A Comprehensive Guide to In-House vs Outsourced Medical Billing

‘’In-house billing involves a healthcare practice having its team of experts that manages the billing process. In outsourced medical billing, providers get professional billing services from a third-party billing company to handle the billing process of their practice. 

Medical billing is a vital component of the healthcare industry as it helps healthcare providers get reimbursed for their provided services. However, due to complexity and evolving trends, rules and regulations, providers face difficulty in managing their practice financial operations. This urges them to think about whether they should manage medical billing in-house or they should outsource it to a third-party or a reliable billing partner. Both in-house and outsourced medical billing have their advantages and disadvantages. If you want the efficient revenue cycle management of your healthcare practice to get the constant cash flow on your rendered services, then you should carefully consider a few things before choosing any option among them.

This article provides a detailed insight into the in-house vs outsourced medical billing. After reading this article, you will get completely familiar with the pros and cons of both in-house and outsourced medical billing, the steps of transition, and the main factors that you should consider while choosing a billing partner. So let’s read!

In-House Medical Billing Vs Outsourced Medical Billing 

Healthcare practices require efficient, timely, and consistent billing to generate revenue. Some choose the in-house team to handle the billing, while some prefer to outsource billing to a third party by considering various factors. Various recent studies have reported that there is a greater probability that the outsourced medical billing market will reach $19.7 billion with an annual growth rate of 11.8% by 2026. The main underlying reason behind this is the rise in complexity of medical billing, coding, and optimization of revenue cycle management. 

What is In-house billing?

In-house billing refers to the complete handling of the entire billing process internally by the practice team instead of outsourcing to a third-party. Practice is itself responsible for managing each aspect of revenue cycle management. From claim preparation, submission, processing, to payment collection and follow-ups, everything is under the control of the in-house experts.

What is Outsourced medical billing?

Outsourcing medical billing is the main process in which a healthcare practice or organization takes advantage of the billing services from a third-party billing company to manage their practice’s billing, coding, and revenue cycle management. In outsourced medical billing, the internal team relies on the expertise of professional billers and coders to perform all billing tasks. 

The outsourced company simply acts as an extension of the practice. Moreover, there is also an increasing popularity of outsourced billing companies as they can significantly improve the efficiency of all core operations and ultimately lead to improved cash flow. 

In-house Medical Billing Vs Outsourced Medical Billing 

This table provides the key differences between in-house medical billing and outsourced medical billing:

Feature	In-house Medical Billing	Outsourced Medical Billing
Expertise	Efficacy of billing depends on the knowledge and training of in-house staff	Third-party billers have a team of professionals who have extensive experience in medical billing
Control	Direct analysis and greater control over the billing process	Less control on billing due to the takeover of billing professionals
Efficiency	High probability of errors due to less efficient staff or their shortage	Decreased rate of errors, rapid claim submission and processing, increased cash flow
Cost	High overhead cost	Low overhead cost
Transparency	Direct and transparent access to the data	Advanced analytics and reporting
Scalability	Limitations in terms of scalability	Higher scalability
Compliance	Healthcare practice is completely responsible for meeting regulatory standards or requirements	Third-party billers independently maintain compliance
Patient interaction	Direct interaction with patients	There is no direct interaction with patients, financial process is completely under the control of the expert team
Cash flow	Less efficient billing can lead to a delay in reimbursements	More efficient billing that results the faster and constant cash flow

Pros and Cons of In-house Medical Billing

Pros of In-house Billing 

There are multiple benefits of in-house billing, which are as follows:

1. Greater control

In-house billing gives healthcare providers more control of their billing process. They can continuously keep an eye on each step of the process. Whether it is the preparation of a claim or maintaining compliance with regulatory standards, they can deal with everything. This indicates that the in-house billing is personalized, and it provides a sense of relief to healthcare providers, doctors, or physicians. 

2. Direct interaction with patients

In-house billing also offers the benefit of direct interaction between patients with the team of the billing department. The efficient communication results in a reduced number of queries related to the process of medical billing. In addition, patients get a timely response to their questions or concerns and exhibit a greater satisfaction rate. This will also encourage the patients to directly share their concerns with the staff without any hesitation. 

3. Tailored solutions 

Each practice is different and therefore responds differently to the billing strategies. The in-house billing team can also develop tailored solutions to handle the entire process of billing and address all the concerning needs. 

4. Return on Investment

In in-house medical billing, return on investment offers a benefit of cost savings and internal control. 

Cons of In-house Medical Billing

Other than benefits, in-house billing also has some disadvantages, such as:

1. Lack of expertise

The in-house billing team can not match the expertise of professional medical billers and coders. They do not have sufficient knowledge and skills to manage the billing and revenue cycle. This results in the claim denials or rejections. In addition, if the in-house team does not pay attention to the unpeeled denials and discarded superbills, then it ultimately affects the cash flow of healthcare practices.

