In house? Or outside vendors?

It’s not wise to make the outsource decision willy-nilly. It requires performing a 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. Cash 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 of time.

Determining the feasibility of going “outside”

Regardless of the task your practice is considering outsourcing, there are certain 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, take into account your physicians’ interest and commitment to participating in management decisions and oversight of the task. And third, consider the availability of expert external sources that can perform the task well and at a competitive rate. Make sure you consider all three of these factors in relation to your practice.

How outsourcing works

Outsourcing offers several primary benefits: improved results from a company 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 responsible for reporting and paying payroll taxes, so choose a payroll provider carefully.

Many other functions can be outsourced, depending on the specialty of the practice. For example, hospital-based specialists, such as radiologists and pathologists, frequently outsource office and administrative functions to other organizations. Hospital-based groups often need only limited staff, which makes outsourcing attractive because it eliminates personnel administration responsibilities.

And outsourcing office functions can eliminate retirement plan contributions, health insurance, paid leave and other fringe benefits for employees that, in a practice composed mostly of physicians, can be expensive under today’s requirements of parity in contribution rates between physicians and employees.

Not just admin

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 personnel or the entire technical component of those services to a niche company that specializes in them.

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.

Time to lighten the load?

As health care gets more and more complicated, it’s critical that your staff be on top of things instead of behind the curve. By outsourcing certain tasks, your office staff will be more productive and maybe happy with the change.

© 2016