Outsourcing Medical Practice Billing Services – Improving Practice Revenue Cycle Management.

Key Points: Practice profitability. Thriving during times of uncertainty. Billing and collections best practices.

Delivering sustainable profits in today’s business environment is a growing challenge. Profitability allows the practice to provide patient care and consistent net income. Step one is understanding basic medical practice economics: The fundamental strategic goal of a private practice is optimizing net income while delivering quality patient care and services. To support these initiatives, positive cash flow is required and is fundamentally based on effective practice revenue cycle management (RCM) processes.

Basic revenue cycle performance arguably has two basic business tenets: Gross revenue minus defined operating expense equals net income. An easy dictum, but clearly details matter. Successful RCM requires skilled leadership, business acumen, accurate billing, coding and collections. Just like any other corporate business, right? Yes, until you factor in the delivery of quality patient care while confronting increasing demographic patient demand, declining payer reimbursements and increasing cost containment models. Add onerous government regulatory oversight and things get complicated. Simply, success in this environment requires a deft hand, a skilled team and often, good fortune – more art than science.

As many reading this article know, leading a profitable practice is an infinite challenge. At its core, the practice provides a platform for quality patient care delivery aligned with efficient financial and operations infrastructure. Business profitability relies on accurate billing for services and effective patient collections. The practice represents a diverse infrastructure of physicians, APP’s, business and clinical and support teams, ancillaries and managers. Based on our experience working with groups of all sizes, often we find certain team members demonstrate different agendas, a common problem not easily resolved. A practice team focused on clear goals does have a significant impact on effective operations and at the end of the day, sustainable profitability. This is especially true in smaller practices where staff often have multiple responsibilities and limited back up support. Poor business practices and a team not aligned with clear financial goals in today’s environment of weak margins and growing financial exposure ultimately has consequences.


  1. Low or declining profitability is often the result of multiple overlapping issues. For example, just adding a new service line or increasing the number of physicians and staff may not alone solve the core problem. Increasing practice production and overhead costs is not the same as increasing net revenue.
  2. Weak revenue cycle performance is often linked to multiple issues. Translation: If you do not accurately charge, bill and collect in an optimal manner, adding a new service or providers may not necessarily improve overall income.
  3. Effective practice billing and collection solutions requires a skilled team. All too often this can be overwhelming for many and may require securing outside revenue cycle performance help.
  4. Having an experienced practice business partner who is involved and understands your business may be the solution.

Strategic outsourcing practice billing services – Does it make good business sense?

We see firsthand practices of all sizes struggle with numerous parts of the revenue cycle. These processes are multi-faceted and overlap functional areas and responsibility. Step 1: Understanding the revenue cycle management process is integrated throughout the practice. Step 2: Improving performance begins with a top down evaluation targeting basic business questions:

  1. Is a practice revenue cycle management model effective?
  2. Is practice management and resource utilization aligned with clear financial goals and objectives?
  3. Does the practice have a strong operational foundation i.e., front end, back office and quality patient care delivery model?
  4. Is the practice overhead including pretax allocations at sustainable rates?
  5. Is net income declining?
  6. Do you have clear expectations and goals, objectives, a business plan, defined metrics targeting practice wide improvements?

This will help define needs and improvement actions.

While it may appear easy to off-load practice RCM problems to others, you should think hard about both strategic and tactical issues. For example, the billing service provider may not be able to correct poor internal business processes and weak management, registration errors, physician delinquency issues, clinical documentation errors, coding delays, billing problems, etc. Whether billing services are internal or outsourced, there is no substitute for having effective management oversite, the right people, ongoing training, effective processes and technology, and clear performance metrics. No, it’s not easy and securing outside assistance can be helpful.

Outsourcing Practice Billing and Collections – Tactical Business Assessment.

Do the homework and start with strong due diligence. Accurate practice financial data, revenue cycle management assessment, situation intelligence, robust analytics and open, clear discussions regarding why and what’s at stake.  Deciding to outsource is not easy. A few basic steps to include in the initial decision review process are:

  1. Clearly state why this is needed.
  2. Are practice processes too decentralized?
  3. Is this a management problem?
  4. Does the practice have low standards and tolerance of poor performance?
  5. Does the practice need a A/R recovery plan?
  6. Does the practice need an experienced partner with hands on management skills?
  7. Are you going to outsource 100% of the practice billing? Define the pros and cons for complete outsourcing.
  8. Define what is needed to solve the core problem internally.
  9. Understand expectations, criteria, time lines, contractual key points, responsibilities.
  10. Have defined, measurable metrics.
  11. Define deal-breakers and have an exit strategy.
  12. Do not rush into a decision.


From our experience, too often expectations of the service provider and client are mismatched and poorly communicated. This can be best avoided if goals and objectives are clear from the beginning. For example, it’s important to have defined metrics, clear internal/external responsibilities, consistent messaging and effective communications. Over communication is key. Simply, confirm both entities strategies are effectively aligned before moving forward. Outsourcing practice billing services represents a major initiative. For this article we have only briefly focused on evaluating some key practice issues surrounding outsourcing services. Again, aligning with a skilled and experienced partner is often a desired solution. The PRS team is uniquely positioned can help the practice navigate successful RCM process and provide proven effective top down solutions.


The art of positioning the practice forward is a delicate dance between realism and projected optimism. A misstep in today’s environment of weak margins and stagnant revenues can prove problematic. Essential to successful practice RCM are skilled managers. These are key team assets and strongly influence the efforts and results the team achieves. We have found a strong recurring theme: Overall practice productivity aligned with consistent accurate collections depends largely on the quality of its managers, effective communication and improving performance.  Keep this in mind as you evaluate outsourcing billing services. Ask why the practice has problems and be honest.

For additional information and to schedule a conference call to review your practice revenue cycle management performance, just provide us your name and best contacts numbers e-mail and direct phone number.

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Larry A. Kemp, M.A, M.S., is a Fellow with the American College of Healthcare Executives, a managing Partner of PRS Consulting, LLC and CEO of Kemp Healthcare Consulting, LLC. He has over 25 years of experience with diverse healthcare operations and successful business development with physicians, medical groups, hospital-systems, corporate entities, consulting, education and training and medical product launch. He has a broad range of executive leadership responsibilities in a variety of healthcare settings including: Facility CEO, COO, CFO and administrator positions, practice management consulting with physician multi and single-specialty groups, IPA’s, GPO’s, new group start-ups and integration and mergers, and hospital employment alignments and exit models. He is a nationally recognize healthcare business and physician reimbursement consultant, author, educator, and keynote speaker to physicians, medical groups, and corporate healthcare for healthcare business solutions, relationship building, new business development, educational training programs and strategic advisory.