Common performance claims of medical billing companies, and why you should question them.
We all know a sales pitch when we see one. Or…do we? A good salesperson knows that we tend to believe what we hope to be true. Twice the value for half the money sounds so good. But usually, of course, it is too good to be true.
In the price-driven landscape of medical billing, prices and margins have been pushed so low that many companies only provide stripped down services. Few billing companies have a truly distinctive value proposition, and most cannot distinguish themselves by better results or greater customer satisfaction. So they try to separate themselves with increasingly outrageous claims of bigger savings, faster payments, etc.
So the sales feeding frenzy is in full swing. Here is a guide to the most common pitches you will hear if you are talking to medical billing companies, and why you should be skeptical, if not downright disbelieving.
- You can save a massive amount of money.
Promises of significant cost reductions are very common. In recent years, there has been an arms race of sorts to make bigger, bolder claims in order to attract potential customers. In just a few years, claims have escalated significantly. While claims of 20% cost reduction were common just a couple of years ago, it is now not unusual to see claims of 30%, 40%, or even 60%!
These cost-savings pitches are an example of the “straw man” fallacy. All you need to ask is “60% of what, exactly?” And the answer is usually 60% of a mythical practice that spends way too much on billing. Are these dramatic cost reductions possible? Sure, if you are poorly managing your practice and your costs are out of control. But are you likely to save so much? It’s unlikely at best, and if you are over-spending on billing, you could save money simply by streamlining your internal billing operations.
And even if there are significant cost savings from outsourcing your billing, you have yet to evaluate the other critical metric: how will it impact collections? If you collect less of what you are owed, or collect it more slowly, your cost savings may evaporate. A billing company that drives so hard on price is likely to have very thin margins and keep as small a staff as possible. If your claims picture is complicated, you could find yourself saddled with a company that simply doesn’t have the tools to succeed for you, and your net costs could increase due to lost revenue.
- You will collect payments at warp speed.
This one takes two different forms. In some cases, its about a relative increase in speed (we can get it done faster than you are getting done now), and in others, it’s an absolute claim about how fast something gets done (we do it in x time frame). As with cost savings, the billing companies will often cite statistics that sound impressive. Relative claims, such as “get paid 32% faster”, are common. Absolute claims implicitly bundle in statements about the company’s productivity and efficiency, such as and “get paid in three days!” or “99% of claims resolved on 1st pass”.
Relative claims like “get paid faster” have the same “straw man” problem as the cost savings claim. Faster – compared to what? A turtle is fast compared to snail. Both are slow, so the claim is not useful or meaningful.
But the absolute performance claims have a different issue. These claims are a bit more suspect. In some cases, there is an inferred expectation that third parties (e.g. payers) will perform in ways that are inherently unreasonable to expect. Payers will resist paying claims wherever possible, and that is not something billing companies can control. So the responsibility to deliver results can be shunted off to other parties. And in other cases, unfortunately, these claims are made in a purely specious manner, and rely on the assumption that the customer will have no access to data that would validate the claim (because they don’t plan on providing it). In either case, it helps to remember that there are no shortcuts in revenue cycle management.
- Your collection rate will skyrocket.
In some cases, billing companies can quite legitimately make a case for increasing your collection rate. After all, your interest in a billing company is probably driven by the notion that you could collect more of what you are contractually owed. But like all other claims in the current environment, these tend to be hyperbolic and quite unreasonable. It is common to see claims like “increase collections 24%” or “99% contract compliance”.
Claims about gross collection rates are suspect at best, because among other reasons not all fee schedules look alike, and they would need prior knowledge of all of your data to provide relevant comparative numbers. For simplicity of example, let’s say that if your fee schedule is 4x Medicare then you might collect about 25% of what you bill, while a provider with a fee schedule of 2x Medicare could collect the same “net” amount, but you could argue that their collection rate is double yours (50%).
