ARE YOU FOCUSED ON WHAT YOU DO BEST?
In the last few years, our industry has experienced a large number of new entrants into the billing industry. The majority of new market entrants have come from physician staffing companies, physicians, and former executives of existing billing companies. Physician staffing companies, both large and small, have led the charge by purchasing existing billing companies or starting new billing companies. A close second in the charge is former executives of larger billing companies. Last but not least, a number of physicians who have multiple Emergency Department contracts have contemplated, purchased, or formed their own billing company. The cozy industry that was once dominated by a few large billing service providers now consists of hundreds of providers that vary drastically in experience, expertise, and business philosophy.
In the United States, competition is what drives our economy. Competition within industry generally yields lower pricing, refinement in the end product, and increased expertise. However, in the billing industry, I'm not sure the onslaught of new market entrants has yielded these same results. Before analyzing some of the results of new market entrants, I think it is important to take a look at some of the reasons each of the three aforementioned groups have charged into the billing industry.
Physician Staffing Companies
Physician Staffing Companies charged into the market mostly by purchasing existing billing companies at the same time or as a result of their involvement with billing companies that experienced Department of Justice legal problems surrounding billing and coding practices. At this same time, the merger and acquisition market was fairly active with larger staffing companies purchasing smaller competing staffing companies in an effort to increase market share to appease their stockholders and the Wall Street analysts. Staffing companies probably viewed this transition time as an opportunity to diversify their business by offering the full spectrum of services in-house, thereby eliminating the need for many of their vendors and potentially reducing cost. The underlying theme here is potential cost savings and internal control. As I will discuss later, I believe the potential savings and benefits from in-house operations and control are far less than actual savings and actual increased control. On the topic of conversion from a private to a public company as it relates to billing companies and staffing companies, I will leave this for a later discussion.
Former Executives
Former executives led the second wave in new billing companies. Most of the former executives utilized their industry knowledge to form new billing companies rather than purchase existing billing companies. Many of these executives had worked very closely with operations and or client relations and thus have both industry expertise and credibility. Due to technological advances, many of the previous market entry barriers such as extraordinary cost for hardware and software have come down to manageable levels. Additionally, many of these executives were very savvy in analyzing the market to determine the best method to compete against the industry giants. Many of the industry giants went to bed at night believing their name and reputation would keep their current business and afford future growth. In reality, many of these new companies were busy providing more efficient value-added services often yielding better pricing for the physician group. In short, the new breed of company understood what the client wanted and needed and were flexible enough to deliver the product at a competitive price while many of the industry giants were still very rigid in their product delivery and pricing structures. Independence, opportunity, and entrepreneurship are reasons many of the former executives chose to become new market entrants.
Physician Groups with Multiple Contracts
The latest and still emerging wave of new market entrants is that of physician groups that have multiple contracts and have started their own billing company or are contemplating the creation of a billing company. Many times this group is very similar to the physician staffing company group previously mentioned because they are in the evolution of becoming a larger staffing entity whether they refer to themselves as a staffing entity varies from case to case. After attending the latest ACEP conference in Seattle and speaking with several of these groups, I see that many are working with a billing vendor but have aspirations of performing their own billing. Additional revenue streams, perceived cost savings, and control are issues stated as important in their decision process.
Potential Pitfalls
Now that I have given my long dissertation regarding the new market entrants and my perceptions as to why they entered the market, I want to review a few potential pitfalls of where I believe losing “focus on what you do best” has resulted in negative outcomes. In presenting these examples, I am not stating that any or all of the aforementioned groups are more or less capable of providing quality, compliant, and cost-effective billing services than established billing providers, I am simply providing examples of what I have witnessed.
With the current environment, physician-staffing companies are sometimes necessary to facilitate the emergency department staffing needs in areas of the country where emergency physicians have not been aggressive in forming independent groups or demographically present staffing challenges. Much of the criticism of staffing companies revolves around the actual or perceived percentage of the revenues they charge/keep to staff these contracts. In response, many staffing companies purchased or started billing companies in an effort to reduce their cost of billing, gain control of billing policies and procedures, and potentially reduce the fees to physicians that are labeled as management fees. Having recently worked with one such organization, I would be hard pressed to believe that this group achieved their objectives. In short, the staffing company charged the group of physicians a management fee to provide recruitment and management services and a separate coding and billing fee (utilizing a company the staffing company owned and charging an above average rate). After reviewing this particular situation and shuffling through their bureaucracy of inefficiency and failure to know who was on first, I discovered many mistakes in the billing and setup of billing that a knowledgeable and efficient billing organization would not make. In fact, from a compliance standpoint, I would think this organization has more risk of compliance failure. While they had a slew of attorney's and staff working in their compliance department, I would say their efforts are far short of what I would call a successful compliance program. As for billing cost reduction, the level of disarray and confusion leads one to believe their costs would have to be higher than a well-negotiated rate with a professional billing provider. The end-result was the loss of the staffing contract at one hospital, the loss of the billing and coding contract at another hospital, and potentially the loss of the management contract at another hospital. As a result of losing focus in what they do best, which is provide physician staffing and management, this particular company is losing market share do to the inadequate performance of their coding and billing company. And by the way, the physician group also loses because they paid an above average billing fee and received substandard services that resulted in lost or delayed reimbursement.
This second example I have witnessed several times. Physician A has a contract to provide staffing and billing services at hospital X. Physician A originally utilizes a billing vendor for his services and is satisfied with the services but thinks the cost might be a little on the high end. Physician A provides good services and soon provides services at two other hospitals. Physician A decides to start their own billing company to reduce billing costs. To make a long story short, after twelve months of operations, the billing company is not only unprofitable, it requires more to operate than outsourcing the billing to a professional vendor. The billing company does not have the size or cash flow to afford the billing and coding experienced personnel necessary to operate efficiently and effectively while maintaining adequate corporate compliance. The billing company creates a cash flow crunch and the group physicians now have trouble. In at least two cases I have witnessed, the failure of the billing company led to the disbanding of the physician group and/or the loss of their hospital contract. Never in their wildest dreams did any of these physicians consider that this decision might cost them this dearly.
The morale of these stories and this article is to maintain focus on what you do best. While some of the barriers to entry into the coding and billing market have been removed, entry into this market is not recommended for all staffing companies and physician groups with multiple contracts. The coding and billing industry is very complex with numerous rapid changes. The sheer complexity mandates that the billing and coding entity you own or utilize be comprised of industry professionals that thoroughly understand the potential pitfalls associated with inadequate knowledge, training, and compliance. Having the coding and billing operations performed internally does not always guarantee more control, greater compliance, better reimbursement, more efficient operations, or lower cost. Many instances I have witnessed the exact opposite. No physician group or staffing company should ever lose their core business as a result of inadequate billing and coding operations. When evaluating whether to outsource your coding and billing to a professional vendor or perform the function internally, make certain you have thorough analyzed all possible pitfalls and costs. Your core business is what generates your salary; therefore, I advise that you “Focus on what you do best” by surrounding yourself with proven vendors or internal operations personnel. Your current and future reimbursement depends on it.