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Hey, y’all. Here we are again. Unless you’re a private pay practice with the billing on autopilot via your EHR, you have likely thought about how to manage billing with the least amount of headache. After you get past the question of whether you want to offload billing to somebody else, the primary dilemma quickly becomes whether to outsource it or hire someone in-house.
[00:01:00] Today, I am talking through the pros and cons of each of those options. This is a question that comes up very frequently and there are a lot of nuances to it. So, I hope you will stick around as I go through each side of these billing options.If you’re a practice owner and you’d like some support in a group with other peers who get it, who get you, and who knows what it’s like to run a testing practice, I would invite you to check out The Testing Psychologist mastermind groups. The next cohort is starting in July. And there may still be room. You can schedule a pre-group call at thetestingpsychologist.com/consulting.
All right, let’s get to this discussion of in-house versus outsourced billing.
[00:02:00] All right, everyone. Here we go. Let’s do it.So billing. Billing, billing, billing. Such a conundrum. It is definitely not a job that we should be doing ourselves, but finding someone to do it requires a lot of trust and training in some cases. I’ve had experience with all the options; the DIY option, which I did for several years- I lost a lot of money doing that; the in-house option, which is where we’re at now; and the outsourced option, which I also used for a number of years. So I’d love to look at all of them from a logistical and financial perspective.
As we get going, when I say billing, I mean primarily two things. I mean, checking benefits and chasing down payments, both from clients and insurance panels.
The obvious[00:03:00] factor here is if you’re private pay, you avoid most of that, which is awesome. So if you’re private pay, you still may be interested in having someone track down the payments and keep track of the payments, that is totally fine. I don’t think we as clinicians should really ever be doing nonclinical tasks, but that’s for other episodes.
If you are going to go to the DIY approach, let’s talk about that. DIY- Do It Yourself. I’m not going to say a lot about this, but I will say that you probably shouldn’t be doing your own billing unless it is totally autopiloted and locked up. Typically, you don’t or shouldn’t have the time to be spending on billing, but there are steps to take or a progression in this whole process.
Insurance billing is the worst. That’s [00:04:00] going to be the most time intensive. DIY private pay billing is significantly easier, or it should be anyway. So I would really only consider doing DIY billing if you have a great EHR, you always take checks at the time of service; even then, you should probably have someone entering the payments into your system, and you are private pay. An alternative is if you have a great EHR, you always take a credit card, and you’re private pay. So the combination here is obviously good EHR and private pay. As much as you can automate payments, the better it’s going to be.
But if that does not describe your practice, I would strongly consider an outsourced billing option, or rather, sorry, an in-house or outsourced billing option. Don’t try to do it yourself.
Let’s talk about the pros of an in-house biller. When I say in-house, I [00:05:00] mean someone that you personally employ through your business. You are not contracting with a company that is external to your business. So typically this will be an employee.
Pros of an in-house biller are that you have lots of control. You can train folks exactly like you want, and you can train them specifically on the processes in your practice. There will be a little bit more on this later.
In-house billers are typically a little bit cheaper. This is somewhat up for debate. It does depend on the size of your practice, the amount you’re billing, and the collection rate of the billing company versus your in-house person.
Let me break that down a little bit. Most billing companies are going to charge at least 5% of revenue collected, okay? So if you’re billing or if your practice bills $500,000 a year, which is [00:06:00] about 20 evals a month at $2,000 each just to give you a ballpark of the context here, 5% of $500,000 is about $25,000 to a billing company. In many places, $25,000 is enough salary for a halftime admin person- a 20-hour-a-week admin person or an in-house billing person.
Now in our case, we have a ratio of the number of evals we do per month to billing hours needed of 1.25. Let me operationalize that. That means that we’re doing about 100 evaluations a month. We have 80 hours a week of admin time to support the billing side. So 100/80 =1.25.
