In a rapidly changing healthcare climate, it pays to put all options on the table when considering improvements to your practice. Some of the ways you’ve traditionally done business may be holding you back. Perhaps it’s time to consider outsourcing some activities to ensure your practice continues to thrive.
A cost-benefit analysis comes first
To be clear, you shouldn’t make any outsourcing decision willy-nilly. Perform a careful cost-benefit analysis.
For some tasks, the direct cost of outsourcing will be clearly less than that of performing the task in-house. But, for other tasks, the direct cost may be close to — or even exceed — that of performing the activity in-house. The question then is whether outsourcing those tasks will improve results that positively affect the practice’s bottom line, reduce indirect costs or provide other valuable benefits.
An effective outside billing service or professional management firm may help increase the practice’s cash receipts and reduce its accounts receivable. Revenue that your practice generates from more effective billing and follow-up may easily exceed the incremental direct cost increase of an outside billing service.
In other situations, factors such as tax consequences, savings in capital expenditures or other financial trade-offs may make a significant difference. For instance, the cost of an outside billing service may be expensed on your practice’s income statement, but the cost of a computerized billing system acquisition is generally a capital expense that the practice may have to depreciate over an extended period.
Interest and commitment matter
Regardless of the task your practice is considering outsourcing, there are several factors that will help you determine the initial feasibility. First, look at the size of your practice and the level of internal expertise that’s needed to perform the task.
Second, consider your physicians’ interest and commitment to participating in management decisions and oversight of the task. And third, explore the availability of expert external sources that can perform the task well and at a competitive rate. Make sure you weigh all three of these factors in relation to your practice.
Streamlining for better service
Outsourcing offers several primary benefits: improved results from a provider specializing in a particular activity, a potential for reduced costs, and the elimination of responsibilities and hassles for physicians and administrators.
Two tasks that can usually be outsourced so smoothly that it’s virtually seamless are payroll and billing. Most medical practices outsource these functions and agree that doing so is cost effective. However, don’t forget that the practice is still responsible for reporting and paying payroll taxes, so choose a provider carefully.
Many other functions can be outsourced, depending on the practice’s specialty. For example, hospital-based specialists, such as radiologists and pathologists, frequently outsource office and administrative functions. Hospital-based groups often need only limited staff, which makes outsourcing attractive because it eliminates personnel administration.
In addition, outsourcing office functions can eliminate dealing with retirement plan contributions, health insurance, paid leave and other fringe benefits for employees. In practices composed mostly of physicians, these can be expensive under today’s requirements for parity in contribution rates between physicians and employees.
Diagnostics and testing
Outsourcing doesn’t necessarily have to be limited to administrative tasks. Specialty group practices performing diagnostic and therapeutic services may outsource not only the administrative responsibility and equipment maintenance, but also the technical component of those services. Niche companies that specialize in these areas can provide well-trained personnel.
A cardiology group may, for instance, choose to outsource its cardiac stress tests. This type of outsourcing can provide expansion opportunities — often without the risk, capital expense and lead time required to develop comparable in-house capabilities.
Less is more
When your staff is burdened with extraneous or administrative tasks, it’s easy to get bogged down and lose your practice’s competitive edge. Consider outsourcing specific activities to help your practice navigate today’s rough waters and come out ahead.
Learn more about Sciarabba Walker’s Outsourced Accounting services here.