A Comprehensive Guide to Medical Billing – Outsourcing vs In-house

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What is Medical Billing?

Medical billing involves submitting claims to health insurance companies to get paid for services provided by healthcare providers.

Revenue cycle management relies on precise medical billing to ensure healthcare facilities receive payment for the care they provide. Electronic medical records have revolutionized this process, seamlessly integrating patient information and billing data. This integration speeds up the billing process and reduces errors that could lead to claim denials or payment delays. Accurate and timely medical billing is crucial for financial sustainability and high-quality patient care in the healthcare industry.

Why is there such massive growth in the billing outsourcing market?

Recent studies indicate that the medical billing outsourcing market is expanding quickly. It is projected to grow at a rate of 16.9% per year for the next eight years. By 2032, it is expected to reach $55.6 billion annually. 

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Outsourcing medical billing can offer numerous advantages, from cost savings to increased efficiency and accuracy. We will also discuss key factors to consider when choosing the right medical billing company for outsourcing. 

Discover why outsourcing medical billing is the best option for healthcare providers in the USA.

Table of Contents

What are the Challenges of In-house Medical Billing?

Doing medical billing in-house can be difficult. This is because of a lack of staff, financial struggles, and complex coding rules.

It can be challenging to manage all these aspects. This can lead to errors and delays in the billing process. Outsourcing medical billing may be a more efficient solution. 

Staffing shortages in medical billing departments can lead to delays in claims processing, which directly impacts revenue generation. Medical coding needs skilled professionals with different code sets and rules to prevent claim denials and ensure accurate billing. 

Reaching revenue goals in billing operations at the office can be challenging. It involves keeping track of key performance indicators (KPIs) and using effective strategies to manage accounts receivable and cash flow. 

1. Staffing & Training Cost

Healthcare organizations struggle to manage costs for hiring and training without assistance from staffing agencies. 

Staffing and training expenses account for a substantial portion of a healthcare organization’s budget, impacting its financial stability and operational efficiency. Healthcare costs increase due to changing rules and technology, so staff need ongoing training.

2. Constant Changes in Healthcare Policies and Regulations

Healthcare providers must keep up with changes in policies and regulations, like HIPAA, to ensure revenue and data security.

Healthcare organizations must follow many rules to ensure they bill correctly in the changing healthcare system. Adhering to HIPAA standards not only safeguards patient information but also reduces the risk of costly fines and penalties. Providers can streamline workflows and improve overall efficiency by integrating these regulations into in-house billing operations. Compliance with HIPAA fosters a culture of trust with patients, enhancing the organization’s reputation and patient satisfaction levels.

3. Time-consuming and Tedious Process 

The time-consuming and often tedious nature of in-house medical billing processes can hinder revenue performance and operational efficiency for healthcare organizations. 

This can lead to delayed payments, errors in billing, and increased costs due to manual labor requirements. 

What is Outsourcing Medical Billing?

Outsourcing medical billing means working with 3rd party companies to manage billing and revenue for healthcare providers. 

This partnership lets healthcare providers hand off billing to experts in medical coding, claim submission, and revenue cycle optimization. Healthcare facilities can improve efficiency, reduce errors, increase revenue, and focus on patient care by outsourcing important tasks. 

Third-party billing companies utilize advanced technology and expertise to expedite reimbursement processes, improve cash flow, and ensure compliance with constantly evolving healthcare regulations. Outsourcing medical billing offers healthcare providers significant cost savings, improved efficiency and revenue growth opportunities.

What are the Benefits of Outsourcing Medical Billing?

Outsourcing medical billing saves money, provides expertise, improves efficiency, and lets healthcare providers focus on patient care. 

Healthcare facilities can significantly reduce operations costs and overhead expenses by delegating billing responsibilities to specialized professionals. This cost-effectiveness helps the organization save money. As a result, they can use resources wisely to improve patient services. They can also invest in staff training and new technology. 

1. Cost Savings

Outsourcing medical billing can save money for healthcare providers, helping them reach their revenue goals more efficiently. 

Healthcare providers can save money by using outside companies for billing. This reduces costs for staff, training, and software maintenance. 

This cost-effective method helps healthcare providers use resources efficiently. It improves patient care and expands their services. This leads to improved financial outcomes and long-term success.

2. Access to Expertise and Advanced Technology

Outsourcing medical billing provides healthcare providers access to specialized expertise and advanced technology, including electronic medical record systems, enhancing operational efficiency and accuracy. 

