manager and regular meetings scheduled to review outstanding problems.

9. Data Security and Protection

Review data center facilities. Ask for evidence on HIPAA compliance: claims must be viewed only on the “need to know" basis, access to claims and modifications must be thoroughly documented. Data must be protected with redundant disaster recovery measures. Review backup process, backup intervals, and data restore capabilities.

10. Data Entry Protocols

Modern technologies allow the doctor to take over coding and reduce the billing role down to claims processing and followup. Technology-competent vendor will supply your superbill online, along with a separate form for patient and charge entry, EOB posting, and on-line claim editing. Similarly, much of data entry validity, including some of claim scrubbing will be done online at the point of data entry.

11. Processes for Continuous Improvement

A successful vendor must have developed an effective process to identify and resolve systemic errors. Without such a process, the vendor will lose competitiveness and you will have to switch the services at a later stage.

12. Size and Scalability

Automation defines scalability. The more steps are automated, the easier it is for the vendor to take on new clients without impairing service quality. To understand vendor's scalability, you must compare gross annual billings, claim volumes, and numbers of doctors. Avoid vendors that would have to treble their scale because of serving your practice.

13. Staffing

Review staff numbers, educational background, experience, and reporting structure. Understand the process of quality assurance and accountability. Avoid vendors that would have to double their staff to serve your account.

14. Pricing

Most billing service vendors charge a percentage of monthly collections. This percentage varies across specialties, depending on the average claim billing size and claim volume. Note that the lowest cost provider is not necessarily the best. Read our companion article on relative value of billing quality and price-performance relationship.

Yuval Lirov, PhD, author of “Mission Critical Systems Management" (Prentice Hall, 1997), inventor of multiple patents in artificial intelligence and computer security, and CEO of Billing Technologies . Vericle delivers comprehensive practice workflow engine that integrates patient scheduling, electronic medical records (EMR), billing, transcription, and compliance management. It improves billing performance and reduces audit risk. Yuval invites you to post questions about and share your knowledge of medical billing and compliance at .


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