Expert EMS Billing

Outsourcing Archive

In-House Billing Is Out of Control

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It’s been argued that in-house billing affords ambulance companies more control. You can, after all, walk into your billing manager’s office and ask questions. But don’t confuse proximity with getting the answers and information you need to increase billing productivity. We’re long past the time where geography is meaningful when it comes to data. That’s why companies got rid of their servers — server farms do the job better.

So it is in billing services. Location is irrelevant; concentrated billing expertise and infrastructure are essential. One call to a billing service gets you more help than someone down the hall — even someone with a lot of experience. Reason? An internal billing manager processes 25,000 or 50,000 transports a year while a billing company expert processes a million transports a year for 100 different entities while surrounded by experts in government compliance, insurance industry regulations, and Information Technology. Where are you more likely to get the best information?

You could say control is your access to information that is critical to your decision-making, in which case you have less control than you think. You have some flexibility, assuming you have someone in-house who has some skill with running reports, or you pay the software vendor to produce the reports. Compare that with a billing service with proprietary software and a comprehensive and customizable reporting system. The billing service has an analytics team of IT pros and industry specialists who can produce any report you can imagine for little or no cost. They’ve also gone up the learning curve, so you don’t have to. In fact, they may have already solved your problem because they’ve worked on it with other clients.

Or perhaps your definition of control is the ability for management to make changes to the billing process or personnel as needed. That’s a bit more difficult to tackle. When does the owner of an ambulance company realize she needs to make a process or personnel adjustment? Probably when cash flow is crippled or an audit reveals errors that entail a sizable pay back – in other words, when it’s too late. And when the decision has been made that change is required, how does that get done? Do you now dig into the billing process, hope you can understand it better than the current manager, and then implement the change yourself? Or do you replace the billing manager? If so, where does that new manager come from? It’s not as if experts in ambulance billing with strong management skills are on every street corner. And what of the people in that department that might be loyal to the old manager?

While we’re on the subject of change, let’s assume you can sense the financial benefit of a software change. You know in your bones that you can save $40,000 a year in payroll if Utility X can be developed or modified. Who do you think is more likely to deliver that development? Hint: probably not your software vendor. They avoid software modifications like the plague because every change made for you has to be transferred to 100 other clients. The vendor also knows that every now and then a client will be lost because they hate a change so much. Billing services are built for change because continuous improvement is a basic component of their proprietary software. They understand they will likely benefit from change because it will also make their job easier.

Maybe control is the ability to have an external auditor conduct an audit at will. Engaging an industry expert to audit a claim sample is pretty easy if you have the budget. Realistically, ambulance company owners rarely do, because it’s distracting, it’s time consuming, and it may test morale. Billing services, on the other hand, do these things as a matter of course and will often send you summaries of the reports. They thoroughly understand the process in that they probably go through more audits in a year than most ambulance companies go through in a lifetime. They have a verifiable track record. And you have control in knowing you can push the audit button at any time, even if you rarely do. 

Ultimately, control is about the ability to make changes seamlessly whenever circumstances dictate change is necessary. The ultimate control is being able to replace a billing service without causing too much disruption. You simply start talking to other billing services, give them some data, and ask them to show you how they can solve whatever problems you have and provide better solutions. The conversion process may be a bit stressful, but it is manageable — assuming the service has a decent transition process. That part you can verify from references.

It may seem odd to suggest that billing services are interchangeable parts. They’re not. Some are better than others. But being able to replace them quickly gives the ambulance company operator the ultimate control: You’re never stuck with an underperformer.

Risky Business: The Collection Percentage Guarantee

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If you’re a government agency that is going to issue an RFP for ambulance bill collection, demanding a collection percentage guarantee may seem like a good idea. And in some ways, it is: a guarantee requires little thought as to how to develop a better, mutually beneficial partnership with a vendor. While the guarantee is a defined benefit for the agency, it is a risky proposition at best for ambulance billing companies.

Agencies include a collection percentage guarantee in their RFPs thinking that it translates to a guaranteed amount of revenue. Seems logical  –  if the billing company agrees to a certain benchmark, it has an extra incentive to collect as much as possible, right?

Wrong. For the billing company, this requirement may have the opposite effect.

One way to increase revenue for an agency is a recommendation to raise ambulance fees. While this will likely increase revenue, it may also decrease the collection percentage. Let’s say a billing company collects 100% of a $400 claim. If the agency increases its rate to $1,000 and the billing company now collects only 50%, they increase collections by $100 but cut the collection percentage in half. This is an extreme example, but it makes the point: If a billing company is expected to maintain a minimum percentage or be penalized, it is actually being discouraged from doing everything it can to maximize collections.

The billing company then has two choices: Ignore the risk of reducing revenue by focusing on the collection percentage, or face penalties for not holding up its end of the deal. This assumes, of course, that the billing company doesn’t put the agency at risk by up-coding claims – billing a level of service higher than what is medically necessary, or showing all adjustments as contractuals – to meet the agreed upon percentage.

A collection percentage requirement will scare off some bidders who could otherwise handle the job well. Reason? The vendors most willing to risk the penalties of underperforming are those who have the legal resources to fight those same penalties. Are you hiring a billing service or a law firm? Or are you looking for a company that collects the minimum for the maximum profit without looking to become a true consulting partner? In either case, your agency could be unknowingly cheating itself out of superior service.

