You can outsource your billing. You can't outsource accountability

If anything, dental insurance filing, follow up and verification has become far more labor intensive over the past ten years. So, it makes sense to outsource it. Insurance work takes time, it requires attention to detail, and it must be done consistently whether the office is busy, short-staffed, someone is on vacation or three patients have arrived at the front desk at the same time. If you have qualified people outside the practice who can do the work – correctly (which is the key word here), there is nothing particularly sacred about having someone sitting ten feet away from you while they do it.

What gets a little strange is when a practice outsources its dental billing and somehow decides it has also outsourced the responsibility for knowing what is happening with its money.

Those are two very different issues.

If you have not made that decision yet, that is a different question and we answer it here.

The financial coordinator position exists to make sure the practice gets paid accurately, consistently and in full for the services it delivers. The position includes financial arrangements, insurance collections and maintaining organized financial systems so revenue isn't lost through missed steps, delays or incorrect accounting. The basic reason for the position is even simpler: production without collections doesn't support a dental practice. Your payroll, lab bills, supplies, rent and every other expense involved in running the office are paid with money you collect, not with the number sitting in your production report. To that end, from a financial perspective, it’s worse to “produce” something and not collect it than to have not “produced” it at all.

When you outsource dental billing, you can absolutely transfer many of the tasks involved in getting that money collected. What you shouldn't transfer is your awareness of whether those tasks are actually producing the desired results.

Outsource the work, not your knowledge of the practice

A dental practice can divide financial responsibilities in many different ways. In a smaller office, one financial coordinator may handle patient financial arrangements, insurance verification, claim filing, follow-up, payment posting and patient billing. As the practice grows, those functions may be divided among several people. A treatment coordinator may handle financial arrangements with patients. A dedicated insurance coordinator may handle insurance-related work. Some or all of the insurance functions may be outsourced to a dental billing company.

There is nothing wrong with any of those structures as long as the responsibilities are clear and the work is getting done.

The problem starts when outsourcing becomes a substitute for management.

I've seen this in businesses forever. Someone hires another person or company to handle an area – for example marketing - and then mentally puts the entire subject in a drawer. They aren't just delegating the work. They stop looking at the result. If something goes wrong, the first indication is usually that the problem has become large enough to force its way back into their attention.

Dental A/R is particularly good at doing this.

You can outsource claim submission. You can outsource insurance follow-up. You can outsource verification and payment posting if those services are included in your arrangement. You can outsource a tremendous amount of the labor involved in dental billing. But at the end of the day, week or month – whatever - the accounts receivable still belongs to your practice. The collections still belong to your practice. If $100,000 is sitting unpaid, it doesn't become somebody else's $100,000 because they happen to be the person assigned to work it.

The owner and management therefore still need enough visibility to know whether the financial system is working.

Start with the result you expect from dental billing outsourcing

Before deciding what to outsource, it helps to understand what the financial area of the practice is supposed to accomplish.

The product of the financial coordinator position is all money collected for services rendered by the practice. I’ll say that again…ALL money, not 60%, 70%, etc. Ideal collection rate for a practice would bottom out at 97% of production. And truthfully it should be higher. That’s how you’d grade a financial coordinator. And that product is intentionally different from a list of activities. The financial coordinator has plenty of activities to perform, but they all exist in service of that result.

The same logic should apply if you were to outsource some of these functions with a dental billing company.

Suppose a company files every claim within the required time. Great. Suppose the claims aren't being followed properly afterward and the insurance A/R continues to grow. The claim-filing function may be getting done beautifully, but the practice still has a collection problem.

Or suppose claims are being followed up and insurance payments are coming in, but payments and adjustments are being posted incorrectly. Now the practice may have money in the bank while the patient accounts are a mess. Balances can be wrong, patient billing can be unreliable and the A/R report may no longer give management an accurate picture of what is actually owed.

The work has to be evaluated as a complete financial process, even if different people or companies are responsible for different pieces of it.

This is one reason I don't particularly care for vague job descriptions or service descriptions. "Handles insurance" tells me almost nothing. I want to know who verifies the benefits, who files the claim, who monitors it, who handles a delay, denial or appeal, who posts the payment, who deals with an underpayment, who communicates with the practice when information is missing and who makes sure an unresolved claim doesn't simply age into oblivion.

Once those responsibilities are assigned, outsourcing becomes very useful. Until then, it can simply move confusion to another location.

