Practices usually decide to outsource billing at a bad moment: a biller resigned, AR is climbing, the vendor stopped answering the phone. The decision is right more often than not, but the timing makes it easy to skip the review that would make it succeed.
We sit on the other side of this conversation often enough to know which questions practices forget to ask, and which answers they accept too quickly. What follows is the review we would want a practice to do before signing with anyone, including us.
Key takeaways
- Pull your own charge lag, first-pass acceptance rate and denial rate for the last 90 days before talking to vendors. They tell you what the vendor inherits and give you a baseline to hold them to.
- Get "applicable collections" defined in writing. A percentage rate means nothing until you know what it is a percentage of.
- Decide explicitly who works legacy AR, who does the coding, and who owns denials. Silence on any of these becomes a dispute in month four.
- Expect three documents: a master services agreement, a service order and a business associate agreement. Read the termination and data return clauses first.
- Compare proposals on your actual twelve-month collections, not on the headline rate.
Review your own practice first
A billing company inherits your front end. If registration is sloppy, eligibility is not checked and providers sign notes a week late, the vendor will bill late and get denials, and you will blame the vendor. Before you sign, pull three numbers for the last 90 days:
- Charge lag: median days from date of service to claim submission.
- First-pass acceptance rate: share of claims accepted by the payer on the first submission.
- Denial rate: denied claims as a share of adjudicated claims, by payer.
They tell you what the vendor is inheriting and give you a baseline to hold them to. A vendor that promises to "increase collections by 20 percent" without asking for these numbers is guessing. If you do not know how to pull them, that is worth knowing too: it usually means your current reporting is thin, and reporting should then be near the top of your vendor questions.
Questions to ask the vendor
How is the fee calculated, exactly?
"Percentage of collections" can mean several things. Ask whether it includes patient payments, copays collected at the desk, payments on claims from before the start date, capitation, and refunds. Get the definition in writing in the service order. A vendor that cannot define "applicable collections" in one paragraph will define it in their favor on the invoice.
Who works denials, and is it included?
Some vendors submit claims and post payments but treat denials as extra, or work only the easy ones. Ask whether denials are categorized, whether appeals are written with documentation, and whether you receive a report of the causes. If denial management is an add-on, ask what the combined rate is and decide with your denial rate in front of you. Read how root-cause analysis differs from follow-up before that conversation.
What happens to the old AR?
Decide explicitly: your previous process finishes it, the new vendor takes it under a separate scope, or your staff work it down. "We will just handle it" without a scope is how legacy AR is forgotten. Ask for the legacy AR to be reported separately from new business so you can see both clearly.
How will they access our systems?
The right answer is delegated user accounts in your EMR, practice management system and clearinghouse, created by you and revocable by you. Sharing a provider's personal login is the wrong answer, and so is moving your data into the vendor's system without a way to get it back. Ask how credentials are stored, who can see them, and whether access is logged.
What will we see, and how often?
Ask for a sample monthly report. It should show charges, payments, adjustments, AR aging by payer, first-pass acceptance and the top denial reasons, and it should include a list of things the practice needs to do. If the report is only a deposit total, you will be flying blind. Ask whether you can see claim status between reports; a client dashboard is better than a monthly PDF.
Who will we talk to?
A named contact and a support desk with tracked tickets. Ask how quickly they answer, whether you can see the status of your own questions, and what happens when your contact is on vacation.
Who does the coding?
Some billing companies code, some expect the provider to code, some review provider coding. Each is a valid model, but the agreement should say which one applies and who is responsible for coding-related denials.
What the agreement should contain
Expect three documents:
- Master services agreement: the commercial relationship, confidentiality, liability, termination and data return.
- Service order or statement of work: the services, the rates, the definition of applicable collections, the start date of service, the providers and locations covered, and special terms.
- Business associate agreement: required under HIPAA because the vendor handles protected health information.
Read the termination clause and the data return clause carefully. You should be able to leave with your data, your reports and your claim history, without a fee for the privilege. Look for automatic renewal terms and notice periods, and for language that lets the vendor change rates unilaterally. Have counsel read the MSA; the service order is the one you should be able to read yourself.
