Boost Your Profitability

In order to explore opportunities to improve your practice's bottom line, let's first review some simple math. Regardless of your healthcare specialty, the profits that you are able to derive from your monthly operations can be distilled down to a handful of key performance indicators, or KPIs. Profit can be measured by organizing these KPIs in the following simple formula:

Profit = (Patient Visits) * (Production per Visit) * (% Collected) - Expenses

The amount of revenue that your practice generates is defined by the number of patients you see, multiplied by the production per visit, multiplied by the percentage that you are able to collect. Your profitability is determined by subtracting your expenses, measured over the same period of time that you are using to calculate your revenues.

While the above calculation is a simple one, many healthcare practices, particularly small and independent ones, lack staff capacity and expertise to focus on the financial health of the practice. How can outsourcing some of your revenue cycle management to a trusted partner help to boost your profits? Let's look at the impact that a capable, focused partner can have on your business.

Patient Visits:

How much time does your staff spend dealing with insurance companies to resolve rejected and denied claims? How much time is spent attempting to reach patients to verify changes in their coverage or to remind them of patient portions that are overdue? Most practices spend countless hours on these tasks, which are critical to the health of the business, though redirect focus away from patient care. Increasing the time available to focus on your patients can result not only in more patient visits, but can improve the experience that your team is able to offer, which will reduce patient churn and ensure that you are maximizing the revenue your team can produce. Outsourcing a portion or all of your accounts receivable (A/R) management to the right partner can free your staff to focus on activities that will drive more patient visits.

Production per Visit:

Are you periodically reviewing your fee schedules to ensure that they are appropriate for the procedures that your practice provides? Do you evaluate your payers to identify which contracts might be dragging down your profitability? Do you review your codes to ensure that you are assigning the most appropriate codes to the procedures that you perform? Many practices fail to capture thousands of dollars due to unintentional or inadvertent undercoding of actual services performed. A quality EMR/EHR system, in combination with professionals who can focus on code review and analysis, can help to ensure that this KPI (production per visit) is appropriate for the services that you provide to your patients.

Percentage Collected:

A good outsourced partner will increase the percentage of outstanding A/R that gets collected. This is because a billing partner has the luxury of making that its exclusive focus, unencumbered by the day-to-day interruptions that are routine for an active healthcare practice. A good outsourced billing arrangement also compensates the billing partner based on the payments collected, and this keeps their interests aligned to yours. The right billing partner will also have considerable experience managing claims across a number of payers, and has likely dealt with even the most complex denial scenarios already. They can spot trends in claims rejections and denials and work with the office manager to modify workflows to prevent recurrences, resulting in improved clean claim rates. Many outstanding claims never get followed up on by internal staff simply because they know that it will be complicated and time-consuming to resolve, so they move onto something else that has higher urgency. After all, timely filing seems like an eternity when you are dealing with the active pace of the practice, so these claims are easy to put off. Over time, this backlog can grow quickly to where tens of thousands of dollars have to be written off. Working with an outsourced partner that can focus exclusively on your revenue cycle, ensure timely claims submissions, follow up promptly on rejections and denials, and spot patterns that enable process improvements, should improve your collection rates.


The three paragraphs above focus on opportunities to grow revenues by enlisting the services of a capable billing partner. Billing services are not free, so how does an outsourced revenue cycle manager help on the expense side of the equation? Believe it or not, when you consider all of the expenses itemized below that can be reduced or entirely avoided with an outsourced partner, it is likely that your costs can either be reduced or stay somewhat neutral. In the presence of improved revenue collection as we've described above, the net result is a boost in your practice's profitability. Here are some costs that can be avoided or reduced:

  • Employee labor and benefits - you can either reduce positions or re-allocate them to activities that focus on patient care and coordinating appointments to maximize the schedule.

  • Recruiting & training - how much does it cost in this current labor market to recruit and train a new resource? Doing so takes time away from several key individuals at the practice, and usually for a period of several weeks. If the resource is not a fit for the position or decides to go elsewhere, the process starts again. Staff churn has considerable costs that often are not measured or considered.

  • Employee costs for workspace, computers, telephones, etc.

  • Software licenses - some billing companies offer software at extremely low costs in exchange for the service contract

  • Monthly fees for clearinghouses - most billing companies work with their own clearinghouses, removing the direct cost burden from your books

When you consider in total the cost avoidance items listed above, they can result in a significant offset against the costs you will incur to outsource management of your A/R. In combination with higher collection rates, you should see a net benefit to the financial health of your practice.

If you think an outsourced model might be a fit for your practice, please contact us for a free consultation.

1 view0 comments

Recent Posts

See All