RBMA Attendees Debate Outsourced Billing

It is a question often pondered by practice managers and others overseeing the financial aspects of an imaging enterprise: What guidelines or benchmarks do I use to determine whether to retain my in-house billing department or outsource billing? At a June 9 session at the RBMA conference in Orlando, Florida, Randal Roat, vice president of radiology services for MMP (Flint, Michigan), and Michael Gonzales, billing operations manager for Radiological Associates (Sacramento, California), provided a unique, engaging, and informative approach to answering that very question.
Michael Gonzales The high level of audience participation was due to the session’s novel format: Roat assumed the role of the billing department manager for an imaginary practice called Everywhere Radiology Group (ERG). Gonzales played the part of an executive with an outside billing company. Over the next 30 minutes, the speakers presented a series of slides detailing the financial state of ERG’s billing department, as well as the RBMA benchmarks for those categories. This side-by-side comparison was, perhaps, the most important information offered during the session because it provided attendees with an idea of how their performance compares with the RBMA survey results. To allow for the fact that many of those in the audience may not have been familiar with the accounting or billing terms presented, the audience was provided with brief descriptions:

• adjusted collection percentage indicates how well a billing office is collecting what is expected to be collected,
• days charges in accounts receivable provides a rough measure of how long it takes to collect,
• bad-debt recovery is the percentage of collection-agency write-offs recovered, and
• cost of billing includes all costs incurred in the billing/collection process.

Key points of comparison between ERG’s financial indicators and RBMA benchmarks are shown in the table

Table. Performance of a hypothetical company (ERG), as compared with RBMA benchmarks.
RBMA Key Indicator		ERG	RBMA
Adjusted collection percentage		76%	84%
Days charges in accounts receivable		65	47
Total adjustments (as % of gross charges)		15%	57%
Total write-offs (as % of gross charges)		20%	7%
Total write-offs (as % of adjusted charges)		24%	17%
Aging > 120 days		22%	16%
Collection-agency write-offs (as % of gross charges)		18%	7%
Collection-agency write-offs (as % of adjusted charges)		22%	17%
Bad-debt recoveries (as % of collection-agency write-offs)		6%	8%
Collection offsets		1%	0.4%
Billing/collection expense percentage		12%	9.3%
Billing cost per procedure		$3.50	$3.37

From the outset, it was made clear that there are many variables in any practice that can influence the decision beyond a comparison of figures and percentages, including the percentage of Medicaid patients, geography (inner city versus suburb), and competitive issues. Gonzales, who has 13 years of prior experience with a medical billing company specializing in anesthesia, says, “We took a case study out of an RBMA accounts-receivable survey. Then, we took some of the variables that are in an urban, hospital-based practice with a high indigent population, high Medicaid, and possibly no CT. All those factors are relevant.” ERG is also described as having no MRI because another facility was first to get the required certificate of need. When all is said and done, however, the true cost of in-house billing versus the percentage paid to outsource the function is often the tipping point for the decision. “We wanted the audience to look at the numbers not as a static comparison, but including the environmental factors that make each practice unique. A lot of it depends on the payor mix,” Gonzales says. After reviewing the benchmarks and comparing ERG and RBMA data, it is time for the audience members, playing the roles of radiologists, to ask questions. One asks how the provider would get its data back if its relationship with the outsourced-billing company fails. “We will create a file to transfer the data,” Gonzales replies, “and there will be a 90-day cool-down period.” Another participant asks what the provider can do, internally, to bring down the 12% billing/collection expense. “Cost containment should always be a work in progress,” Gonzales answers. As the outsourced-billing consultant, Gonzales also answers a question that is no doubt common among those in his business: Are you willing to guarantee results? “I answered no, and it’s one question I’d like to do over,” Gonzales later says. He would have noted that the variables of every medical imaging operation make such guarantees all but impossible. One of the areas not targeted by the speakers or the audience was billing fraud, which is estimated by the National Health Care Anti-Fraud Association to be equal to at least 3% of total health care spending, or more than $60 billion per year.¹ Billing fraud in radiology may be increasingly in the spotlight as the health care system evolves and the government seeks new sources of cost containment. In March 2009, for example, West Valley Imaging, Las Vegas, Nevada, paid a $2 million settlement after being accused of billing fraud by the OIG. Specifically, the OIG alleged that the two radiologist owners of West Valley Imaging defrauded Medicare by billing for procedures that were not supported by physician orders and for failing to meet other billing and coverage requirements. William L. Boren, MD, and Luke S. Cesaretti, MD, the two radiologists involved, contested the allegations and deny any liability. While the information presented may not have answered the outsourced-billing question once and for all, there was no doubt that it provided clear direction for those considering it as an option to reduce overhead. Asked whether future reimbursement cuts would cause more medical imaging enterprises to investigate billing outsourcing as a cost-saving measure, Gonzales replies, “There are a lot of factors in making that decision, including where the practice is located. In the future, people will be looking at all options to see how they can do more with less.”