03 Mar Death of a Medical Biller

“Death of a Salesman”, by Arthur Miller, is a remarkable literary work that has haunted me ever since I watched a theatrical version of it many years ago. The story has become a constant reminder for me to remain vigilant of self-obsolescence, whether as an individual or a business. Combined with the widely shared sentiment that “change is the only constant”, we have the state of the healthcare industry in a nutshell for those of us who participate in it from the “supply side”.

There are over 8,500 Medical Billing Service Providers in the US, as of May 2015 – a very fragmented industry much like the long-haul trucking industry was back in the late 90’s. The average number of healthcare providers (physician, Nurse Practitioner, Physician Assistant) a Medical Billing Service Provider has as clients is 7 (there is a mathematical reason for this limiting number, feel free to ask me if you would like to know). Typically, this billing service provider is made up of one or two people working out of their kitchen at home, processing claims on behalf of their clients. This was indeed a cottage industry born of the necessity created by the healthcare insurance industry’s complexity in reimbursing physicians. Let’s make no mistake that this complexity is not an accident, rather it is by design. For the uninitiated, it is sufficient to know that insurance companies as a category of business operate and thrive on the notion of what is called “float” in finance parlance. Basically, it is using OPM (other people’s money) for free! It is a wonderful concept and very profitable – just ask Mr. Warren Buffet since he bought GEICO fundamentally for this exact reason.

But I digress; back to the story. The task of the medical billing service provider used to be mostly a tedious one that required attention to detail in completing all the required information and keeping up with the rejections and denials games that insurance payers played. Then came the inexpensive personal computers and the applications that ran on them. This was the beginning of the end for some of these billing service providers as quite a bit of the tedious and labor intensive work involved in medical claims billing was automated (albeit not entirely) by the software applications. This stage of the industry, that is the mainstream even today, required a combination of operational and technical savvy to be able to remain profitable and grow. Some consolidation took place as some of the players threw in their hats and exited the industry by selling their businesses. Other factors behind the consolidation included Competitive Bidding (for DME/HME Suppliers) and the downward pressure on reimbursements for healthcare providers. Larger companies appeared with operational and technological sophistication (athenaHealth) as well as software pure-plays entering the services side of the market (Kareo, AdvancedMD, PracticeSuite) via alliances and billing partnerships. The landscape was changing rapidly and the traditional medical billing service provider was struggling to make margins. Their most common “weapon for defense” was and remains dropping their billing fee to keep the client. It is easy to see the limitations of this defensive “strategy”.

We have now entered the next stage of evolution in this industry. This stage is more problematic than ever for the traditional service provider described earlier. It is no longer a question of being able to code the claims correctly, although that is essential, or to handle the insurance payer rejections and denials efficiently; both are expected. Rather, it is increasingly a matter of the service provider’s sophistication in finance, data analytics, business process optimization, and operational excellence to deliver what the clients now need. Technology has leveled the playing field from a coding viewpoint to a greater extent than most medical billing professionals want to recognize or admit. Therefore, the value of a medical billing service provider largely does not come from the billing and coding part of the service. The value increasingly and rapidly comes from delivering to the client the one thing that no amount of money can buy more of: Time. The medical billing service provider’s first key distinguishing deliverable for its clients is the time that the service gives back to the providers to use as they see fit:

• use the freed-up time to relax or spend with family and friends
• use the freed-up time to spend more of it with each patient currently seen to improve patient experience
• use the free-up time to see more patients to increase gross revenue

All else is a given by any service provider worth a dime: maximum allowed reimbursements, consistent, effective, and comprehensive service, 24×7 access to practice performance metrics.

The second key distinguishing deliverable of a service provider in this stage is consultative insights and guidance for the clients based on data analytics. This capability requirement is what will come to ring the death bell for most of the remaining service providers that survived the consolidation from the previous stage mentioned above, and do not possess it. Having the people, processes, and systems that enable a service provider to deliver actionable insights and recommendations to the clients for maximizing practice revenue and freeing up the healthcare providers’ time spent on non-patient activities will determine who is left standing in short order. How will such a medical biller sitting at a kitchen table filling out claims forms, whether on paper or on a computer screen, that does not know how to navigate BPCI (Bundled Payments for Care Improvement) Model-1, Model-2, Model-3, and Model-4, add value for the client? Can this biller even begin to extract financial insights from the complex and intertwined cost data at the procedure level (time and materials) to then process the same to maximize profitability that increasingly depends on a “patient outcome” instead of the procedure? And what actionable insights would such a biller produce to help guide the providers and the practice in maximizing revenue and freeing up time locked up in non-patient facing activities?

The days of the traditional medical billing service provider are fast coming to an end. Much like the traveling salesman in Arthur Miller’s story, it may be a sad ending to a business model that will cause disruption in the lives of those involved in it. However, sophisticated players have been entering the market for a few years, armed to varying degrees with the capabilities mentioned above to serve the clients well. The ones that will make it to the next stage (yes, there will be a next stage as change is the only constant) will possess at their core the ability to deliver the two key benefits to their clients: Time and Actionable Insights using sophisticated data analytics and structured approaches to practice performance optimization.