Whether you outsource your billing or rely on in-house software and staff, facilities want sophisticated reporting, better denial management, and reduced billing costs.

In the past, radiology billing managers settled for the old “80/20 rule,” expecting that 20% of their claims will be denied by payors for one reason or another. However, with the Deficit Reduction Act of 2005 (DRA), having a 20% loss of revenue is no longer acceptable. Billing managers are now expected to squeeze every dollar out of denied claims, and they depend on the right software solution—or outsourced service—to do it.

The good news is that both outsourced billing services and in-house billing software now have the tools that practices need to turn denials into recovered revenue. They can also reduce overall operations costs and give practices sophisticated reports to help with marketing, insurance negotiations, or even measuring the performance of individual billing personnel.

Reducing Denials

Pat Free, senior vice president of radiology operations for the revenue management solutions group at McKesson, San Francisco, remembered the old days when a payor would send a payor voucher with a 50- to 500-page list of payments and denials.

Free said, “Nobody really would take any of that data and be able to extrapolate it into the patterns around those denials and the 80/20 in that pile of paper. Maybe you had a gut check, but you had no way to quantify. Perhaps 5 or 6 years ago, they started being able to quantify it, but it had to be done by a programmer, and you had to make a special request.”

Today, billing managers do not have to bother programmers. In today’s environment, a few clicks of a mouse will allow users to find out specifically which payors are responsible for most of the denials and what are the causes, and gain insights about what can be done to reduce or eliminate those issues.

Mark Isenberg, a partner in business development for billing solutions company Zotec Partners, Carmel, Ind, said, “Billing has really become a game of exception management. There needs to be some kind of automated workflow that drills down to the 20% of those claims that need attention, and once you get down to those 20%, then you also need the ability to have integrated document imaging built in throughout the product, because, ultimately, when you’re following up with the insurance payors, they’re going to request a copy of the dictated report, a copy of the insurance card, or whatever [documentation] they may be looking for. That’s very important in this day and age in following up on the claims. ”

Modern RIS revenue management modules can give operators powerful reporting tools that reveal detailed data, from the disposable costs of an exam to what exams are being ordered most, and by which referring physicians. They also can identify groups of CPT codes that are having denial problems with a single carrier—or all of them.

Increased software automation also increases workflow and efficiency. Programs are now smart enough to notice billing anomalies. For example, if a claim from a particular insurer is neither paid nor denied within the usual time frame, the software can alert the appropriate claims personnel to call the carrier or automatically generate a form letter. Similarly, letters or invoices can be automatically generated to a patient if a payment has not been received. Alternatively, under client-specified conditions, the software can send an automated reminder to the billing person, reminding them to call the patient or carrier.

Zotec’s licensed software even allows billing managers to measure the productivity of their own accounts receivable staff.

Isenberg explained, “Whereas, before, you instinctively thought that Mary and Tom were the best employees, now you really have factual information to back that up. Mary can do 30 appeals in an hour, and Tom’s only doing 10. You can then drill down and find out why Tom isn’t doing the 20 extra, or what the effectiveness of Mary’s 30 is generating in that practice.”

The company developed the feature to measure its own billing specialists who handle their outsourcing clients, but have applied the same feature to their licensed software solution.

Looking Outside

There is no question that radiology practices and hospitals now have more powerful tools at their disposal. Perhaps the more challenging question is whether to spend the capital and human resources for an internal billing program or hand the entire task to an external service while keeping key enterprise RIS functions that will help with marketing and practice analysis.

Zotec has both billing software and an outsourcing service. Lately, Isenberg said that he has seen more large radiology practices move toward outsourcing because they feel that even the most automated billing system distracts them from their main focus: providing radiology services.

An example of this trend is Desert Radiologists in Las Vegas, which has 40 radiologists on staff covering five outpatient centers and six hospitals—with plans for even more growth in 2008.

William Moore, CEO of Desert Radiologists, said, “We have a very aggressive growth strategy, and our billing operations took focus away from our primary business plan. Our physicians opted to refocus on growing our business, rather than our administrative focus being spent on a radiology billing system.”

Still other practices prefer having complete dominion over their accounts receivable. They pride themselves in employing a loyal staff that keeps on top of denials, proper coding, and speedy reimbursements. They also worry that an outside company would be less vigilant servicing so many practices at once, and therefore would not be as effective as a dedicated in-house operation.

