Are you looking for ways to improve the efficiency of your billing and increase your bottom line? A medical billing service could be the answer. Many physicians already look to medical billing companies for assistance with their billing and collection functions. Most billing companies offer billing and collection services, plus a wide range of other services.

Due Diligence

If you are considering hiring a billing service, you should weigh your options. The following self-assessment will help you determine whether in-house or outsourced billing is better for you:

  • Do you have someone in your practice who understands the nuances of the billing process and who could monitor billing performance?
  • Do you have the ability to hire and retain a qualified biller?
  • Do you have a contingency plan or the ability to cross-train another staff member to cover the biller as needed?
  • What is the cost of your in-house billing? Consider the following and compare the cost of outsourcing:
    • Staff salaries
    • Benefits e.g., medical, sick-leave, vacation leave, etc.
    • Payroll taxes
    • Worker’s Compensation insurance
    • Practice management and coding software
    • Postage
    • Clearinghouse fees
    • Training
    • System hosting, support and maintenance

Also, see the table titled, “Cost Comparison of Medical Billing: In-House vs. Outsource?” to see an example of a cost comparison for a single biller for one primary care provider.

Types of Medical Billing Service Companies

When you determine that having an outside billing service is more cost effective for your practice, you should then determine what type of service you need. Billing services come in different forms and can be divided into four main types:

Important Note: The Privacy Rules under the Health Insurance Portability and Accountability Act (HIPAA) of 1996 requires physicians who use a billing service to enter into a HIPAA-compliant Business Associate Agreement (BAA) with that billing service.

Why Hire a Medical Billing Service Company?

The main reason for hiring a billing service is centered on saving money. You should see a net positive impact on your bottom line. In short, your reduced costs and increased collections should more than compensate for the fees you pay the company. In addition to saving money, you and your staff should have more time to dedicate to your patients. When looking into your costs, make sure that you consider some of the intangibles such as training your staff, unexpected staff absence or sudden staffing changes. These may add up to a significant amount of time and money. On the other hand, compare your tangible costs to that of the cost of outsourcing. The table below compares the cost of in-house billing versus the cost of outsourcing based on a single biller for one primary care provider:

Finding the Right Fit for Your Practice

Choosing the right billing company is going to be a critical component of your practice’s success. In some ways the billing company will become an extension of your own office. Therefore, you should take time and do your due diligence. It is prudent to request a background check on the billing company. You should be able to review the company’s financial statements, current number of clients and years of experience. Your findings should reveal the company’s track record and financial viability. Find out what type of training and experience the staff has. Also, ask if the supervisor of the billing company has an education and training in medical coding and if they are a member of a billing association. More specifically, verify that they are familiar with your specialty and if they are familiar with the insurance companies you work with most. Regardless of what type of company you decide to hire, you should always check references on your candidates. Ask the billing company for references to practices similar to yours in size and specialty. Most likely you will be referred to very satisfied customers; nevertheless, the following questions can help you determine how good a match the service is for your practice:

  • How long have you been working with this billing company? What duties are they handling for you?
  • Overall, how satisfied are you with them?
  • Have they complied with HIPAA requirements to your satisfaction?
  • How have your collections changed since you started working with them?
  • What percentage of your claims are accepted on the first submission?
  • How effective are they at pursuing unpaid claims?
  • What is the best thing about working with them?
  • How do you get information to them? Is the process intuitive and efficient?
  • Do your patients notice any difference in billing and collections?
  • Does your staff feel like they can count on them to resolve problems?
  • What was the biggest challenge about working with them?
  • Do you intend to stay with them, and for how long?

After narrowing your search for the most suitable candidates, you should make sure that the services offered to you match your practice needs. Consequently, you have to ensure that all the services that you have in mind are written into an agreement.

Responsibilities of a Medical Billing Service Company

Generally, some of the functions performed by a billing company include the following:

  • Register patients, confirm insurance eligibility and coverage information (we recommend the practice to perform the eligibility and coverage information before seeing patients);
  • Code the procedures;
  • Prepare, scrub and submit claims to the appropriate payers and patients within a certain number of days from the date of service;
  • Enter all applicable information into an appropriate computer system using electronic claim submission where possible;
  • Respond to telephone and written inquiries from third-party payers and patients concerning their bills;
  • Assist in audits, if necessary;
  • Provide postage and necessary computer billing forms;
  • Pursue collection of unpaid or inadequately paid claims for a specified number of months, e.g., 2-3 months after the initial billing, and appeal unpaid or unfairly paid claims;
  • Deposit all payments received into the physician’s account at a specified bank, or into a specified segregated account from which the billing service may subtract its payment and make payment to the physician within a certain number of days, e.g., seven (7) days; and
  • Provide the physician with monthly, year-to-date and annual reports. The report could be broken down by individual patients or payers. It is recommended that physicians request to see examples of reports before signing with the company to make sure they are complete and understandable. Sample of management reports includes:
    • Accounts Receivable (A/R) with aging of balances in the columns marked as “Current, 0-30 Days, 31-60 Days, 61-90 Days and Over 91 Days”. In addition, the aged report should break out patient accounts by payers and should have a percentage of the total outstanding per aging category.
    • Patient responsibility report (separate from the A/R);
    • Charges billed;
    • Collection/revenue;
    • Denied claims;
    • Credit balance; and
    • Contractual and other write-offs.
  • Provide feedback on the financial performance of the practice. If possible, provide comparative data based on national averages and peers in the same specialty and geographic area.