And when it comes to net collections, it gets worse. Set aside the fact that any claim that comes close to 100% is false by definition for a variety of reasons, not least of which is that patients can’t always pay their bills. More importantly, they would most likely have no way of knowing their net collection rate. Only a tiny percentage of billing companies are even able to measure net collection, much less deliver on such metrics. The medical billing ecosystem is so complex, with payments so inter-dependent on a variety of factors, that it requires very sophisticated (and costly) software to calculate net collections, as well as an enormous amount of operational overhead to manage. And that is beyond the capabilities of all but a few billing companies.
- It’s true because the insurance company said so.
This is typically not a direct claim, but an implicit one. Insurance companies will communicate allowed amounts in ERAs and EOBs, which are often very different from (and typically lower than) the contractually allowed payments. But many billing companies will use these allowed amounts to calculate their collection performance, essentially lowering the performance bar to exactly where the insurance companies say it should be. It’s a bit like completing a 100-yard dash by stopping after 80 yards and moving the finish line to where you stopped, and claiming you ran it in record time.
The ceiling on collections from insurance companies will always be what is “contractually allowed”. The actual amount collected will on average be below this, because insurance companies have an imperative to pay as little as possible. If a billing company is using those “best case” figures from the ERAs and EOBs, they are being disingenuous, at best. For instance, if a payer says that the allowed amount in the EOB/ERA is $1,000, whereas the contractually allowed amount is $2,000, they would claim that collecting $1,000 is a 100% net collection rate, when it is actually only a 50% net collection rate.
- We will provide total transparency.
Even if this claim is not made in marketing campaigns, it is often part of the sales pitch. This is perhaps a less common claim, but a critical one nonetheless. Many billing companies will promise you dozens or even hundreds of reports, and easy access to data and analytics. Essentially, they are saying “don’t worry, once you hire us we will provide you with all the reporting you need”.
For you, the customer, this is perhaps the most dangerous claim. Once a billing company is hired, the reports available to you might have very limited (and thus not very useful) information. Your billing company becomes a “black box” from your perspective. This robs you of your ability to make informed judgments about their performance. And thus, it protects them from accountability for the above claims. We have seen that claims about things like “collection rate” are suspect, at best. The data your billing company provides is your best tool to evaluate their performance in the context in which it matters most…how it affects your profitability. Before you hire a billing company, you should review the reports available and be satisfied that you can adequately evaluate their performance on an ongoing basis.
“Trust, but Verify”
Medial billing falls prey to the same marketing traps that any industry does. There is a lot of noise, and much of it can (and should) be dismissed. There are no widely accepted industry benchmarks for any of these metrics, other than perhaps AR days, which in of itself has little value unless it is sliced to be specific to a practice’s same insurers, specialty, and procedure mix. As discussed in a previous article, your best tool for evaluating billing companies is return on investment (ROI). How will the company impact your bottom line, and how will you measure that? To get there, you need information. You need to access to things like:
- Transparency: who is working on your business, and how they are spending their time?
- Analytics: do you receive real and actionable data?
- Problem solving: are difficult claims given direct attention & and followed to resolution?
A billing company should have good answers to those questions. They should be able to provide raw data to support their performance claims. If they don’t, there is a good chance that they are a sales-driven organization rather than a performance-driven one. And at the end of the day, performance is the only thing that really matters.
About Apache Health
Apache Health is a revenue cycle management (RCM) analytics, benchmarking, and auditing company. The founders of Apache formerly ran a large RCM company that was acquired by a private equity group in a rollup. Apache’s predictive analytics will benchmark billing performance and project exactly how much more revenue you should earn from your existing volume of patients. Using many factors and a blend of artificial intelligence and specialty specific benchmarks, the model projects whether changing the billing process would improve collections for your particular mix of procedures and payers. Apache Health can help you evaluate whether to outsource the billing, determine which billing company to select to maximize performance, or track in-house billing performance improvement over time. For more information contact: