Monitoring the Performance of your Outsourced Medical Billing Team

Sound outsourcing relationships depend on constant evaluation of the service provider’s medical billing process and performance. Just like an annual check-up identifies potential health issues, outsourced medical billing team performance monitoring helps medical professionals and practice owners identify billing issues, implement actions to address the problem, and ensure long-term profitability of the practice. Most practice administrators typically have a sense of what their billing and revenue cycle should look like. Drivers for outsourcing vary, but most healthcare managers want to make their billing process more effective and efficient while reducing costs and increasing collections.

Some organizations rely on the medical billing service provider to develop a service level agreement (SLA) that includes performance measurement. However, top performing practices understand that their input is crucial when creating the SLA and monitoring vendor compliance. They understand that it takes both parties to manage the outsourcing relationship and ensure that goals are achieved. These companies consider practical concerns such as the best way to allocate limited resources, which competencies are the most important, and areas where changes can improve accuracy and time to collect.

Successful Outsourcing Partnerships

Although performance management strategies, metrics and improvement plans vary by company, healthcare organizations with high-performance revenue cycles due to successful outsourcing partnerships share common characteristics. Top performers focus on improving key areas that are most crucial to their success, and they enlist the help of the medical billing company to ensure that the practice excels at what it needs to excel at.

Top performers are good at setting effective metrics, and they are good at implementing strategies to ensure that these metrics help achieve their goals. On the executive management side, they employ traditional and non-traditional metrics to improve monitoring of revenue cycle processes, and they develop and implement accountability systems around monitoring and reporting process. On the provider side, top performing healthcare organizations expect their outsourcing partners to measure performance using specific metrics, report frequently, and provide client-focused value. Simply put: these companies make performance monitoring and reporting top priority, integrating performance management into daily operations and the company culture.

Service Level Agreement (SLA)

Most medical billing providers integrate outsourced medical billing team performance management into every outsourcing contract. A detailed service level agreement (SLA) serves as the main tool for monitoring the engagement. The SLA covers issues such as transfer of resources and staff, pricing model and payment terms, liability, penalties, and contract termination. After developing the SLA, the client and provider develop key performance indicators (KPI). This requires detailed process analysis and workflow mapping to establish required levels of performance and identify tasks involved in execution. Risk and relationship management is the final stage. It involves identification of what should be measured, how it should be measured, and the frequency of measurement and reporting.

While the exact metrics for each SLA vary with the billing provider, the typical areas covered include volume, quality and accuracy of work, speed, responsiveness, and efficiency. The level of service required should be specific and measureable for every process to allow the quality to be benchmarked and outsourced medical billing team performance to be rewarded or penalized. Here is an example of a service expectation for invoice processing: invoice scanning and processing will be completed within 20 days from date of receipt. The accompanying metric is: invoice and invoice status can be accessed within 20 days from date of receipt.

While medical billing companies often use tools to monitor outsourced medical billing team compliance with SLAs and provide self-reporting to clients, the organization should assign its own internal staff to measure vendor compliance. Performance is measured against medical billing providers in similar markets using data and pricing comparisons from multiple industry sub-segments. One downside is that the client may have to invest in databases and analytics software for monitoring. However, rigorous data-driven performance monitoring and auditing are always superior to traditional, intuitive spot-checking.

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Outsourced Medical Billing Team Key Performance Indicators (KPI)

The best key performance indicators (KPI) to use when monitoring the performance of an outsourced medical billing team will vary depending on the organization’s goals. Many medical billing firms develop and use their own KPIs and tweak them to fit the client’s needs. Examples of medical billing KPIs:

Claim Acceptance Rate

Majority of clams (90 percent) must be accepted by the insurance carrier the first time they are submitted. Claims acceptance depends highly on the accuracy and completeness of submitted information. Experienced billers as well as claims validation and scrubbing can boost the claim acceptance rate. If the claim acceptance rate of the outsourced medical billing team falls below expected and remains that way for a certain time, the provider must make changes or face penalties.

