“There is no shame in not knowing; the shame lies in not finding out.”
Russian Proverb
One of the common questions radiologists have concerning their billing is how much should they be paying? This white paper will take you quickly and simply through the issues related to the cost of billing including the areas with the highest potential impact and those most commonly overlooked. Our topic areas are:
Basic Cost Ranges
Let’s start off with the simple answer. A hospital-based group (professional component billing only) should be paying somewhere in between 7.5% of collections to 10.5% percent of collections. If you are operating an imaging center (global billing), you should be paying somewhere around 2.0% to 4.5% of collections.
This target range does not vary dramatically one way of the other regardless of whether you are billing in-house or outsource billing. The cost does vary according to size. It stands to reason that the larger the amount being billed, there should be some discounts efficiencies gained through that volume. The more procedures that are billed, the more you can spread out your fixed costs such as computer servers and billing software thus reducing your billing cost per procedure. Billing companies are able to spread out costs across multiple organizations and gain economies of scale. This is how billing companies are able to achieve rates similar to self-billers and still have some profit for themselves.
Determining Costs
If you are self-billing, you need to aggregate all of your costs to determine your true cost of billing. Costs typically fall into the following categories:
- Wages & Payroll Taxes
- Benefits (Vacation, Bonuses, 401K, Pension, Health Insurance, etc.)
- Workers Compensation
- Forms & Statement Printing
- Postage
- Billing Software Purchase & Maintenance
- Computer Hardware Purchase & Maintenance
- Electronic Clearinghouse
- Utilities
- Billing Related Business Insurance
- Supplies
- Education & Conferences
- Travel
- Phones & Long Distance
- Coding Service or Coding Software
- Temporary Workers
- Expenses related to compliance and audit
Take the sum of these expenses and divide this by your annual net collections to find out your billing expense percentage.
Staffing
Another huge variable in billing is staffing. Depending on how efficient the billing system you use is, staffing will vary widely. If you use an older system, it is probably going to translate into higher employee costs as fewer processes are automated. The newer, radiology-specific systems are going to mean you will need less people and, by extension, your employee costs (more than likely your second highest cost after lost revenue) will be lower as well. This is true as well for the productivity savings of auto-coding software, streamlined clearinghouses, etc.
Staffing varies widely. We have seen a 25-man radiology group with 7 billers on staff (which was an unmitigated disaster) and a 4-man radiology group with the same amount (that wasn’t really doing a whole lot better). A rough rule of thumb is one biller for each radiologist. The larger the group, the more efficiencies can be gained such that in large radiology groups, you may see more like a 2:1 radiologist to biller ratio.
The True Cost of Billing
Though this is the typical list of costs that virtually everyone would use to calculate the cost of billing, we do not believe the above list to be adequate. Before we explain why, let’s explain a very common mistake people make in billing.
In billing terminology, there is a metric called Adjusted Collection Percentage. Adjusted Collection Percentage tells you of the money that is possible to collect, how much is being collected. For example, if your Adjusted Collection Percentage is 90%, it means that you are collecting $.90 for every $1 that is possible to collect. It is the best metric for determining the effectiveness of your billing efforts. (For more detail, please ask for the white paper What Every Radiologist Should Know about Medical Billing).
One point of billing fee is the same as one point of Adjusted Collection Percentage. Let me repeat -- one point of billing fee is the same as one point of Adjusted Collection Percentage.
The most common mistake radiologists make is to focus on the cost of billing from the list above and ignore Adjusted Collection Percentage. We have seen radiology practices that are 20 points below the national average for Adjusted Collection Percentage worried about ½ a point in billing fee. In one case, there was a two-man imaging center that was leaving $750,000 a year (or about 20 points) on the table through bad collections and yet didn’t want to change their billing practices because the fee would possibly increase by 1 point. If I told you for every $1 you gave me, I would give you $19 back, would you do it?
If this were a rare occurrence, it wouldn’t be worth mentioning, but this happens all the time. Bad collections are potentially your biggest cost to the extent that it will dwarf your other expenses. In the above case, the radiologist though he was paying about 3.5% a year for billing, but was really paying over 20% a year when you added in the money lost through poor billing practices. It is only when you add in your lost revenue that you come to a true cost of billing.
We recommend that you don’t skimp on your billing software, billing company or billing employees. Coders need to be experienced and preferably certified in radiology. Don’t hire a local billing firm that doesn’t know anything about radiology. Radiology is the toughest specialty to bill in medicine; even more so if you do interventional radiology. Experts in interventional coding have found that as many as 60% of all interventional radiology procedures during an audit are coded incorrectly. When you don’t code correctly, you expose yourself at best to lost revenue or fines and, at worst, loss of licensure or imprisonment.
Wide Variations
In working in the radiology billing industry for many years now and performing countless billing analyses on radiology practices, one thing is certain – the variations of costs are wide. I have seen a single, hospital-based physician paying less than 7% for billing and a large, hospital-based group paying over 13%. When the true cost of billing is considered, I wouldn’t be surprised if some group’s costs didn’t exceed 50%.
Kyle Tucker is the founder of Dexios Radiology Billing, a radiology-only medical billing company that specializes in accounts receivable management. For copies or reprints of this white paper, please contact Mr. Tucker at 804-378-3543 or email at k.tucker@dexioscorp.com. Dexios will provide a free practice analysis comparing to current RBMA AR Survey numbers for US-based radiology groups, imaging centers and teleradiology companies.