Important Note: While some physicians rely on billing services to perform Current Procedural Terminology (CPT) coding, medical claims are made in the name of the physician. Thus, the physician is responsible for the propriety of the claim. Remember that the physician is the expert on what service was provided and is the one who will be penalized if the codes are incorrect. Moreover, third-party payers often track physician efficiency and clinical outcomes based on CPT codes from claims, so coding errors could cost the physician contracts in the future or can be the cause of a bad or unfavorable profile, report card or an audit. Hiring a billing company and delegating your billing and collection functions to the new company does not warrant a hands-off approach on your part. You should audit the performance of the billing company. One of the best strategies to audit is to review the Explanation of Benefits (EOBs) periodically to determine whether claims are being submitted correctly, and to check for denials and underpayments. Then, you should compare your monthly reports against the EOBs. Make sure the company posts the payments or denials by CPT codes. You will need this information to respond to a managed care plan’s utilization inquiry and for determining acceptable capitation amounts. Any practice will need to know what it is making on its capitation accounts and how this compares to fee-for-service revenue. Reports should track the frequency of procedures and services and average receipts, by CPT code.

Responsibilities of the Practice

Although most of the labor is delegated to the billing company, you still play a critical role in the success of your practice. The key to a successful relationship is to have an open line of communication. For example, if you do not provide good data to start with, the subsequent tasks will become more difficult to perform, and the whole process will collapse. As the source of the data, you need to supply:

  • Billing provider numbers including the NPI(s);
  • List of contracted payers, along with the portions of the contracts related to the reimbursement guidelines and the fee schedules;
  • Accurate patient information;
  • Timely and accurate charges; and
  • Authorizations and Advanced Beneficiary Notices (ABN).

Whichever direction you decide to go–keeping your billing in-house or outsourcing–you would need the above data to be up-to-date, accurate, and available for your claims processor.

Evaluate Your Candidates

Once you decide to hire a billing company and after checking the references of your candidates, but before you sign an agreement, you should meet with your candidates. The face-to-face meeting is important because you can take away a lot when you see people in person.  You could also use the following questionnaire to evaluate your candidates that you have in mind so far. Use the questionnaire, or a similar one, to enhance your research about the billing company. Make sure to use the questionnaire related to your practice’s situation.


  • What is your average client size? e.g., number of physicians, total charges per month
  • How does your organization inform staff of current state and federal rules, regulations and guidelines
  • What billing compliance policies and procedures do you use?
  • Have you ever had a claims review by a local or regional carrier?
  • How many clients do you serve? How many full-time-employees (FTE) support them?
  • Which employees will be assigned to my account? How many years of experience do they have in my specialty?
  • Are your employees credentialed? Please explain.
  • Outline the specific tasks a collector performs.
  • Do you measure employee productivity?
  • Do you perform quality reviews of your employees’ work? How?
  • Do you provide management reports on a monthly basis? If yes, what kinds?
  • Do you have standard performance benchmarks? If so, what are they?
  • Do you have record retention and storage policies? If yes, please describe.
  • Do you provide electronic imaging? Which paperwork?
  • Do you process credit balance and refunds? If yes, how frequently?
  • Do you follow state escheat laws for returning unclaimed payments?
  • What information technology system do you use? Is it proprietary?
  • Will you demonstrate your billing system and process?
  • Does your IT staff incorporate the most current required industry changes? How often do you make updates?
  • Do you conduct background checks on new and current employees?
  • What is your employee turnover rate?
  • Do you have customer service guidelines? Can we review them?
  • Can you address current health care issues that affect our practice, e.g., can you report diagnoses specified in Medicare’s quality reporting programs?
  • Describe your firm’s financial health.
  • Please provide current and past client references.

After determining a good fit for your practice, you should inquire about the billing company’s pricing. Go to “Hiring a Billing Company – Pricing Guidelines (Part 2)” to find out more about how much billing companies charge for their services.

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