2. High overhead costs

Managing the in-house billing is quite expensive as the providers have to pay for the charges for team wages, training of new hired persons, and handling some aspects of the billing systems. 

3. Support issues

If the in-house billing department is only having few staff members, then a situation might occur in which any of the members is not able to perform the task. If it happens, then it also affects the functioning and ultimately the cash flow. 

4. Need to stay updated with evolving trends.

The in-house team always needs to stay updated with the latest trends, rules, and regulations of the billing industry. This requires the extra effort and investment of time and resources. 

5. Consumes more time

Managing in-house billing requires more time. This diverts the attention of healthcare providers from providing patient care to billing management. Instead of focusing on patient management, they invest their time in handling the billing and their related issues. 

Pros and Cons of Outsourced Medical Billing 

Pros of Outsourced Medical Billing

Major benefits of outsourced medical billing include:

1. Professional expertise

Professional medical billing companies usually hire experienced billers and coders who have extensive years of experience in billing or managing the revenue cycles of practices. They are familiar with the latest trends, policies or rules, and regulations of the concerned niche. 

Moreover, they also employ the highly advanced billing systems and strategies so that your practice faces fewer issues and generates more reimbursements for the provided healthcare services. 

2. Streamlined operations

Outsourcing companies utilize their own top-notch and innovative billing strategies to streamline their core operations. Whether it’s claim tracking or collecting payments, their experts can deal with everything. They are committed to minimizing the delays in reimbursement, duration of billing cycle, denials, and enhancing the cash flow. 

3. Cost savings

One of the major benefits of outsourced medical billing is its cost-effectiveness. In in-house billing, the billing department has a great expenditure in terms of team salaries, training, hiring, equipment, and software, etc. However, outsourcing the medical billing to a reliable billing partner can resolve this issue. It offers a major cut down in overhead cost, as providers have to just pay for their rendered services. 

4. Diminished errors 

Outsourced billing also gives the advantage of reduced billing errors. As the billing professionals are skilled in identifying the main causes of errors of issues that can result in claim denials or rejections. In addition, they do not just identify but also resolve all the errors to lessen the claim denials and their increased approvals for the high reimbursement rate.

5. Increased focus on patient care 

By outsourcing the medical billing, healthcare providers give the entire responsibility of billing to the experts and easily focus on the thing that actually matters: patient care. This develops an extra space for the patients to interact with the administrative staff and get timely answers to their queries. This ultimately increases satisfaction and retention rate, which also affects the financial aspects of practice. 

6. Transparency 

Outsourced companies regularly provide the analytical reports that help the healthcare providers to get a complete insight into the billing operations. 

7. Scalability

Scalability is another major benefit of outsourced billing. With this feature, healthcare practices can easily make adjustments in their billing operations despite the fluctuation in trends, patient volume, and concerning requirements.

Cons of outsourced Medical billing

Some common disadvantages of outsourced medical billing are as follows:

1. Lesser control over billing

One of the major disadvantages of outsourced medical billing is the decreased control of providers over the billing process. Only the experts of an outsourced company completely take over the billing, so healthcare providers can not see the financial operations regularly. They can not get an insight into how the third-party experts are handling the critical aspects of revenue cycle management. This can sometimes result in conflicts.

2. Transparency 

Outsourced medical billing can also raise data security issues. Sensitive information can be stolen or shared. There are also chances that the third party can hide the major drawbacks of their strategies and not take responsibility for any negative results. Therefore, it should be ensured that the outsourced practices are compliant with HIPAA for adherence to rules and regulations. In case of any fraudulent act, they should take action on time so practice remains secure.

3. Issues in communication

Although outsourced medical billing provides ease to healthcare providers, they can suffer due to communication issues. It happens more if the time zone or workplace of the billers is different. In most cases, healthcare providers face difficulty in clearly communicating their concerns with them, which in turn can result in multiple errors or inaccuracies in billing and delays in solving issues. 

4. Cost variability 

For outsourcing the medical billing to any professional billing company, you might have to break your bank. Different billing companies have variable charges between the slow or highly working, or busy months. So this can put pressure on your finances. 

5. Hidden charges 

Before signing a contract with any billing company, read it carefully, as they might have hidden fees. If it is not noticed on time, then it later affects the finances and gives an unpleasant experience to the healthcare providers. 

Key points to consider before deciding transition

If you are in a phase where you have to decide whether you should choose in-house medical billing or outsourced medical billing, you should never forget these points:

1. Size of practice

Larger practices have higher claim volumes as compared to smaller practices, so they can benefit from outsourcing their billing to third-party companies.

2. Level of staffing

In-house billing comprises a higher turnaround and burnout due to multiple factors, which include complexity in regulatory changes and higher administrative burden etc. However, there is a diminished staffing pressure and lower administrative stress in outsourced billing.

