Benchmarking the Cost of Processing Charges: Is Your Cost Too High?

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Radiology practices create the largest number of new accounts per month of any specialty within a health care delivery system. On average, a practice reading 500,000 examinations per year would generate 35,000 new accounts per month. The billing issue that confronts every radiology practice is achieving a balance between processing costs and collection performance. This article will deal with assessing the cost side of the equation to determine whether what your practice pays to process charges is within reason.

The spectrum for processing radiology charges is covered by five options:

  • internal operations with dedicated staff, employed by the practice, using an on-site billing system under a license agreement;
  • internal operations using an Internet-based billing system, where all transaction data are maintained on a server located off the office premises;
  • a centralized receivable department that handles the billing for the academic radiology practices and all other specialties within a medical school’s practice plan;
  • external operations, where all functions are handled by a vendor; or
  • hybrid operations, where critical components of processing are subcontracted to vendors, but some of the easier follow-up requirements are retained in-house.

Receivable processing for radiology has some unique challenges that influence technology requirements. Foremost among these is the aforementioned large number of new accounts each month. Practices are dependant upon hospitals for all necessary demographic and clinical information, and this dictates the use of advanced programs to extract all relevant information needed to construct an account. The clinical files need to be scrutinized cost effectively to apply appropriate codes that document what was done, and why, in a manner compliant with government regulations and insurance-carrier guidelines. The large number of new accounts practically requires electronic interfaces between billing and insurer systems for claim submission, data-field editing, and remittances.

The fee for processing receivables for any practice, regardless of size, will be its largest general/administrative expense. When a practice subcontracts the entire function to a vendor, the expense is easy to find because it is a single line item, usually based on a percentage of cash collections. The other, more important, benchmark will take some work to determine: the billing expense per examination. This is the truest measure because the resources needed to adjudicate an account are independent of the account’s cash value. It does not matter whether you are billing a population of routine procedures or an equal number of CT or MRI examinations. The system, space, staff, and supply costs will be identical. Perhaps there is a small difference for a practice that has a disproportionate interventional caseload, because the coding demands are greater for this subspecialty.

RBMA Survey Information

The RBMA has conducted surveys of key receivable benchmarks. The 2006 survey,1 based upon 2005 information, offers some useful data about this marketplace. The survey organized billing costs both as a percentage of receipts and per examination. It also provided both the median and mean values, important in a sampling this small because the median is a better measure of a central tendency in small populations. The data were organized by group size, annual volume of examinations, type (academic versus private), and geographic location. Table 1 is a summary of the population totals.

imageTable 1. In-house and Billing-service Respondents.

Based on data from the 2006 Accounts Receivable Performance Survey, RBMA1

There is no information in the 2006 survey suggesting how many of the 2005 respondents also are in the 2004 and 2003 datasets. This relatively small sampling suggests that the trend is toward increased use of billing services. Table 2 suggests why this may be occurring.

imageTable 2. Comparison of 2005 Median Cost Per Examination: Professional Component

Based on data from the 2006 Accounts Receivable Performance Survey, RBMA¹

Table 2 uses the median cost per examination, organized by examination volume. The first block, in-house systems, shows that smaller practices are predictably less efficient because they have to over-purchase the most expensive resources (computer systems and staff). In my view, the in-house cost per examination for the three-practice sample (700,000 to 1 million) is likely to be a statistical