So how does one know if their billing company is good? You can apply this more broadly applied to, “How do you know if your billing department is good?” Basically, how do you know if your billing is fair? I’ll share with you a story that illustrates this problem.
I have a colleague who founded a private equity group, built it up to about a billion dollars in assets and acquired healthcare providers, physician groups, and things like that. They acquired a whole series of practices in a state that they were going to merge with another series of practices in a particular specialty. I won’t say what specialty he’s going to get. Again, I’m not trying to out anybody in particular. You can check my LinkedIn profile and see the private equity friends that I have.
Experience matters
When they acquired this provider group, there was an existing CFO. They brought in their CFO across the larger system of providers that they had. The CFO was from a large publicly traded healthcare provider with experience in healthcare finance. It wasn’t somebody who was trying to figure out, “What are accounts receivable?” in this business and “What’s the difference between fee schedule?” and so on. He was a knowledgeable, very experienced CFO who understands healthcare revenue cycle management.
There was an existing billing company in place for the provider group that they acquired. When they reviewed how that company was performing, they determined that the billing company wasn’t performing exceptionally well, so they fired the billing company.
Do additional resources help?
They hired another billing company to come in and take over the billing. Ramped up for about a year, they concluded that this billing company wasn’t particularly great, and they had not swapped out one for a better solution. They needed to get a different billing company, so they fired that billing company and hired a third billing company.
Since implementing firing, setting a go-live date, ramping up a new implementation, and so on, and then collecting some data to see how they’re doing takes at least a year.
They determined that that third billing company wasn’t particularly good at some later point, and they now were wondering whether or not they ever should have fired the first billing company. Maybe, they should have kept them.
When I had the conversation with the CFO, the issue they had was everybody’s issue, where they had no way of knowing who the excellent billing company was.
How to measure the performance?
There are some quantitative measures that CFOs and owners of healthcare providers try to employ. Some of those include things like accounts receivable days or “Is your AR going up overall?” and so on. Unfortunately, most of those things are crude at best. For the most part, they don’t tell you whether your billing is performing exceptionally well vis a vis if you swapped it out for another in-house billing group or hired a different billing manager or hired additional staff, additional collectors, or a separate billing company, or whatever it might be.
It’s tough to determine, “Are they performing well or not?” It was not an unsophisticated group of individuals, a very sophisticated financially-oriented troupe, and they could not determine this. They were now in a position where they were trying to decide, “Do we fire the third billing company, try to rehire the first, or we go find another one? Do we bring in-house billing? What do we do, and how do we determine what is successful and what’s success?” I think this is a challenge that everybody faces.
Identifying metrics to determine if your billing is fair, whether it’s an outside billing company or in-house billing, is challenging. However, it is something we should all endeavor to do.
In another episode, we will share with you some tips on how to figure out if the billing is right, what metrics to use, and how to quantify those sorts of things. Best of luck!