Your statistics should not be outsourced

One of the most useful ways to manage the financial area of a dental practice is through statistics because they tell management whether the area is actually producing.

A practice should be tracking

1.       total collections,

2.       insurance collections,

3.       over-the-counter patient collections,

4.       the dollar value of insurance billed,

5.       collection percentage and

6.       total accounts receivable.

These statistics should be tracked and reported consistently so management can see what is being collected, what remains outstanding and whether a problem is beginning to develop.

If you’re a dentist and outsource billing, those numbers become more important, not less.

You don't need to know every phone call the billing team made that afternoon. You don't need to sit beside them while they check claim statuses. You don't need to personally inspect every attachment before a claim goes out. The entire point of outsourcing is that someone else is doing those functions.

You do need to know whether the practice is collecting its money.

A monthly collection percentage of at least 97 percent after applicable write-offs is a good target. Insurance A/R should never exceed one month of average monthly production by much, accounting for some lag on a few claims over 30 days that might be being appealed and so on.

Those numbers give you a way to look past activity.

If your practice is producing $100,000 per month and your A/R has climbed to $180,000, something requires attention. The fact that the billing company sent you a report showing 700 claims touched doesn't answer the question. Maybe those claims were handled correctly and there is another cause. Maybe the practice has a patient collection problem rather than an insurance collection problem. Maybe old insurance claims are sitting unresolved. Maybe some claims have been downcoded, or denied and were never appealed, leaving unexpected (and potentially unnecessary) patient balances. The statistics don't automatically tell you the cause, but they tell you there is something worth investigating.

Trying to manage the financial area without statistics is like driving a car with the dashboard instrumentation in the trunk. You may still be moving, but you won't know what is working, what is failing or when trouble is building until it becomes a crisis.

Outsourcing the billing doesn't move the dashboard into somebody else's car. You still need it.

Patient A/R and insurance A/R are different problems

One of the most useful things a practice can do when reviewing accounts receivable is separate patient balances from insurance balances.

They are both money owed to the practice, but they don't require the same handling.

An outstanding insurance balance may require claim follow-up, additional documentation, correction of information, resolution of a denial or some other action involving the carrier. An outstanding patient balance may require a statement, collection action or review of the original financial arrangement. Treating all A/R as one giant number makes it much harder to see what is actually happening.

A weekly A/R review should look at patient and insurance balances separately, identify aging accounts, track unresolved insurance payments and work problem accounts. Credit balances should be excluded from the A/R review because they can obscure the true outstanding balance.

This becomes particularly important when dental billing is outsourced because you need to know which part of the financial problem belongs where.

If the insurance A/R is under control but patient A/R is climbing, blaming the billing company isn't especially productive if they aren't responsible for patient collections. Conversely, if the practice is doing an excellent job collecting patient portions but old insurance balances are piling up, telling the front desk to "collect harder" isn't going to fix that either.

Responsibility works best when it is specific.

Who owns the insurance A/R? Who owns the patient A/R? Who reviews each one? What happens when an account requires information or action from someone else?

You don't need everybody doing everything. In fact, that usually creates more confusion. You need everybody knowing exactly what they are responsible for.

That division is also why we run A/R recovery as its own function with its own team, and why the analysis comes before the cleanup. Here is how that works. 

Outsourcing dental billing requires a clean handoff

There is another side to outsourcing that practices sometimes overlook: the outside company can only handle the functions it has been given if it has the information required to do them.

If a claim needs an X-ray, narrative, clinical note or other documentation from the practice, the billing company cannot manufacture it. If patient or insurance information was entered incorrectly at the office, someone may need to correct it. If a treatment entry or account detail needs clarification, the practice may have to answer the question.

This is why communication between the practice and the outsourced billing team matters.

That doesn't mean everyone needs to spend all day emailing each other about every claim. It means there needs to be a clear method for identifying items that require action from the practice and a clear expectation that those items will be handled.

Otherwise, you get one of my favorite forms of organizational insanity: both sides are technically waiting on each other while neither side realizes the other one is waiting.

The billing company notes that it needs documentation from the office. The office doesn't see the request. The claim sits. Two weeks later the billing company checks again and the documentation is still missing. The claim sits some more. Eventually it appears in an older aging category and everyone is annoyed with the insurance company.

The insurance company may well deserve annoyance for plenty of things. In this example, however, they aren't the reason the claim hasn't moved.

If your practice is responsible for providing something, provide it. If the billing company is responsible for taking the next action after receiving it, they should take it. This is not complicated. It only becomes complicated when nobody knows whose turn it is.

