Don't get trapped by focusing only on cost...

Profitably managing a small medical practice in today’s consumer healthcare market is quite challenging. By definition, a small practice has fewer providers (typically we consider 3 or fewer), which means a modest revenue “ceiling”, capped by the production opportunity available through patient encounters in a fully-packed schedule. The actual production achieved by the practice is impacted by late cancellations, missed appointments, variances in the allowed amounts across payers for the specific procedures performed, insurance denials and rejections, and delinquencies in patient receivables. Nonetheless, practitioners and office managers can generally determine with pretty good visibility what their monthly “top line” revenue will be, and the costs of operating the practice need to be managed within a budget consistent with the actual financial production.



In order to ensure profitability and maximize profits, leaders of small practices need to make tough decisions regarding labor expenses and what skillsets are needed to operate the practice. Larger practices and hospital systems have the opportunity to achieve “economies of scale” with certain labor categories by hiring specialists that are shared across more providers. For example, professional coders and medical billers can be hired by the organization as the number of providers justifies the fixed and dedicated expense. For small practices, these functions are often performed by in-house staff resources that also have other critical responsibilities within the practice. In many cases, the office or practice manager ends up with these responsibilities and struggles to justify the expense of another hired resource.


Outsourcing is an option worth considering in many cases. Often viewed by practice managers as an unnecessary expense, the benefits can far outweigh the costs. While many small practices have the benefit of very experienced in-house billers and are able to keep them focused on that critical function, others attempt to manage their billing and revenue cycle functions as shared responsibilities within the practice. Allocating functions that are mission-critical to your business to generalist resources that have other responsibilities can have negative impacts on your financial performance that are difficult to measure until they are corrected.


Specialist resources that can focus exclusively on revenue cycle management for your small practice will quickly become very efficient as they gain experience across your practice’s typical procedures and insurance payers. They will also become proficient at dealing with the most common rejection and denial scenarios, and working with the right third-party specialist firm also enables your practice to benefit from learnings across many small practices that may experience similar challenges to your own. This opportunity to have specialist resources focus exclusively on managing the recovery of your receivables should lead to greater efficiencies that result in faster and improved recovery. These improvements offset at least a portion of the cost associated with outsourcing management of your revenue cycle. The other benefit that is often difficult to measure is the accompanying freeing up of labor hours within your staff to focus on other core functions within the practice. By freeing your staff to focus more time on filling the calendar, ensuring that referrals and preauthorizations are secured when required, and having more time to focus on the details that result in positive patient experiences, you can complement the improvements in revenue recovery with greater opportunities to generate top line production.


If you manage a small healthcare practice and are concerned about the cost of outsourcing management of your insurance and patient receivables, perhaps consider the evaluation also from the perspective of what not outsourcing to dedicated specialists may be costing you. Try to consider the net-benefit of leveraging shared, specialist resources and avoid keeping your focus only on the cost, and the alternative of outsourcing is likely to be viewed far more favorably.

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