Deciding on whether to outsource any portion of your healthcare facility's revenue cycle department is something that cannot be taken lightly. And facilities have different options when outsourcing the coding function. Some facilities have chosen to keep the coding in-house and only outsource the processes involved with electronic claims submissions, collections and financial reporting. However, with the increased number of audits, health care facilities are deciding to outsource all revenue cycle functions including the coding of claims.
![]()
The implication of inaccurate coding is significant. A healthcare facility should look at their available resources when determining if the coding should be outsourced. One only has to look at the two types of coding errors: "overcoding" and "undercoding." The obvious ramification of overcoding is potential for an extended audit; repayment and possible penalties and fines. Undercoding or what providers call "defensive coding" results in millions of dollars of lost revenue.
Healthcare
Pros of Outsourced Coding
Comparing the Pros and Cons of Outsourced Healthcare Coding
As mentioned, healthcare providers are seeing audits from all areas. These claims audits include RAC, MIC, MAC, CERT, PERM, MFCU, ZPIC and others. With more claims audits, the healthcare industry is seeing a higher demand for qualified coders. One benefit of outsourcing the coding tasks is that the headache of hiring an individual with coding experience is no longer an issue.
Medical coding rules can be arduous. A coder must be privy to CPT rules, Correct Coding Initiative Edits (CCI), ICD-9-CM (and soon ICD-10-CM), Local Carrier Determination (LCDs) and National Carrier Determinations (NCDs). With small practices, those individuals who are granted the task of "coding" are also given other responsibilities which affect the amount of time they have on applying, learning and keeping abreast of all of the rules. Utilizing a company who only hires qualified individuals to conduct the coding tasks, provides confidence that the claims are being submitted based on the appropriate rules and policies.
The American Academy of Professional Coders (AAPC) and the American Health Information Management Association (AHIMA) provide various ways of obtaining the required continuing education credits. Many ways are affordable and do not require leaving your desk. However, many of these ways are not as specialty specific as you would find at regional and national conferences. With attending offsite conferences, the expenses are increased. The budgets in many health care facilities cannot accommodate the expenses associated with continuing education classes. Outsourcing the coding to a company eliminates this extra expense.
With the above benefits of outsourcing the coding, comes due diligence on the health care facility's end. It is imperative that it is understood that these companies do provide specialty specific continuing education and that they provide their staff with the appropriate resources that spell out all of the coding rules and policies.
Cons of Outsourced Coding
So what are the cons involved in the outsourcing of the coding? For one, when mentioning the benefits of using a coding company, we are making the assumption that their employees are qualified and educated on the coding rules. Negative outcomes have been shown with physicians of certain specialties that have more difficult coding scenarios. This is often seen with Interventional Radiology and Neuro Surgery. Although the coding company may have qualified individuals, they may not be experts on these more difficult specialties. It is imperative that you find out if your designated coder is educated on your specialty. Ask for the bios and CVs of the coders who will be working on your claims. In addition, coders lose their credentials. It is easy to contact the AAPC and AHIMA to determine if the coder who is submitting your claims has allowed her credentials to lapse. Find out what type of continuing education they have received in the past; get specifics.
Unless you contract with a coding company that only deals with claims in one particular part of the country, you are taking the gamble that they are truly applying LCDs and other regional coding policies to your claims. If you are a provider in Louisiana and you are utilizing the services of a company out of Minnesota, you must get confirmation that the coding company is experienced with Medicare, Medicaid and other third-party payers in your state.
Beyond the coding tasks, there is the remainder of the revenue cycle process that can be outsourced. The process for outsourcing billing can be pretty straightforward. Typically superbills and other documents are scanned and electronically sent or mailed to the medical billing service. If the practice is using EHR software, the patient's superbill is stored and electronically transmitted to the billing service. The medical billing service takes care of the data entry and claim submission on behalf of the provider. The company will also follow up on denied claims, work unpaid accounts (A/R management) and send out-patient statements. The mere fact that they do not have to deal with any of this is the major reason that providers choose to outsource. In this outsourcing scenario, the fee for outsourcing these revenue cycle tasks is based on a percentage of gross collections. The industry average for these fees is approximately 7 percent of gross collections.
Compare hard costs: Calculate the expense of doing it in-house (salary and overhead of your billing staff, amount of time you are spending on billing, third-party fees for claims clearinghouses, billing related supplies such as claim forms) versus the billing company fees (which are typically a percentage of collections). Many organizations provide salary surveys that can assist you with average cost of billing staff.
Compare soft costs and intangibles: This comes down to the basic hassle of dealing with daily billing issues and all issues related to human resources. Is dealing with these issues worth it?
Compare effectiveness: You must take into account the quality of the resources that you would have in-house versus assessing the potential effectiveness of a third-party. If you have done billing in-house, you can measure your collection rates; turnaround times and other points of billing to practices of the same specialty and size. This could assist you in determining how well your billing staff is doing. Another question that you could ask yourself is how often do you get reports regarding A/R, charges, and collections?
Any business decision requires acknowledgment of cost benefit, good business practice and common sense for the company. When determining whether to outsource the billing, consider these facts and apply them to your daily practices. The ultimate decision comes down to one thing and that is how can we practice medicine and maintain a business in the most efficient way.
Comparing the Pros and Cons of Outsourced Healthcare Coding
HORNE LLP is one of the top 50 accounting and business advisory firms in the United States, as reported by the Public Accounting Report (PAR), and one of the top 10 accounting and business advisory firms in the Southeast. With offices in Mississippi, Tennessee, Alabama, Louisiana, Texas and Arizona, the firm has team members serving clients across the nation providing evaluations of health care compliance, Medicare/Medicaid reimbursement, cost report preparation, healthcare audit and assurance services, and other services for the health care industry, as well as services for the franchise, financial institution and construction industries. For more information on HORNE, visit http://www.horne-llp.com.