How to compare two proposals fairly
Put both on one page with the same rows, then apply both to your actual collections from the last twelve months. Here is a hypothetical comparison for a practice with $1,200,000 in annual collections, of which $960,000 is insurance payments and $240,000 is patient payments, sending about 30,000 statements a year:
| Line | Vendor A | Vendor B |
|---|---|---|
| Headline rate | 4.5 percent | 6 percent |
| Applies to | Insurance payments only | All payments, including patient |
| Denial management | Add-on at 1 percent | Included |
| Patient statements | $0.95 per statement | Included |
| Legacy AR | Separate fee on amounts collected | Not offered |
| Minimum monthly fee | $1,500 | None |
| Term and notice | 36 months, auto-renew, 120 days | 12 months, 60 days |
| Reporting | Monthly PDF | Dashboard plus monthly report |
| Estimated annual cost | $43,200 + $9,600 + $28,500 = $81,300 | $72,000 |
Vendor A looked cheaper on the first page and costs more once denial management and statements are priced, before anyone touches the legacy AR. Vendor B costs more per dollar but includes the work you would otherwise buy separately, and you can leave in a year. Neither answer is always right; the point is that the comparison is impossible until every row is filled in with your numbers.
Red flags, and what to ask their references
During the sales process, watch for a guarantee of a specific collection increase before anyone has looked at your data; a rate far below the market with denial management, patient statements or old AR quietly excluded; reluctance to define "applicable collections" in writing; a requirement to move your practice to the vendor's billing software as a condition of service; no named contact, or a contact who is also the salesperson; automatic multi-year renewal with a long notice period; and no mention of a Business Associate Agreement, or a BAA that the vendor "will send later".
Ask for two current clients of similar size and specialty and one former client. Then ask each: How long did the transition take? What did charge lag look like after 90 days? What happens when you send a question, and how quickly is it answered? Have you ever disputed an invoice, and how was it handled? Would you sign again? A vendor that will not provide a former client has something to hide, or has no former clients, and both are worth knowing.
The first ninety days
A good transition has a written start date of service, a checklist of access and setup items with owners, a review of the first week of claims together, and a monthly review meeting from month one. Measure the same three numbers you pulled before signing. If charge lag and first-pass acceptance have not improved by month three, ask why. The transition checklist we use looks like this:
- Written start date of service and a list of providers and locations covered.
- Delegated user accounts created in the EMR, practice management system, clearinghouse and payer portals, with the vendor's access documented in one place.
- Payer rules, fee schedules and claim edits reviewed together before the first batch.
- A decision, in writing, about who works legacy AR and until when.
- Front-desk training on eligibility and registration standards, because the vendor cannot fix registration errors after the fact.
- A daily contact for the first two weeks and a review of the first week of claims together.
- A monthly review meeting with a standing agenda: charge lag, first-pass acceptance, denials by cause, AR aging, practice actions.
Questions we hear
Is outsourcing cheaper than an in-house biller?
Often, once you count salary, benefits, software, training and vacation coverage, but the better question is which option collects more. A billing company with daily rejection handling and denial management usually collects more than a single overworked biller, and the percentage fee scales with the practice. It depends on your volume and on how good your current biller is.
Can we outsource only part of the cycle?
Yes. Practices commonly outsource denial management, credentialing or an audit while keeping billing in-house, or the reverse. Scope it in the service order so both sides know where the hand-off is.
How long should the transition take?
For a single-location practice with delegated access ready on day one, the first claims typically go out within the first two weeks and the numbers settle by month three. Multi-location groups, system migrations and a large legacy AR add time. Ask the vendor for their plan in writing and compare it with what their references experienced.
What to do this week
- Pull charge lag, first-pass acceptance rate and denial rate by payer for the last 90 days, and keep them as your baseline.
- Export twelve months of collections split into insurance and patient payments, with the claim and statement counts, so you can price any proposal on real numbers.
- Write down your answer to three questions before any vendor asks: who works legacy AR, who codes, and who owns denials.
- Request a sample monthly report and the three agreement documents from each vendor and read the termination and data return clauses first.
- Call one former client of each vendor. Revelrex publishes its standard rates, defines applicable collections in every service order, and shows practices their claims, denials, invoices and tickets in a client dashboard; if that is what you are looking for, book a call.
