Often a hotly debated subject at physician meetings, the type of billing a practice chooses can make all the difference to the smooth running of a practice and a physician or surgeon's peace of mind. Naturally, questions immediately surface when faced with this decision: Which is the wiser choice for me? The short answer is that neither approach is intrinsically better. Many practices are successful doing their billing in-house, and many are successful outsourcing. Performance and cost of both solutions are approximately equal when reasonable quality is attained. The real question is which solution is better for you at this time in your personal and professional life cycle?

While it is true that many practices find success with in-house billing, many practices do not, and the same statement can be made for practices that outsource. If both options have benefits and deficits, how do you decide? What is best for you? While it can be difficult to make a decision, consideration of several key points may assist you in the process. Most successful practices will make their best decisions by matching their strengths and weaknesses against the strengths and weaknesses of each option, as discussed below.

This is the traditional manner of billing. In-house billing has several advantages over outsourcing. Primarily, a hands-on approach allows the convenience and independence of addressing situations immediately. Advantages of in-house billing include:

On-Premises Billing Staff: The billing staff is on the premises and readily available. This creates opportunity for face-to-face access to providers, patients, and front desk staff. Billing clerks can stop a physician in the hallway to ask a quick question. They can make inquiries of front desk staff members regarding particular carrier quirks in policy coverage. They also can see patients in person and answer their questions directly.

Local Knowledge: On-site billing staff will have a good knowledge of the local market and community. For example, staff members are likely to know that a major local employer is changing insurance carriers and appropriate actions can be taken on behalf of a patient (and your practice).

Better Relationships: As part of the office team, the in-house billing staff will have better relationships with front desk personnel (and other vital members of the "reimbursement" team). Billing success relies almost entirely on the quality of information obtained at check-in. If the front desk staff feels a connection to the billing staff, they are more likely to go out of their way to obtain better information and be more receptive to positive and constructive feedback.

Immediate Access: On-site staff will have immediate access to patient charts and other practice documents, which can contribute to procedural efficiency. In-house billing clerks can get up and copy a chart themselves without involving any other staff members.

Loyalty: We can assume that a billing clerk employed by a practice will be more loyal to that practice than an outside vendor would be. The billing staff only works on this practice and will become intimately familiar with the practice's routines and preferences.

Having the billing staff totally immersed in the practice, can create a sort of single-mindedness that presents not only benefits but also concerns. Some disadvantages of in-house billing include:

Staff Turnover: Billing staff turnover can be catastrophic to a smaller practice. Accounts receivable (A/R) management is a mission-critical function of the practice. Losing your one-and-only—or even one of two—billing clerk(s) could literally bankrupt a practice.

Poor Quality of Work: The quality of billing work is dependent almost entirely on the quality of the clerks performing the task. If your clerks are poorly trained or just perform poorly they can severely harm your practice. Having such a staff member often can be more harmful than losing a staff member, especially if the practice is unable or unwilling to train or terminate the employee.

Less Technology Access: Smaller medical practices often have less opportunity to access (or learn) the latest technology.

Immediate Access: Immediate access to physicians, charts, other employees and patients can be a negative. Easy access can create bad habits among billing clerks and physicians that may lead to compliance issues. (For example, we know that Dr. X always uses a blue pen, and Dr. Y always uses black, so it is okay if they don't sign charts, because we can tell who provided the service.)

Lack of Exposure: Lack of exposure to other processes and procedures can limit a practice's development, ability to identify problems, and exposure to unusual circumstances.

Reduced Risk: Billing services typically have many staff members and sound processes. This provides consistency of service and reduced risk that turnover will affect your practice cash flow.

Assumed Liability: A quality service will assume some of your liability. They will be responsible (and liable) for their actions, which could include coding and, consequently, audits that may result from incorrect or inconsistent coding.

Greater Access to Technology: Billing services have access to newer and more efficient technology that can offer improvements in data mining, claim submissions, patient statement quality, and even coding and claims follow-up.

Trained Staff: Outsourcing vendors have the ability to spend more time and money training staff. Many have certified coders, and general staff training is often more up-to-date.

Broader Industry Knowledge: Outside vendors usually have broader industry knowledge than can be achieved in a small practice. They perform services for many groups and will offer a diverse view of processes and performance.

Standardization: A good vendor can reduce or eliminate bad habits. Because they work with many groups, standardization and compliance is important. They often will require a practice to implement front office checks and balances that normally are not in place.

Compliance-oriented: Quality vendors are very compliance-oriented. Billing companies often are more averse to risk than private practices and therefore install tighter controls.

Outsourcing sounds great, too. However, there is another side to the coin:

No Access to Practice Staff: Since they are not on site, outside vendors won't have access to physicians, patients, or staff. It will be much more difficult for an outside vendor to obtain answers to even simple questions. They will have to rely on your staff to pull charts and prepare all source documents, which can be burdensome for practice staff.

Key Staff Turnover: Although billing services are typically larger enterprises with many staff members, they are also susceptible to key staff turnover. The risk is lower, but it still exists.

Too Little Attention: Billing service attention can be the biggest issue. Is your practice an important customer? Are you getting the attention you need and deserve? This problem often arises when a small practice partnered with a large vendor "gets lost" among the other customers. This problem can be every bit as bad as having a bad employee.

Lack of Local Knowledge: Billing vendors often are located outside the practice region and will lack great local knowledge. They may not be as plugged into the community and may not know important local information.

How do you decide what is best for you? Consideration of several important points can help lead you and your management team in the right direction.

Price. Price should not be the decision-making point. Good or bad billing can affect your gross revenue by up to 15 percent, which is often hundreds of thousands of dollars. It is better to spend an extra $10,000 on billing rather than lose $200,000 in revenue.

Perils of Changing. If you already outsource, be cautious about switching to in-house. This is a mission-critical function. If it does not go well, the practice could be devastated (even ruined). Bringing billing in-house requires building something out of nothing. You will need to hire and train staff and purchase and install software—all while continuing to operate your practice. This can be a risky proposition. Undertake such a course of action with extreme care.

Control Issues. Can you give up control? Many physicians are unable or unwilling to trust an outside vendor with a mission-critical service. In-house billing is probably a better option here.

A/R Problems. Are your A/R problems internal? Neither solution will be effective if the doctor is not completing paperwork or the front desk is not obtaining proper information. Do your best to honestly evaluate where your problems lie before making a decision.

Staff Termination. If you currently are accomplishing the work in-house, are you willing to terminate your billing staff in order to outsource? Reassigning billing staff to other departments and adding a billing company simply adds to overhead. If you are unwilling to terminate, you seriously should consider trying to make an in-house solution work.

Get Personal. Lastly, are the benefits actually benefits in your situation? Access to the physician is neutralized if nobody approaches the physician with questions. A billing service with old technology or poorly trained staff neutralizes their advantages. Are the in-house pros actually pros in your practice? If not, this will lead you to your decision.

Every mission-critical decision a practice makes should be executed with great care and forethought. Your billing processes and methods are no exception. Explore your options and consider the questions before you. Remember that many practices are successful doing billing in-house and many are successful outsourcing. Armed with a strong, intimate knowledge of your practice and its billing issues and challenges, a good, justifiable decision almost surely will follow.