However, thanks to the Internet, outsourcing companies are now giving clients more access and control over their data.

“We make all of our information accessible online,” Isenberg said. “So, if they wanted to get into their account and see if their files are being worked, they have access to do that. If they wanted to see how much money we posted for them that day, they could do that as well. So that barrier of [not having] control has been somewhat mitigated by the improvement in the technology.”

Deciding to stay in-house can also be due to an employer’s confidence in staff, as well as economics. Isenberg has worked with facilities that believe they have competent billing personnel who know how to take advantage of Zotec’s billing applications. “These people may be able to provide effective and efficient billing at the same cost or lower than what we might be able to do from an outsourcing relationship.”

Staying In

To gauge which billing platform is right for clients, Zotec will generally go through a review of the client’s return on investment for licensing the software, maintenance, hardware, service, plus their biggest yearly cost: human resources.

With its new automated features, modern billing software should be able to process more procedures per full-time employee, thereby reducing the number of full-time billing personnel. Of course, the number of staff reductions will depend on the administrator and full utilization of the software. Isenberg said that he has seen clients reduce staffing costs 20% to 40%.

Some billing software may have features that enable facilities to bypass payment clearinghouses—and their fees—and directly send claims to the major insurers.

Prices for billing software, servers, etc vary greatly depending on the vendor and the size and volume of the radiology practice. The price can also depend on how the software is packaged into a RIS or a RIS/PACS, or sold as a separate add-on module.

These days, the trend is more toward purchasing an integrated RIS/PACS in one package because of the intervendor communication difficulties. Consequently, some information technology personnel may flinch at installing a best-of-breed billing/RIS software that needs to communicate with an existing tried and true PACS from a different vendor.

However, new middleware solutions, such as MEDxConnect by Compressus, Washington, DC, are making it easier for imaging centers to still choose the best-of-breed software to work seamlessly with various software solutions—and even multiple HIS/RIS systems in different locations.

Leaving the Bills to Somebody Else

Though outsourcing one’s billing may mean a loss of direct control over one’s books, it can also mean huge savings in the number of full-time employees, faster turnaround time, and fewer staffing headaches.

Desert Radiologists, for example, estimated that they would save more than $1 million in overall operating expenses this year because they decided to outsource their billing.

Moore said that the savings would be garnered from increased automation and reduced clearinghouse fees and employee costs.

Similarly, Free reported that McKesson outsourcing clients typically find significant human resource savings. “Our labor rates are probably a little better than many markets that you can find, and we have highly productive software systems for our billing,” he said. “So, if you were doing this for yourself, you’d probably have a higher cost structure and have a smaller team of individuals that you would rely on.”

Free also points out that employee turnover, vacations, and sick days are no longer a concern when using an outsourcing service. Large billing companies such as McKesson have 300 to 350 full-time and experienced billing personnel who can cover different accounts and compensate for normal employee fluctuations.

An outsourced billing company may also be able to hasten reimbursement payments with experienced workers who know how to accurately code claims, thus reducing denials. Consistently poor coding can significantly affect reimbursement levels.

Another advantage to using an outsourcing company is its knowledge base of billing data. Because outsourcing companies serve similar-sized imaging centers or hospitals, they have access to regional and national data that can help practices to benchmark their collection efforts and see overall radiology trends in exams ordered and other data.

Billing services also can provide direct connections with insurers and avoid clearinghouse fees. In addition, direct submissions speed up reimbursements as well as catch mistakes.

Isenberg said, “By filing [claims] directly with some carriers, we’re able to push down their edits into our claims filing routine. So if I know that a claim isn’t going to be paid because of a variety of reasons based on that carrier’s specific edits, it won’t even go out.” As a result, cleaner claims go directly to the carrier and reimbursements are more quickly processed than if they had been filed through a clearinghouse.

In terms of pricing, outsourcing companies typically charge their clients for a percentage of cash that is collected. That percentage is usually based on the entity’s payor mix, volume, size, and region.

For an imaging center, an operator could expect to be charged somewhere between 3% and 5%. For hospital-based billing, the national rates can be anywhere from 7% to as much as 11%.

Whether outsourcing or upgrading your internal billing software, today’s modern billing solutions are designed to help practices save more during the post-DRA era and overall declining reimbursements.

Tor Valenza is staff writer for Axis Imaging News. For more information, contact .