I-Med Claims - Medical Billing Company
Account Receivable Management

Outsourcing Your Account Receivable Management to a Medical Billing Company

Account receivable is essential to revenue cycle management in the healthcare industry. Providing equitable access to quality healthcare is challenging in the US, particularly for underserved communities. However, the complexity of the revenue cycle management (RCM) process can hinder this goal, resulting in higher costs and lower efficiency. Outsourcing accounts receivable to a third-party company has become popular among healthcare providers, with over 70% outsourcing at least some part of their revenue cycle management process. Healthcare providers can overcome various challenges and improve access to care for their patients by outsourcing their accounts receivable to a reputable medical billing and coding company.

Challenges of Accounts Receivable Medical Billing

Here are the following challenges associated with account receivable management: 

Insurance Claim Denial

Insurance companies frequently deny claims, leading to outstanding payments due to missing information, late filing, lost claims, duplicate submissions, and coding errors.

Bad Debts

The increasing financial burden on patients leads to more bad debts, which are bills that patients never repay.

Unwarranted Write-offs

Unwarranted write-offs have a concerning impact on your bottom line and should be avoided as much as possible. They become a more significant issue for companies with a manual collection process.

A Disorganized Collection Process

A poor collection process can cause a negative customer experience, unnecessary write-offs, and a structured adjustment approval process.

Restrictive Modes of Payment

Failure to accept various payment methods puts your organization at a severe competitive disadvantage, risking claims rejections and denials. Gathering patient information can be cumbersome and time-consuming without proper tools.

Understanding the Differences Between In-House and Outsourced Account Receivable Management

In-house and outsourced account receivable management (AR management) differ in control, expertise, and cost. An in-house AR management team gives the practice more control and ownership over the process but requires a significant investment in time, training, and resources. Outsourcing AR management to a third-party company provides specialized expertise, reduces the risk of errors, and can be more cost-effective.

Control Over the Account Receivable Management Process

In-house account receivable management gives a medical practice complete control and ownership over the billing process. Outsourcing account receivable management shifts this responsibility to a third party, allowing the practice to focus on patient care. Choosing the right outsourcing company is crucial to building trust.

Reduced Risk of Account Receivable Errors

In-house teams are more susceptible to making costly accounts receivable errors, which can impact insurance reimbursement. Outsourcing account receivable management to experts reduces the risk of mistakes, as they have the time and resources to process billing accurately.

Vast Expertise in Account Receivable Management

Outsourcing account receivable management to a third party can alleviate many of the medical practice’s stressors during the billing process. Experts in account receivable management are dedicated solely to this task and are knowledgeable about regulatory changes that may impact practice. This ensures compliance and leads to accurate processing for the medical practice.

What are Outsourced Accounts Receivable Services?

Accounts receivable outsourcing is when a company hires a third party to manage AR in medical billing process. This practice is helpful for companies that need more resources or expertise to manage their accounts receivable effectively. Outsourcing can help companies improve their cash flow and reduce the risk of bad debt.

Definition and Benefits

Outsourced accounts receivable services refer to hiring a third party to manage tasks related to billing and payments. Outsourcing these services can improve cash flow, reduce administrative burdens, and increase revenue. It is a cost-effective solution compared to hiring locally, providing focused assistance at a lower cost.

Essential Functions

Outsourced professionals can handle tasks like customer account reconciliation and commission calculations. They can reconcile the general ledger and bank statements and prepare month-end and year-end processes. They can generate invoices and account statements and maintain the billing system.

Financial Reporting

Outsourced professionals can provide accurate reporting on finances and sales to ensure the company’s financial stability. They can also prepare and proceed with monthly journal entries to maintain accurate financial records.

Query Resolution and Irregularities

Outsourced professionals can identify and resolve any irregularities or queries related to accounts receivable. This ensures that issues are addressed promptly and accurately to maintain a healthy revenue cycle.

