Why Doctors Should Outsource Medical Billing

Why Doctors Should Outsource Medical Billing

One of the main business questions faced by physicians is whether to outsource medical billing to a third-party medical billing service or do it in the office with medical billing software. Many physicians feel that outsourcing billing to a company makes the most sense because billing and coding specialists. Don’t make a decision before considering your options. Weigh the differences when assessing your practice’s needs and decide if outsourcing is best for you.


Cost Analysis


Costs In-House Outsourced
Billing Dept. Costs $  118,000 $     4,000
Software/Hardware Costs $     7,500 $        500
Direct Claim Processing $     3,600 $  122,500
Software/Hardware Costs $     5,500 $     2,000
% Billings Collected        60%         70%
Collections $1,370,900 $1,623,000
Collections Costs $   129,100 $   127,000
Collections (Net of Costs) $1,241,800 $1,496,000



For many physician practices, the decision regarding in-house billing versus outsourcing boils down to one key factor – cost. To help compare costs of outsourced billing versus in-house, you should do a cost analysis. This involves:

  • Billing staff costs – With in-house billing, the calculated rate involved adding up the median salaries of two medical billing employees ($80,000), federal and state taxes ($12,000), healthcare costs ($9,000), and training costs so the employees are updated on new industry developments ($2,000). These two employees will cost the practice around $118,000 per

    year. With outsourced billers, we factor in 5 hours each week at $15.00 per hour. This adds up to around $4,000 per year in administrative costs.

  • Software and hardware costs – With in-house billing, you can expect an annual cost for practice management software and hardware to be $7,500. When you use an outsourced billing company, you only pay around $500.
  • Direct claims processing costs – Clearing house fees for around 20,000 claims a year can cost you $300 per month for 3 physicians ($3,600 each year). With outsourced billing services, a percentage of the collected amount will be paid, which is around 7% for most primary care practices ($122,500).
  • Percentage of billing amount collected – With outsourced billing, you can expect a 5%-15% increase in the amount you collect. We factored in a 10% increase as an average between these numbers. Regarding in-house billing, the practice will collect 60% of what it actually bills to the payers.

The In-House Process VS. Outsourcing

With the in-house procedure for insurance claims processing, there are many steps to consider. The employees must enter patient information and billing codes using a software program. The superbill is used to bill services, and it is submitted to a medical billing clearinghouse. The clearinghouse will evaluate the claim for errors, for a fee, and then passes the claim on to the payer. If the claim is rejected by the payer, the staff must redo and resubmit the claim after additional information is gathered. With in-house billing, you must have an integrated electronic health records (EHR) practice management system. EHR software will populate both systems’ data fields, and diagnosis codes are used for data entry.

The process for outsourced billing is much simpler for the office staff. The superbill is electronically sent to the medical billing service, who handles data entry and claim submission for the provider. The industry average is around 7%, which provides incentive for the biller to collect what is owed to you. Using EHR makes the billing process straightforward and easy. The EHR software eliminates much data entry, improving accuracy, efficiency, and reimbursement.

Reasons to Outsource your Medical Billing

Besides saving you money, there are several factors to consider regarding billing options. With outsourcing, you can expect:

  • An efficient billing system – If you are noticing drops in collections, you could have billing department issues. Outsourcing to a third-party billing company decreases time to receive payment from a payer, and lowers the number of rejected claims.
  • Tech-savvy specialists – Outsourced billing and coding professionals are tech-savvy, investing in practice management software and training. These specialists upgrade your software, handle technical issues, and deal with the computer aspect of billing.
  • Low staff turnover – In your office, you can expect medical billing staff turnover. With an outsourced company, you do not deal with this problem.

MPMR works with practices nationwide on complete revenue cycle management. The company offers certified coders and billers along with consultants who help with operational efficiencies. Call us today for a free 30 minute phone consult!

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