Outsourcing doesn't eliminate the need for financial reporting

A financial coordinator should provide a weekly financial summary to the office manager. That report should include current and previous collections, the upcoming collection goal, total A/R, an aging breakdown, collection percentage and any special financial concerns anticipated for the coming week.

The purpose isn't to create paperwork for the entertainment of management. It is to make the financial condition of the practice visible.

When dental billing is outsourced, the format of the reporting may change, but the need for visibility doesn't.

Management should still be able to see whether collections are keeping pace with production. They should still know the total A/R and how old it is. They should still be able to identify unusual insurance delays, high-risk balances and recurring problems.

A practice owner shouldn't discover that insurance A/R has become a disaster because someone finally happened to print the aging report six months later.

The whole point of consistent reporting is to catch a problem while it is still a manageable problem.

If you outsource dental billing because your internal staff doesn't have the time or expertise to handle insurance collections properly, wonderful. That may solve a significant operational problem. But if nobody inside the practice ever reviews the results, you have replaced one weakness with another one.

What should stay inside the practice when you outsource dental billing?

The exact answer depends on what services you've outsourced.

If your billing company handles claim filing and follow-up but not verification, then verification still needs a clear owner inside the practice or with another service. If the company doesn't handle patient collections, the practice still needs a financial coordinator or another assigned person responsible for patient balances. If payment posting remains in-house, someone needs to be responsible for posting accurately and keeping the accounts correct.

These functions can be divided among multiple roles as a practice grows. One person doesn't have to perform all of them, but every function needs to be clearly assigned and actually performed.

Inside the practice, management also retains responsibility for monitoring the financial picture. Someone needs to review collections and A/R, identify trends and make sure unresolved problems are being addressed.

There is also the patient-facing side of the financial system. Financial arrangements need to be made accurately, patient portions need to be collected according to the practice's policy, and patient accounts need to be reviewed so there are no unnecessary surprises at checkout. Advance account review should confirm balances, identify insurance delays or missing payments, make sure credits and prepayments are reflected correctly and determine what should be collected at the visit.

Outsourcing insurance billing doesn't eliminate any of that. It simply changes who is performing some of the insurance-related functions.

How to know whether dental billing outsourcing is working

You shouldn't have to guess.

Look at the financial results and the condition of the accounts.

Are collections keeping pace with collectible production? Is A/R within an acceptable range? Is insurance A/R being worked before balances become old? Are unresolved claims being identified? Are patient accounts accurate? Are insurance payments being posted correctly if posting is part of the outsourced service? Are recurring problems being communicated to management so the underlying issue can be corrected?

Daily and weekly reporting matter precisely because financial problems are easier to fix when they are identified early.

You can also look at the amount of chaos required to keep the system functioning. If your office is constantly discovering old claims the billing company didn't know about, while the billing company is constantly waiting for information nobody in the office knew they needed to provide, the problem may not be effort. It may simply be a badly defined division of responsibility.

A good outsourced relationship should make the financial flow more controlled and predictable, not more mysterious.

The practice should know what the billing company is responsible for, the billing company should know what the practice is responsible for, and both sides should have a clear method for handling the things that cross that line.

You can delegate dental billing without becoming financially blind

I am a big believer in delegating work to people who can do it correctly. There is no prize for personally performing every job in your business, and there is certainly no reason a dentist should spend time chasing insurance claims merely so the work can technically remain "in-house."

But delegation only works when the person delegating still knows what product is expected and how to tell whether it is being achieved.

If you outsource dental billing, let the billing team do the billing. Let them file the claims, work the insurance A/R, handle the follow-up and perform whatever other functions are included in the service you've hired them to provide. There is no need to hover over them or duplicate the work inside the office.

Then look at the statistics.

Look at collections. Look at insurance collections. Look at the A/R. Look at the aging. Look at whether old balances are being resolved and whether recurring problems are being identified. If the numbers are healthy and the accounts are accurate, you have evidence that the system is working. If they aren't, find out why.

The goal of outsourcing dental billing is to remove work from the practice while improving or maintaining control of the financial process. It should give the office qualified people who can take responsibility for the functions assigned to them without requiring the doctor or internal staff to spend their days chasing claims.

Just don't confuse not having to do the work with not having to know whether the work is getting done.

If you want to see how we divide that responsibility, our services are laid out here. 

You can outsource dental billing. You cannot outsource the fact that it's still your money.