Reasons for Businesses to Outsource Accounts Receivable Process

An outsourcing firm can handle responsibilities such as invoicing clients, tracking payments, and following up on overdue invoices. Customer credit checks are also part of an outsourcing company’s tasks. Other benefits include: 

Expertise

Outsourcing providers offer specialized expertise in managing the collection process, providing businesses with experience that most do not have.

Cost Reduction

Healthcare providers can cut down on costs related to staff hiring and training, infrastructure maintenance, and compliance management by outsourcing accounts receivable.

Improved Cash Flow

Outsourcing providers can expedite collections and reduce the time it takes to receive client payments, which helps businesses improve their cash flow.

Increased Efficiency

Outsourcing providers use advanced technologies and systems to manage collections, which can help businesses become more efficient.

Focus on Core Activities

Outsourcing accounts receivable frees businesses to focus on core activities, such as product development and marketing, while leaving non-core activities to the outsourcing provider.

Potential Cost Savings of Outsourcing Accounts Receivable for a Medical Practice

The table compares the cost of handling accounts receivable in-house versus outsourcing to a third-party provider. The cost categories include employee salaries, benefits, office space, equipment, and software. 

Cost CategoryIn-houseOutsourcedSavings
Employee Salaries$120,000$40,000$80,000
Employee Benefits$30,000$5,000$25,000
Office Space$24,000$0$24,000
Equipment$10,000$0$10,000
Software$15,000$0$15,000
Total$199,000$45,000$154,000

Benefits of Outsourcing Accounts Receivable Services in Your Medical Practice

The following are the benefits of outsourcing the account receivable management process:

Access to Expertise 

Outsourcing AR provides access to the expertise of professionals who specialize in managing account receivables. This ensures your business benefits from the latest tools, technology, and best practices.

Operational Efficiency: 

Saves time by handling all AR management tasks such as software and equipment selection, hiring and training new employees, and auditing transactions. Improves accuracy by reducing the chances of errors and identifying inaccuracies in time. Reduces operational expenses by eliminating the need to set up a dedicated team, hire new staff, and incur additional software and facilities expenses.

Financial Benefits:  

Outsourcing account receivable management speeds up collections by using the best skills, technology, and practices to tighten and speed up collections. Ensures data security by providing dedicated setups, technology, and infrastructure to safeguard medical and patient information from theft. Customer screening expertise in establishing and communicating helpful credit policies for the business, verifying the patient’s eligibility and active coverage, covered benefits, and precertification requisite for inpatient procedures.

Business Advantages:

Outsourcing A/R offers expert support at each level of the outsourcing process, including insights and guidance for a successful outsourcing journey. It can enhance business flexibility and availability by enabling 24-hour availability. It promotes business growth by freeing money to be invested in expanding the company’s ability to take on extra work. Improves staff satisfaction rates by identifying tasks and responsibilities that would be best suited for an offshore employee, allowing the local team to focus on what they do best and enhancing job satisfaction.

Cost Reduction: 

In-house account receivables management involves several fixed overheads, such as setting up a dedicated team, hiring new staff, employee training, and more. Outsourcing accounts receivables helps reduce these operational expenses. Outsourcing firms are experts in managing account receivables and use the latest tools and best practices, including automation, to ensure accuracy in handling AR. This reduces the chances of errors and helps identify inaccuracies on time.

Scalable Solutions: 

Outsourcing A/R enables businesses to scale their operations as needed without worrying about hiring new staff or investing in new equipment or software. Outsourcing AR helps improve cash flow by expediting collections and reducing the time to receive client payments. Outsourcing providers use advanced technologies and systems to manage collections, which can help businesses become more efficient.

Conclusion:

Outsourcing accounts receivable allows businesses to focus on their core activities while ensuring they receive timely payments. This helps them to improve their financial operations and stay on top of their paperwork. By delegating back-office tasks to an outsourcing provider, businesses can save time and money while improving accuracy, data security, and collections. Additionally, outsourcing the accounts receivable process can provide expert support, enhance business flexibility, and increase staff satisfaction, leading to business growth and success. 

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