With businesses looking to save money any way they can it might be time to consider outsourcing the medical billing you’ve been handling in-house. You might be apprehensive and that is understandable,but before you dismiss the idea consider the problems that doing it in-house presents and then consider the benefits of outsourcing it. We will start with the obvious issues of inpatient medical billing and then discuss things you may not have considered.

The problems with your own staff doing medical billing

• It costs a lot to have a medical billing expert on your staff:
  
  The average national salary for a medical billing specialist is $31,700.00 (assuming fully trained with 1-4 years experience). Other resources, such as Salary.com have similar information with just $100.00 difference. Salary.com says the average medical billing clerk’s salary is 31,800.00 per year.

  You might be thinking that $31,700 to 31,800 really isn’t a lot of money and by itself it isn’t. However you also need to consider the other costs related to having another body on your staff.

  • Benefits -
    
    While there are still companies out there that offer no benefits (or very poor benefits) to their employees yours is not one of them. Is it? I’m sure you offer a comprehensive affordable plan that is beneficial to all parties involved. But why incur more costs to provide additional benefits to people you don’t need to?
  • Unemployment insurance -
    Anytime some works for you as an employee you have to pay unemployment insurance. Having collected my fair share of unemployment benefits in the past I have no problem with the concept however a job like medical billing that doesn’t require an employee makes paying unemployment insurance an unnecessary cost.
  • Employment taxes -
    This category is things like workman’s compensation insurance, payroll taxes, retirement benefits, paid leave and other things of that nature. A report released on June 8, 2011 by the Bureau of Labor Statistics says that the average employee costs an employer $40.54 between state and federal taxes. Out of pocket a private company will pay approximately $7.00 per employee, per hour worked. Let’s say you have two medical billing specialists who work on your staff and further we will assume they work a full 40 hour work week.

    40 (hours per week) * 2(employees) = 80 hours
    80 hours * $7 (out of pocket expense per employee) = $560 per week
    $560 per week * 50 weeks a year (assuming 2 weeks vacation) = 28,000.00
    per year
    

    $28,000.00 per year is how much those 2 $31,700 medical billing clerks are costing your business in addition to their base salaries. Now instead of paying $31,700 per year per specialist you are actually paying $45,700 per year per employee. The math looks like this:

    31,700.00 (average yearly salary) + 14,000 (yearly cost to the
    business) = $45,700 (total cost per employee)
    
    45,700 * 2 (assuming two medical billing specialists) = $91,400
    per year total cost
    

    Those numbers are in addition to the benefits you provide and the unemployment insurance the government expects you to pay. As you can see having more bodies filling the seats at your office can cost significantly more than it appears at first.

• Other costs you should consider:
  
  In addition to the costs mentioned above did you consider how much it costs to have another body in your office? The equipment and supplies they use to do their jobs (computers, printers, copiers, scanners, faxes, pens, pencils, paper, etc) adds up rapidly. Let’s take a look at what the average office worker costs in terms of equipment and supplies.
  • Computer -
    
    Assume that a computer will run around $400 to $500. Further assume that specialized medical billing software will run you over $1000 per computer it is installed on. Then you need to calculate the cost of the electricity to run the computer and the software on it. Plus the monitor. It doesn’t seem like a lot but take a look at how the math breaks down:

    Computer cost $400
    Software cost $1000
    Total cost $1,400
    
    Daily power consumption for computer: 2.5 kWh (24 hour period)
    * 30 (days per month)  = 75 kWh per month
    Average cost per kWh: 0.11 cents * 75 (usage per month) = $8.25
    (cost per month of operating a computer without the monitor)
    Cost per year to operate computer: $8.25 * 12 = $99
    
    Daily power consumption for 20" lcd monitor: 0.30 kWh (24 hour period) *
    30 (days per month) = 9 kWh per month
    
    Average cost per kWh: 0.11 cents * 9 (usage per month) = 0.99 cents
    (cost per day to operate monitor)
    
    Cost per year to operate monitor: 0.99 cents * 12 =
    $11.88 per year to operate monitor.
    
    Cost per year for monitor and computer:
    $11.88 + 99.00 = $110.88
    

    You might think to yourself that 110.88 is pretty cheap, and it is but this is assuming that the computer has no issues which require technical support. When you get people who service computers involved your cost per machine goes up significantly.

  • Printer, fax, scanner and copier -
    
    For the purpose of this information I am going to assume that the billing specialist has their own desktop all-in-one setup. I’m also going to assume that their MFP (multifunction printer) is a mid level piece of equipment.

    MFP Cost: $400
    Ink cost: $150 every 3 months * 4 (total purchases
    of ink during the year) = $600 per year
    
    Paper costs: $50 per case (10 reams, 5,000 sheets) *
    5 (how many cases a medical billing specialist will go
    through per year) = $250
    
    Total MFP cost per year: $600 (ink) +
    $250 (paper) = $850 per year
    

    In this example I didn’t include numbers for electrical cost of operation. You also have to figure on something going wrong with the equipment that requires a technical support specialist to intervene.

  • Miscellaneous items -
    
    This includes the pens, pencils, paper clips, staples and all the rest of the things that are on the average office workers desk. And they add up. If they didn’t you wouldn’t have a policy stating that employees are not to walk out of the office with those things.

  The bottom line
  As you can see having a medical billing specialist on your staff costs significantly more than it appears at first. By outsourcing to a 1099 contractor you can save a great deal of money. Granted their base pay will be more but it should still be a huge savings for your clinic.