[00:07:00] So for this hypothetical example where we are doing 20 evaluations a month, you would theoretically only need about 16 admin hours if you’re taking insurance. If you’re private pay, that would be significantly lower, but remember back a minute ago I said, the amount you’d pay to a billing company would essentially pay for a 20-hour-a-week admin person. With this example, you’d maybe only need 16 hours, so you’d be overpaying, so to speak, by 25%.That was a lot of math, but the takeaway is typically it’s a little bit cheaper for an in-house person. Even if you factor in payroll taxes, benefits, an in-house person is usually going to be a little bit cheaper. As your practice grows and you put more systems in place, the ratio of evals to admin time gets a little higher, meaning that it’s even more cost-effective to have an [00:08:00] in-house person. And then, as I said, if you’re private pay, the ratio is going to be a lot higher because you’ll need far fewer admin hours than in an insurance-based practice. So slightly cheaper in a lot of cases.
Another pro of an in-house biller is accessibility. Having someone right in-house, easily messageable, is very valuable if you have issues. Clients can also contact someone directly. You have control over the customer service aspect of billing. So for all those reasons, I think these are all good reasons to consider an in-house biller.
Now, the cons are basically related to employee management. So if you have an in-house biller, that opens you up to turnover and losing employees. Relying on only one person can be a little tricky.[00:09:00] If they’re sick or if they’re out for an extended period of time, you can be out of luck. Billing departments are typically hotbeds for embezzlement. That leans toward the idea that someone’s deliberately stealing money, but it also opens up the possibility of just straight-up errors. And that leads to the possibility of lower collection rates than a professional outsourced company might provide, especially in the beginning as the person gets trained.
Another downside is you’re training and developing that person all on your own. That’s a double-edged sword. You can train them exactly as you would like, but you also have to train them exactly as you would like.
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All right, let’s get back to the podcast.
Let’s talk about outsourced billing.
Some pros with outsourced billing are they typically have a slightly higher collection rate. When I say collection rate, this just gets at the idea that I don’t know any businesses that have a 100% collection rate, which means every dollar that you bill to the client or to the insurance company gets paid.[00:11:00] That’s a 100% collections rate. You have no denied claims. You have no outstanding balance. You have no aging report. That is not a thing.
So in our example of this company that makes $500,000, if a billing company has a 98% collection rate, that’s $490,000. That’s great. If your in-house person collects 95%, which seems pretty close, right? That’s $475,000. So that’s a $15,000 difference. And depending on the size of your practice and the cost of in-house versus outsourced, that might be a deciding factor. So, if that $15,000 difference is enough to make up the higher cost of an outsourced company might be worth it.
Typically, an outsourced company is going to give you, [00:12:00] they’re just going to have more infrastructure in place. They’re going to have the capability to give you pretty comprehensive reports on your financials and the collections. You can train an in-house person to create reports as well, and your EHR can generate reports, but typically, an outsourced billing company is going to have processes in place and software in place to actually do that for you with relatively low input on your part.
Another pro of outsourced billing companies is because they are typically paid as a percentage of the amount they collect, they are motivated by earning since they don’t get paid if they don’t collect. So compare that to what I would say is a typical hourly model of an internal biller or employee where they’re not as motivated to collect because they just get paid no matter what.
Downsides of an outsourced billing company.
[00:13:00] Contracts that you might be locked into. This happened with us with our second billing company that we worked with. We got locked into a contract and had to stay with this company for 6 to 8 months longer than we wanted to. So you have to read the contract. It is a contract. You have less control. Typically these companies are further away, both practically or literally and metaphorically. So the access might be a little bit lower.Typically, they are a little bit more expensive, but as I said, if the collection rate is higher than your in-house person, it might make up for that, where you’re actually spending less, even though it seems like you’re spending more.
One big thing to consider is that they may not work with your EHR. I know many billing companies who are locked into one or two specific EHRs or they [00:14:00] use their own software entirely, which means the billing might not even be happening in your EHR. I don’t love that. I like to have everything under one roof, so to speak, where I can see all the numbers in our electronic health records. So that’s a question to ask if you’re thinking about an outsourced billing company because then it means that you either have to get familiar with two systems or run two systems, or it forces you to convert to another system entirely.
