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Understanding the total cost of managing your receivables

Updated: Aug 21, 2022


If you manage your accounts receivable with your own staff, it can be difficult to understand your total cost when considering outsourcing. In this brief, we will focus on the costs associated with managing the billing and accounts receivable "in-house", and in our next article, we'll review some of the ways that outsourcing to the right partner might impact revenue. Specific to cost, here are some things to consider:


  • Labor - Staff labor for these types of administrative roles can vary greatly, though often the resources doing this work are performing other roles within your practice, so understanding the number of hours spent on billing by the appropriate labor rate is important when evaluating your cost. When considering these costs, don't forget to allocate time to data entry, claims filing, follow-up associated with rejections, denials, and appeals, tracking and posting receivables, managing patient statements and following up with patients that have outstanding balances.

  • Recruiting - It takes time to recruit and interview new staff, and if you use a recruiting service, those costs need to be considered. Particularly In today's labor market, it can be challenging to maintain staff, so consider the cost of staff "churn" within your practice, where other staff have to perform the roles of vacant positions while the practice is recruiting new resources. During transition, it is common for a backlog of claims to develop, creating additional strain on cash flows.

  • Training - Every time a new staff resource is hired, they have to be trained. This can be a drain on the office manager and other staff and again create additional workload within the practice until the new resource can operate independently. This can take weeks or months, depending on the experience level of the new resources.

  • Employee Expenses - Don't forget the cost associated with paid time off and other benefits, IT expense for computers and software licenses, and office space. If your office space is tight, could the space used by a billing resource be better allocated to another medical specialist within your practice?

  • Billing Software and Clearinghouses - If you manage your own claims and patient billing, you are likely paying additional license fees for your practice management software billing application, and you might be paying monthly clearinghouse subscriptions for every provider within your practice.

  • Opportunity Cost - This cost is often difficult to measure, though it refers to the lost opportunity when time and resources are allocated to functions that distract from your core business. Have you considered the financial impact if your staff was able re-focus time spent on billing to patient care and experience? Without having to spend so much of your available staff capacity on collecting receivables, imagine the opportunity to improve your patients' care and experience, or the number of additional appointments you could accommodate within your weekly schedule?

With the right partner, practices can avoid all of the costs outlined above, and as we will discuss in our next post, there are other potential missed revenue opportunities to consider if you are trying to manage all of this within your small practice. If you would like to explore your true cost of maintaining your accounts receivable functions in-house, please contact us -- we'd love to help!


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