3. Budget requirements 

Practices with smaller or tight budgets have to invest more in hiring, training staff, or other tasks. But in some cases, some practices require advancements despite their low budgets. 

4. Compliance 

There is a higher requirement of compliance in both in-house and outsourced billing. However, outsourced billing companies have greater expertise in maintaining compliance. 

What is the process of transition from in-house billing to outsourced billing?

If you are planning to shift from in-house billing to outsourced billing, then you should be careful in making specialized plans and their efficient implementation. The main process that can result in the transition from in-house billing to outsourced medical billing includes:

1. Selection of a billing service provider 

Choosing the right billing partner is the game-changer. Numerous billing companies provide medical billing services, but you have to be careful in choosing a reliable platform. You have to make sure that their billing team is expert in billing, reduce your administrative stress, and also respond to any queries. 

2. Internal audit 

First, you have to prepare your mind that you have to make a shift from in-house billing to outsourced billing. Make a complete internal audit of your practice and analyze your key performance indicators, which include the rate of claim denials, AR, and final collection. 

Then, think about those tasks that you will give to the billing company that might be claim submission, processing, regular follow ups or timely collections. 

3. RFP development

Develop a request for proposal to explain your service level agreements and scope of services, etc.

4. Make a specified timeline.

Set a deadline by which you have to complete the transition. Whether it’s your data transfer or training, each phase of transition should get done within the selected timeframe. 

5. Data transfer

Billing, patient as well and financial data are transferred from the existing system to the new system while maintaining compliance. This step is performed with accuracy and precision. 

6. Training for the new workflow space

Train the staff to prevent future consequences. If there are any issues, then address them to favour a smoother transition. 

7. Regular monitoring 

Once the system is launched successfully, make a regular analysis of all KPIs to ensure the diminished errors. 

How to select the right billing partner?

The selection of a medical billing partner is a wide decision if you want to focus on your patient care, along with significant revenue generation. However, you should consider the following factors while choosing a billing partner:

1. Expertise and experience 

The billing company should have a team of professional medical billers and coders who have years of experience and a proven track record of handling the billing, coding, and revenue cycle management. In addition, they must have familiarity with all standard policies and guidelines of the healthcare and billing industry. 

2. Reliability 

Before signing a contract with any third-party billing company, first take a deeper look at the feedback as well as reviews to get an idea of the reliability and transparency. 

3. Compliance assurance 

The selected billing company should have compliance with HIPAA and other relevant regulations. This is vital to maintain the regulatory standards. 

4. Latest technology 

Also, determine that your selected billing partner is using the latest and advanced technology and develop the strategies that can easily integrate into your existing system. Moreover, they should develop such strategies that can easily integrate into existing workflows. 

5. Clear communication

The billing partner should be capable of avoiding communication issues. There should be clear, effective, and transparent communication between the outsourced billing company and the healthcare practice that is taking the billing services. They should clearly explain the billing strategies and always give faster responses to any concerning questions. 

6. Future Trends in Medical Billing 

In the field of healthcare industry, the advancements in medical billing are happening rapidly. The future trends for the current and upcoming era undergo certain alterations and improvements due to technological advancements. There is an increasing focus on accurate optimization of revenue cycle management, maintaining the focus on patient care, and rules and regulations concerning the industry.

7. AI-driven billing and coding 

There is now rapid integration of AI in the process of claim preparation, submission, coding, minimizing errors, and collecting reimbursements.

8. Advances in telehealth

Outsourced companies are also using telehealth services for handling billing, coding, and various reimbursement models. While delivering the services via healthcare, quality is never compromised.

 9. Value-Based Care & Bundled Payments

There is also a rapid shifting of focus from volume-based reimbursement to quality care and payments, which are based on outcomes. 

Choose MedStar to make your billing more efficient & Profitable. 

If you are managing a healthcare practice and are highly concerned about improving its financial performance, then you are in the best place. MedStar Billing Services is a #1 trusted medical billing company that offers the best medical billing and revenue cycle management solutions. Our billing specialists develop tailored billing solutions that suit the individual requirements of each healthcare practice. 

Contact MedStar Billing Services to take a first step towards the financial stability of your practice.

Final thoughts 

The financial success of each healthcare practice depends on the optimization of the billing process and revenue cycle management. If you want to excel in the healthcare industry, you should have financial stability that can be achieved through medical billing. 

Both in-house and outsourced medical billing have their advantages and disadvantages, which affect the efficiency and financial performance of healthcare practices.  In-house billing gives enhanced control over billing but also presents multiple issues, including cost and staffing issues. 

However, on the other hand, outsourcing medical billing is transparent, delivers expertise in billing, and is also more effective in terms of getting the desired outcomes. But other than benefits, outsourcing can result in some major issues such as hidden charges, data security as well and communication issues. 

Therefore, healthcare providers should consider the positive and negative aspects of both in-house and outsourced billing before making a decision. They should also deeply consider the patient volume, size of practice, as well as present resources.