Time to Collect

Insurance claims must be collected within 90 days or less. The medical billing provider must collect 90 percent of insurance payments within 60 days after processing is completed.

Claims Appeal and Re-submission

The medical billing provider must re-work and re-submit all denied or rejected claims within three days to avoid backlog and speed up collections. Some outsourcing firms specialize in claims appeals and resubmission; you can tell by their higher-than-average performance in this area.

Billing and Coding Accuracy

The medical billing partner must have a synchronized billing and coding process to ensure that documentation is matched with codes and that errors are kept to a minimum. Accuracy and completeness help reduce denials and allow the practice to breeze through audits.

Other examples of medical billing indices and benchmarks are insurance verification rate of scheduled and unscheduled patients, payment request rate, real-time collection rate of co-pays and deductibles, and registration accuracy rate.


Practice owners and revenue cycle leaders should have dedicated teams assigned to address process improvements. One group performs oversight functions, such as monitoring and evaluating key billing metrics, identifying trends, and developing improvement strategies as needed. In large organizations, the group can include the CFO or revenue cycle manager. In smaller practices, the role can be performed by the billing department manager or even the physician assigned to the outsourcing project. Another group is assigned to a specific area of the revenue cycle or to a certain billing task. The goal is to identify problems and address them immediately. For example, when the medical billing provider implements new software, this group manages the response and transition. Group participants generally include IT, admin, clinical leaders, and clinical staff.

Successful practices also have internal systems in place to gain feedback from employees. They hold frequent meetings focused on addressing specific issues and less frequent general meetings. They also have sophisticated processes to gain feedback from patients regarding process improvements. For example, when the medical billing partner employs electronic records, the practice and the provider assess the impact on patients through direct interviews or focus groups. Feedback systems can be established on an ad hoc and ongoing basis for better performance monitoring. Top performing practices involve their patients in revenue cycle activities much more frequently compared to other practices.

Collaboration Between client and Medical Billing Service Provider

Proper oversight also means frequent collaboration between client and provider. Communication between the provider and physician, practice owner or outsourcing project lead is a top priority. Even for seemingly unimportant tasks like writing the content of patient forms, the provider and client should work together to align expectations around gathering accurate information for insurance claims. Another method is to assign a dedicated representative for the practice that will interact with the provider regularly to communicate billing-related issues and changes to operations as they come up. When the provider is well-informed about how the practice is being run, it can make necessary changes to metrics and KPIs to improve performance.

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Targeted Improvements

Improvement efforts of the medical billing provider and practice leaders should be targeted around revenue cycle areas that have the biggest impact on patient care and patient experience. Successful practices focus their improvement efforts on areas like front-end billing and collections systems. A practice that targets improvement of front-end process tends to increase collections and profitability. Examples of front-end improvements include mentoring/coaching of internal and outsourced medical billing staff, implementing incentives programs for top performers, streamlining patient scheduling processes, and using more sophisticated technology for front-end processes.

To improve collection systems, top service providers work with management to educate patients about insurance coverage, copayments, and deductibles. When patients are scheduled for appointments, for example, front desk personnel can give them a cost estimate immediately and communicate payment processes and expectations. Clear communication also helps front desk staff to ease the anxiety associated with pursuing payments from patients.

Remediation and Correction

Performance monitoring and management of outsourced medical billing includes remediation and correction or issue identification and resolution. No matter how well the client runs an outsourcing project, issues do and will come up. Common issues include incorrect patients demos, poor account tracking and documentation, and balance adjustment errors. Remediation and correction help reduce the negative impact of these errors on the organization. The practice should not wait for the vendor to report problems; using actual data and the right tools, the person or team assigned to manage the outsourcing project should initiate remediation plans with the billing provider. Sophisticated tools can flag non-compliance issues on a regular basis and alert internal teams to investigate and address the issue quickly.

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