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Is it cost-effective to outsource the practice billing department?

PMI is routinely called in to help practices determine the feasibility of outsourcing their billing department to a Revenue Cycle Management (RCM) company.   Unfortunately, many practices focus exclusively on the cost of an RCM service by multiplying the proposed RCM fee by the total practice revenue and comparing that to the estimated current billing department cost.  For example, they compare the 6-9% of revenue typically charged by RCM companies versus the number of billing department employees at $15 per hour. 

The reality is that it is a bit more complex.  When a practice focuses exclusively on the percentage charged by an RCM company, they forget to consider the fact that any qualified RCM company worth considering should be able to increase your collection rates- thereby increasing your overall revenue.  Such an expected increase in revenue should, without excpetion, greatly offset (or even surpass) the fee charged by RCM companies thanks to their ability to manage the billing cycle better than a practice can do on their own.  Specifically, with a properly-aligned RCM company, they should have "best practices" in place to ensure a consistent flow of charges out the door, higher clean claims rate as well as the ability to increase/decrease resources as warranted.  

A properly managed RCM company should outperform any internal billing department a practice could assemble since the RCM company is well-versed on the most effective way to maximize your payments.  Practices need to take this expected increased collection rate into consideration when examining the feasibility of an RCM company handling this responsibility.

While there are many pro's and con's to outsourced billing, below you will find an online calculator to help with the math.  Take a few moments to plug in your numbers and you might be surprised at what a good RCM company can do for your bottom line.

Based on PMI consultants' many years of helping pediatric practices around the country, it is very rare for a practice with less than five full-time providers to justify keeping an internal billing department in light of the growing complexities and practice stakeholders' desire to reduce the day-to-day demands of ensuring the revenue cycle is operating at peak efficiency.  Depending on what part of the country your practice is located in and availability of properly trained billing staff, many practices with more than 5, 10 or 20 providers may see some cost savings from an RCM solution.

Disclaimer: PMI does not offer RCM services and is providing this information as an unbiased way to evaluate what is best for your practice.