The Real Cost of Internal Billing – Part 1
The biggest mistake doctors make is forgetting to calculate how much it will cost them to manage the staff they hire to bill internally. It is one of the golden rules of business. Pay yourself first. There are also other hidden costs when it comes to managing a billing team. The numbers below are based on numbers given to the doctor by a well-known chiropractic trainer, not numbers I came up with.
· Projected number of weekly patient visits: 500 patient visits/week
· Total Projected Collections (TC): $60,000/month x 12 = $720,000/year
· Total Insurance Collections (TIC): 60% sure = $432,000
Total Personnel Cost (SC)
Staff hours per year (SHY):
o 3 part-time employees = 3 x 20 hours/week = 60 hours per week x 52 weeks = 3120 hours/year
Average hourly rate (SHR):
oh $15/hour
· (SC) = (SHR) $15/hour X (SHY) 3120 hours = $46,000
Management Cost (CM)
Physicians Hourly Compensation (DHC)
o Hours worked = 30hrs/week X 52 weeks = 1,560 hours/year
o Total collection = $720,000/year
oh DHC = (Total Revenue) $720,000 / (Hours Worked) 1,560 = $461/hour
Hours dedicated to personal management of billing staff (HS): 2 hours/week x 52 weeks = 104 hours/year
· MC = (SA) 104 hours/year X (DHC) $461/hour = $48,000
Total Cost of Internal Billing (TCIB)
· TCIB = Personnel Cost (SC) + Management Cost (MC)
· TCIB = (SC) $46,000 + (MC) $48,000 = $94,000
TCIB as a percentage of collections (TCIB%)
TCIB / Total Insurance Collections = ICR%
$94,800 / $432,000 = 21.94%
Total Cost of Outsourced Billing (at 8%) (TCOB)
· TCOB = Total Insurance Charges X Billing Company Fee
$432,000 X .08 = $34,560
frequent questions
Q: What if I find a super biller who could work 20 hours a week and can do it?
HAS:You would still need to manage that person 2 hours per week and it’s not worth it.
His staff salaries would be reduced to $15,600, but he would still be paying himself $48,000, for a total of $63,600 or 14.72% of the insurance charges. He wouldn’t be below 8% until he spent less than 45 minutes per month managing a part-time person to bill an office of 500 per week.
This is what you should be asking:
1. Can a part-time person handle billing for a practice that sees 500 patients per week? Claim Filing, EOB Posting and Tracking?
2. Since this person is not paid on a percentage basis, will he really fight for every dollar?
3. What happens if they are sick for three days?
4. What if they get a better job? How will you find the time to replace them?
5. Will they attend seminars to learn the latest in coding?
6. Will they process thousands of claims per month like a professional billing service would and be able to analyze data to make sure they stay ahead of the insurance companies?
7. Will they give you compliance reports that show you exactly when you raise a red flag for an insurance audit?
8. Will they provide real-time reporting and accurate call logs on every claim so you can check your productivity at any time?
9. What happens if insurance charges go down? Will your staff accept less pay?
10. Would an internal biller accept a percentage of the charges as compensation?