Any way you slice it, a required collection percentage guarantee is a certainty that the vendor/client relationship becomes either a little bit dishonest or not mutually beneficial. If your goal is to maximize revenue with the help of a trusted partner, steer clear of percentage guarantees. Any company willing to enter into such an agreement does not have your best interests at heart.

The Right Partner

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optimizeEvery growing business is faced with critical, make-or-buy decisions. Accounting, tax, customer service, office management, maintenance — at some point these functions suck up too much time and resources to be handled internally. They distract you from your company’s main task: delivering a valued service to customers.

That’s especially true for billing: Outsourcing your billing with the right partner will outperform in-house billing every time. That partner will collect more, cost less, maintain a higher level of compliance, and often provide better reporting and analysis.

Why? Because the right partner’s collection software is better than your collection software — even if you’re buying from a third-party software “specialist.” You’d like to think that buying from a third-party vendor will give you the best-performing software available. But that’s not the case. In fact, using a third party vendor can almost guarantee that you won’t have best-in-class collections. That might seem contradictory. After all, wouldn’t a software specialist strive to provide the best product out there? The answer is no. The specialist’s business model doesn’t work that way.

A company that bills in-house must do two things to maximize profit: 1) collect everything it’s entitled to; 2) be as efficient as possible – that is, minimize the number of billers in the department. To try to accomplish that, the firm purchases billing software from among the small group of vendors that specialize in ambulance billing software.

This is where the economics get interesting, and not necessarily in a good way. The third party software companies are similarly striving to maximize profitability, which turns the vendor-client relationship into a zero-sum game. That means the more you get, the less they get — and vice-versa. Some partnership. To enhance their own profitability, software companies have an incentive to minimize the efficiency of their own product and pay less attention to helping clients maximize collections.

And therein lies the rub that has cost ambulance companies millions over the years. The contemporary software model is to sell by the seat license. The more seats a software vendor sells, the more revenue it earns and the higher its long-term (forever) monthly support fee. That system has worked pretty well for Microsoft, a company never accused of being customer-centric. If a billing software company boosts efficiency, it will sell fewer seats. Even worse, increasing the software’s efficiency also increases its complexity, which in turn raises costs for development, implementation, training, and support. Overall, that’s a really bad deal for the software company — inflating costs to reduce revenue has never been a good long-term business strategy.

Somewhat perversely, the software company is similarly incentivized to resist helping its client improve collections. To improve collections requires developing and testing new modules, upgrading a working system, re-training billers, and adding support costs. As firms rarely like to upgrade their software, even less so if they have to pay for it, the upgrade cycle becomes difficult. And if conscience, competition, and pride force the vendor forward (damn those torpedoes), losing a client for making that effort will likely recalibrate the conscience instantly.

Why would you lose a client for doing good, you might ask? Change creates frustration at the client’s company, wherein the software company has to deal with the ire that comes with upending the daily routine of billers who benefit naught from the improved collections. That sometimes leads to complaints to the owner who, aware of his complete dependence on his billing manager, may utter something like, “If you don’t like our vendor, go find one you do like.” SURPRISE! The billing manager likes the one that doesn’t need or require continuous upgrades.

The solution is to find the “right” billing partner, meaning not just any billing partner. You’ll need to do a bit of digging. Take a look under the hood. Develop a set of requirements. The good news is that choosing is less subjective than you might think as it revolves around the technology in use – or rather, that technology’s origin.

For starters, any billing service that uses someone else’s technology is in the same position as the entity that bills in-house. In fact, this partner could underperform the in-house group because it’s savvy enough to know which claims are profitable to collect and which aren’t and may decide to focus on those that are profitable. It’s classic Low-Hanging Fruit Syndrome. If they use someone else’s software, remove them from your list.

Identifying the right partner begins with the right technology. You’ll recognize it if they own their own processing software and have made a long-term commitment to improving its efficiency and ability to maximize collections. You’ll know this is the case if:

  • They have a staff of full-time programmers who work exclusively on this software. It’s a bonus if those programmers have a ton of experience with the company.
  • They upgrade their software regularly (weekly) and every client receives the benefit of those upgrades.
  • They can point to specific modules they have released in the last year that have improved collections or efficiency or both.
  • They offer full transparency. In other words, the service allows the client to access the billing system 24/7, produce a list of claims on screen that represent every transport done for a specific date range, and enables the client to drill down into each claim and find out everything that was done to collect that claim.

Those capabilities are a healthy start. You’ll know you have a partner who shares your priorities and has committed resources to achieve them. And you’ll know you have a partner that does not fear transparency. They won’t be trying to hide anything.

But there’s more you can do. If your partner has large municipal clients, you’ll know it has the following qualifications as these are required by many municipalities:

  • The firm has a solid IT infrastructure with good Disaster Recovery systems.
  • The firm has been audited by independent external auditing firms that are experts in the field.
  • The firm has audited, publicly available financial statements.
  • The firm has SOC 1 Audit results, which are reports by external auditor who insure this company meets its contractual obligations.
  • HIPAA and PHI breach data is publicly available.

References should be at the heart of any evaluation. While there are many companies that do ambulance billing, there are only a few that do it on a large scale. And in most cases, clients have moved from one of these top-tier companies to the other. Ask potential vendors to speak to clients that they have taken from competitors and then ask the clients about the circumstances under which they left. Who collected more, who responded better, how did their implementations compare, whose reporting was better? If one company’s name keeps popping up, and that company meets the criteria above, then maybe you’ve found the right partner.