Healthcare organizations can improve efficiency and accuracy by using electronic medical record systems. These systems streamline documentation and reduce errors from manual data entry. These advanced systems not only facilitate seamless access to patient information but also improve coding accuracy and compliance with regulatory requirements. 

3. Increased Efficiency and Accuracy 

Outsourcing medical billing helps healthcare providers improve efficiency and accuracy in billing, leading to better revenue and streamlined revenue management. 

Outsourcing medical billing helps healthcare providers access experts and technology focused on billing, ensuring accuracy and compliance with regulations.

4. Focus on Patient Care

Outsourcing medical billing helps healthcare providers focus on patient care, leading to better patient satisfaction and quality of care. 

By letting experts handle billing, providers can make their work smoother, saving time and reducing administrative tasks. 

This means payments are on time and bills are correct, avoiding mistakes that could affect patient care and happiness. 

5. Avoid Overbilling and Underbilling 

If you always use the highest billing codes, your practice may get in trouble with a PPO or Medicare. This can result in audits and severe penalties. On the other hand, bills are too low, and you may leave money on the table. 

How can you strike the perfect balance and bill at the right level? 

That’s where a medical billing service comes in! Billing companies use coding experts and audits to improve coding and billing accuracy.  

They’ll get your billing rates exactly where they need to be to optimize cash flow without risking an audit. This is one of the chief ways outsourcing medical billing will boost your bottom line. 

5. Secure Patient Data

Companies must tell the U.S. Department of Health and Human Services about data breaches that impact over 500 individuals. The department’s data for 2023 indicates the reporting of 541 breaches.  

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Medical billing companies put cybersecurity front and center. After all, their business lives and dies by the trust healthcare providers place in them. Even one data breach could ruin their reputation and end their career. 

When hiring a medical billing company, do your homework first. Investigate their past security record and make sure they’re trustworthy. As mentioned earlier, a good medical billing company will protect patient records from cyber attacks to prevent breaches.

6. Deeper Insight Into the Revenue Cycle  

Do you know if your billing operations are improving or stagnating? How are coding and billing influencing the other steps in the revenue cycle? Who is keeping track, and how are they doing this?  

Revenue Cycle Management (RCM) is a holistic approach that ensures that the entire process, from patient first contact to authorizations to collections, is seamless and creates a synergy between the various methods.  

Medical billing companies use technology to create easy-to-understand reports showing growth and performance areas. The company provides these in-depth reports frequently according to the agreement or whenever requested on demand. 

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What Are the Fee Structures or Pricing Models for Outsourced Medical Billing?

Outsourced medical billing costs can be flat fees, percentage-based fees, or hybrid models. The pricing varies based on the needs of healthcare providers.

  1. Flat fees are typically a fixed amount charged for each claim processed, providing predictability in costs for healthcare practices. 
  2. Percentage-based billing charges are a percentage of the total amount collected, aligning the biller’s pay with the revenue earned.
  3. Hybrid models combine elements of both, balancing fixed costs and a percentage of the revenue. These pricing models aim to offer flexibility and cost-effectiveness to healthcare providers seeking outsourced billing services. 

What’s the ROI on Outsourced Medical Billing?

If you consider the demand growth, it suggests that there should be a positive return on investment (ROI). Why else would more and more healthcare organizations line up to outsource their medical billing operations?

Apart from other macro-economic variables such as the current labor shortage in the healthcare industry playing a role, a primary motivator is the ROI of outsourcing medical billing.  

An Estimation of ROI 

  • Consider that you are a $10 million healthcare organization that collects around 85% of the bill owed. 
  • Uncollected annual revenue= $1.5m
  • An MSO with a 90% to 95% revenue collecting power can help bring down the uncollected figure between $1m to $500,000.
  • Your net collections will increase by an amount ranging from $500,000 to $1m
  • If the agency charges 4% for their services, you would still be collecting an additional $100,000 to $600,000 more.

Thus, outsourcing your medical billing services will not only increase your collection but will also reduce overhead. Think of the additional costs your billing team accrues. We’re not only talking about the obvious costs like computers, licenses, salaries, etc. but also the absences for paid leave, sick leave, etc.

These additional costs should also be included in the savings calculation when trying to determine the viability of outsourcing medical coding and billing.


Learn how your healthcare organization can benefit from outsourced coding and billing service by scheduling a demo with Neoltyix today. 

We have been working with healthcare organizations for more than 12 years. We have built a reputation for our expertise and proven success in delivering guaranteed improvements during this time. 

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