Physical Therapy Billing Service or In-House Billing – Which one is a better fit?

Author: Paul Singh

If you have not already read our customer service blog, I encourage you to do so prior to reading this blog.  The take away from that blog should be an understanding that we put our client’s best interest at the forefront ahead of our own.  Before I started StrataPT, I worked in the outpatient industry and was responsible for managing the billing and administrative operations for a very busy physical therapy practice that had 5 locations in Florida and Ohio.  During that time, we transitioned the billing from a billing service to in-house.  At the time, it made sense from a financial standpoint. We had strong systems and well-trained staff in place to handle it. However, I knew that this was not always the case and that there were many private practice owners that did not want to deal with the stress of managing an in-house billing operation.

So what determines if you should use a third party billing service or do your billing in-house?  I would say there isn’t a clear cut answer to this by any means, but let’s take a look at a few key factors to consider.

  • Your Current Revenue: Let’s use ABC Therapy who has an annual revenue of $200,000 as an example. They could complete their billing in-house and pay their front desk or a biller to do the job at approximately $30,000 (based on a conservative salary estimate). They could hire a third party billing service and pay approximately $13,000 (based on an estimated 6.5% of collections). Solely based on cost, it would be obvious that this practice would benefit from using a third party billing service.  However, I am not naïve to the fact that using a billing service is a huge pill to swallow in that you are ultimately trusting your revenue to an outside party.  If you pay your front desk or a biller to do the job, there is a sense of having more control.  However, with the ever changing insurance world, what typically happens is that the front desk/biller cannot keep up with the payer regulations and rules, cannot keep up with checking benefits, cannot keep up with filing claims in a timely manner, cannot keep up with posting payments, and cannot follow up on denials.  So in addition to the payroll cost being elevated, your uncollected revenue quickly amounts to a cost that far exceeds the cost of just your payroll.
  • Your Uncollected Revenue: One of the biggest mistakes practice owners often make when hiring a billing service is that they base their decision on the quoted price without gaining a full understanding of what the actual price is going to be. At face value, it’s easy to think that the difference between the quoted price and the actual price is solely related to hidden start-up fees, training fees, add-on services, etc.  These hidden fees can certainly be part of the equation but a factor that is often overlooked and way more expensive is the amount of money that is uncollected. There are many billing companies that quote a price of 5% of collections which may sound good at face value.  However, the part that they are failing to communicate is that their average collection rate may only be 85% which quickly takes the quoted price of 5% to a staggering 20%. In short, the price of a billing service is only as good as the collection rate.  Make sure that you hire a billing service that not only collects every dollar owed to you, but also a billing service that is able to keep up with the constantly changing payer rules.
  • Your Systems: In the perfect billing world, claims would be submitted to the payer and full payment for every visit would just show up in your bank account within days. I’m sure it’s no surprise to anyone that the billing world is far from perfect.  With a constant stream of payer rules and industry changes, using a billing software or service that is able to adapt to these changes is more important than ever.  Without solid internal systems in place and a billing system or service that is able to keep up with these constant changes, your private practice will struggle.  All too often we talk to outpatient physical and occupational therapy practice owners who are on the verge of shutting their business down due to the neglect of their accounts receivable and lack of internal efficiency. Regardless of whether you’re doing billing in-house or using a billing service, just remember that the ability to keep up with the payer rules and requirements is key to your financial success.

Only you know exactly what the needs of your business are, but we would be more than happy to explain our services and how we are able to streamline your revenue cycle and take the burden of the insurance industry off your shoulders.

You May Also Like: