Coding and Billing

Improve Cash Flow by Outsourcing Billing & Coding

 By Peter J. Cass, OD

Sept. 7, 2016

It is estimated that 39 percent of income in the average practice comes from exams, according to Management & Business Academy Key Metrics, and that 67 percent of that income comes from third-party payers. In a practice grossing $650,000, that comes to more than $250,000 in billable claims. With so much money at stake, it is essential to profitability that coding and billing is done efficiently and accurately to ensure prompt reimbursement to the practice.

My practice has found an outsourced coding and billing service to be the best solution for us in this critical area of the practice. In fact, I believe so much in the benefits of outsourcing coding and billing that I also have become a partner in a billing company that works with optometric practices.


Accurate and efficient coding and billing is essential to maintaining and growing practice revenues. Run the ROI to determine if outsourcing this important function is the best option for your practice.


ASK KEY QUESTIONS. Ask important questions like how long claims sit in your accounts receivable and the percentage of claims paid on first submission.

PROJECT ROI. The industry average is a cost that is around 7 percent of the claims filed. Ask how the fee is calculated. Calculations based on collections are better than those based on billings.

PROVIDE ESSENTIAL INFORMATION. Discuss your documentation process, your EHR, payer mix and clearing house with a billing company to make sure the billing company is experienced with your unique situation.

While there is an expense associated with outsourced billing, it can often be less than the cost of hiring a full-time biller, and without the responsibilities that come with employment.

Compute ROI on Outsourcing

As a partner in a billing company, as well as a practice owner, I am in a unique position to see both perspectives on the question of whether or not to outsource coding and billing. One of my own staff members bills for me and for other offices. From the billing company perspective I often talk to people about billing, and tell them that if they have a highly trained, knowledgeable and experienced staff member there are benefits to keeping billing in-house. However, keeping staff motivated and at top performance can be a key challenge for most practices.

I often ask my colleagues these key questions to get an idea of how good their staff is at coding and billing:

How long do claims sit in your accounts receivable?
WHAT IS IT: Average number of days it takes for a claim to be paid.
HOW TO CALCULATE: Current receivables – Credits / Average daily gross charges
GOAL: Under 30 days (poor performance is over 50) (mine is 10)

WHY THIS IS IMPORTANT: Poor accounts receivable management can drastically reduce cash flow. Cash flow problems lead to trouble paying bills promptly, managing payroll, and reinvesting in the business. Proper accounts receivable management is vital to a successful practice.

What is your first-pass resolution rate?
WHAT IS IT: Percentage of claims paid on first submission.
HOW TO CALCULATE: Total number claim charges paid (for “x” time period) / Total number of charges submitted (for same “x” time period)
GOAL: Over 90 percent (mine is 98 percent)

WHY THIS IS IMPORTANT: Re-submittals can drastically increase payment time and thus increase accounts receivable. When claims are denied it can take several days to receive the denial, then the claim has to be resubmitted, and the wait for payment starts over again. This chain of events could easily triple the amount of time for a claim to be paid. This also means the staff time spent initially submitting the claim was wasted, which increases payroll costs and decreases productivity. Getting it right the first time is much more profitable for the practice.

What percent of accounts receivable (AR) is greater than 120 days?
WHAT IS IT: Indication of old, unpaid claims status.
HOW TO CALCULATE: Total value A/R >120 days / Total value A/R
GOAL: less than 15 percent (poor performance is over 25 percent) (mine is 5 percent)

Big picture questions to consider include:

What is your write-off per month?

When was the last time you audited your A/R?

Do you need to outsource both medical, as well as vision, coding and billing? Many practices find that they only need to outsource the medical billing because it is more complicated, and vision billing is often done at the time materials are ordered anyway.
Many ODs don’t know the answers to these basic questions, or track the associated basic metrics. If the practice’s biller does not know the answers either, or if the metrics are low, it may be time to consider outsourcing.

When considering outsourcing you also need to decide if you want to outsource both medical and vision. Fortunately, many practices find that they only need to outsource the medical billing because it is more complicated, and vision billing is often done at the time materials are ordered anyway.

Additionally, think about a records review. This is something that our company provides. We refer to them as training audits (we audit charts for accuracy of documentation, billing and coding) and accounts receivable audits (review A/R for improperly filed, unpaid, and un-reconciled claims). Unfortunately, performance in these audits is very low. In fact, we have not done an A/R audit that showed a healthy A/R. Many of our colleagues (maybe you) are losing significant amounts of money due to inefficient billing practices.

How Do Coding & Billing Outsource Partners Charge & How Costly?

Most billing companies charge based on a percentage of billing, some charge a flat fee, some on a percentage of collections (this is usually the most cost effective for a practice).

About how costly in this service annually? The industry average is around 7 percent of the claims filed. Doctors should ask how the fee is calculated when looking at outsourcing. Calculations based on collections are better than those based on billings. Doctors should also look for discounts if they are a high-volume practice. The cost is often the same or lower than hiring an in-house staff person to do it, but without the hassle of hiring and managing an employee.

What is the ROI of Outsourcing Coding & Billing?

We have performed numerous A/R audits on practices, and in one case, we found more than $1,000,000 in A/R and were able to recover over $300,000 in under 30 days. A large portion of that was about to be written off! Obviously, that was one of our worst cases, but the numbers can be shocking in some practices as the owner often is busy seeing patients and assumes the biller is doing a good job. In a scenario like that, things can get out of hand quickly, and without proper systems, training and knowledge in place, practices can lose significant amounts of money doing it themselves.

Along with the efficiency, and faster, more reliable reimbursement to the practice, patients will appreciate proper billing and coding. Proper coding and billing can save the patient money too, because they are less likely to get a bill for improperly filed or unpaid claims.

Provide Outsource Partner with Needed Information

Proper coding and billing starts with good documentation and properly utilizing a good EHR. Practices should discuss their documentation process, their EHR, payer mix and clearing house with a billing company to make sure the billing company is experienced with their unique situation and is a good fit for their practice.

 Assign Specific Staff Member to Work with Coding & Billing Company

It is critical to have a specific staff member assigned to be a liaison with the billing company. Similarly, the billing company should assign a specific biller to a practice. There needs to be a good two-way flow of information between the two entities and key contact points for each.

If difficulties or questions arise from the practice or the billing company, the key contact should be easy to reach and there should be a comfortable working relationship so that issues can be quickly resolved. Having an expert in billing, who works within a company of billing experts, gives a practice access to a huge amount of resources and knowledge to much more quickly and efficiently resolve issues that can cost the practice money.

Peter J. Cass, OD, is the owner of Beaumont Family Eye Care in Beaumont, Texas, and is a partner with Practice Compliance Solutions / Optometric Business Solutions. To contact:


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