Medical practices exist through the implementation of robust billing and collection processes. Over time, these processes have become more complex because clients have different covers, payment methods, and use various medical programs. This has forced medical institutions to rethink their billing and collection processes and having third party collections is one viable option. It is important to analyze the benefits and drawbacks of third party collections before its adoption in any healthcare setting. Therefore, this paper focuses on various aspects of this option and their impacts on institutional functioning so as to make a well informed decision on whether to have in-house or third party collections operations.
The first advantage of third party collections is that it makes the process of collecting reimbursements efficient and certain. Studies have shown that the chance of collecting from patients reduces by up to 20% once the patient leaves the medical institution. Therefore, it becomes easier to outsource the collections program so that specialists can make the relevant follow ups and leave medical practitioners to concentrate on their professional practice. In fact, mailing statements rather than collecting them upfront decreases the chances of receiving payments. Therefore, it becomes the role of third parties to increase the chances of receiving reimbursements within proper timelines.
Adopting in-house processes also comes with staffing costs that cannot be compared to having third party collection processes. The costs of salaries and benefits are higher than those of hiring a third party biller. Therefore, making the switch is recommendable because third party collections eliminate hidden operating costs, postage fees, processing fees, and other expenses that could be incurred when an in-house program is used. Since many third parties are paid a percentage of their collections, this is an appropriate cost to incur because it comes with higher returns in terms of convenience, probability of reimbursement, and lower cost structures (Herbert, 2012).
Sometimes, in house collections departments are laden with inefficiencies and functional inconsistencies making third parties advantageous. In-house departments have higher rates of turnover and suffer from workplace inefficiencies. New employees require time for recruitment, training, and adaptation to working processes, making in-house programs inefficient and costly. On the other hand, third party collections provide consistent service because medical institutions do not have to worry about staff management, staff turnover, and implementation of workplace practices that make the larger organization inefficient in its billing and reimbursement processes.
Another advantage of third party collections is that they leverage on the latest and most efficient technologies to perform their assigned responsibilities. They use automation that ensures prompt filling and fast follow-ups that result in faster payments, as well as reductions in lost revenue. Organizations that opt for in-house programs are forced to incur massive investment costs when trying to implement similar programs, usually with less returns in the long term. Therefore, it becomes advantageous to outsource collections so as to make the process efficient, cost efficient, reliable, and faster. These elements make third party collections advantageous in this regard.
On the other hand, third parties have drawbacks that must be considered before organizations make contractual relations with these entities. One disadvantage is that medical institutions lose control of their core functions relevant to supporting their existence. When it comes to finances, it is not recommendable for organizations to give up their control to third parties because institutions do not have a way to monitor and regulate their contractors. Other times, third parties may leverage on their control of financial processes to enforce contractual terms that sometimes seem unfavorable to their clients. Their advanced expertise forces institutions to overly rely on these third parties, which is not advisable.
According to Ghazawneh & Henfridsson (2013), the more organizations use third parties, the more they lose their control and the harder it becomes for them to invest in an in-house program after their contract is over. It is a drawback to realize that medical organizations are forced to renew their contracts even if they do not like third party collections. Even though these third parties have comparative advantages to their in-house counterparts, it is a disadvantage to have them since they introduce higher forms of reliance which result in health organizations losing their control.
Another disadvantage is increased costs of operations when third parties are involved in financial management processes. These organizations train their workers and invest in technologies that are sometimes costly. These costs are then passed to clients in form of a percentage of the revenues collected over a given time. Once clients are integrated in third party systems, their fees can be adjusted accordingly, increasing the costs for their clients. In this case, medical institutions are forced to give up their profits to meet their contractor adjustments which makes third parties an option worth in-depth analysis before their adoption into collection and billing processes.
Billing and collections is a core institutional function that is increasingly becoming complex as healthcare needs evolve. Third parties are advantageous because they increase the chances of making collections, reduce operating costs, increase institutional efficiency, and increase the speed of filing and getting reimbursements. On the other hand, they become disadvantageous to organizations in terms of losing control, leveraging on compatibility issues to increase their contractual times, and using their dependency to adjust their charges which their clients must pay. However, the benefits of third parties and ability to make contractual agreements that limit their powers makes them a good choice for modern day health institutions.
- Ghazawneh, A., & Henfridsson, O. (2013). Balancing platform control and external contribution in third‐party development: the boundary resources model. Information Systems Journal, 173-192.
- Herbert, K. (2012). Hospital Reimbursement: Concepts and Principles . New York: HarperCollings.