And then perhaps the biggest downside for me for outsourced billing is that I haven’t found any that truly know how to bill for testing. We have a very niche practice. It’s not complicated billing, but billing companies often do not know how to bill for testing. I only know of one billing company out there that specializes in testing. It’s Cohen Billing. It’s out of Atlanta. [00:15:00] It’s a partnership. The wife is a psychologist and the husband is not. That’s the only one that I found that truly specializes in testing. So, that’s something to keep in mind.
So to me then, this is a big, this is an important factor. So if I’m going to spend the time to train someone on how to bill for testing, I just want to train them in-house and help them do a really good job.
So how do we pull all this together? What do you do? These are my thoughts:
If you’re a small insurance-based practice without the time to train your staff on billing and you don’t personally have much experience with billing, then I would outsource it until you have the cash flow to hire someone good and bring it in-house.
If you are a larger practice with some time and money, I would strongly consider bringing it in-house and possibly even look [00:16:00] at medical billing VAs to help lower the cost. This is a major shift that we made in our practice about a year ago. We use a VA company called My Mountain Mover also linked in the show notes. They’re medical VAs and they specialize in medical billing, medical reception, all sorts of things, and it has been amazing, highly endorsed.
I personally like the in-house feel. Across all of these experiences with billing companies and in-house folks, I like having someone in-house. I feel like there is more control. There’s a closer relationship. There’s the ability to train specifically on testing. Customer service is dialed in because our clients just call that person. They know all the clients. They know all the statements- all the accounts. And here in our practice, it is much more cost-effective.
As your practice scales, for example, our [00:17:00] practice last year had a revenue of about $2 million. So if we take that number that I was talking about, the 5% number, a lot of billing companies will do 5% of collections, 5% of $2 million is about $100,000. And in our case, we are spending currently $70,000 for our billing team. That’s a significant savings for us just on payroll and employee costs. So for us, it works out, and like I said, as you scale it might be a better fit for you.
So big choice in your practice. There are lots of layers here, but hopefully, this will give you some information to think about as you make that decision. And the number one takeaway is don’t do your billing [00:18:00] yourself. You shouldn’t be doing it unless you’re a private pay practice. You have a card on file and all you’re doing is going through and clicking charge card for 3, 4, 5, 8 appointments a week. Then I’ll give you a pass. You can do it yourself, but any labor beyond that, don’t do it yourself.
All right, y’all, thank you so much for tuning into this episode. Always grateful to have you here. I hope that you take away some information that you can implement in your practice and in your life. Any resources that we mentioned during the episode will be listed in the show notes, so make sure to check those out.
If you like what you hear on the podcast, I would be so grateful if you left a review on iTunes or Spotify, or wherever you listen to your podcast.
And if you’re a practice owner or aspiring practice owner, I’d invite you to check out The Testing Psychologist mastermind groups. I have mastermind groups at every stage of practice development: Beginner, intermediate, and [00:19:00] advanced. We have homework, we have accountability, we have support, we have resources. These groups are amazing. We do a lot of work and a lot of connecting. If that sounds interesting to you, you can check out the details at thetestingpsychologist.com/consulting. You can sign up for a pre-group phone call and we will chat and figure out if a group could be a good fit for you. Thanks so much.
The information contained in this podcast and on The Testing Psychologist website are intended for informational and educational purposes only. Nothing in this podcast or on the website is intended to be a substitute for professional, psychological, psychiatric, [00:20:00] or medical advice, diagnosis, or treatment. Please note that no doctor-patient relationship is formed here, and similarly, no supervisory or consultative relationship is formed between the host or guests of this podcast and listeners of this podcast. If you need the qualified advice of any mental health practitioner or medical provider, please seek one in your area. Similarly, if you need supervision on clinical matters, please find a supervisor with expertise that fits your needs.