Published 8/1/2009
J. Brian Gill, MD, MBA

Which system is right for your practice?

Considerations for moving to electronic billing and collection systems

How medical practices bill and collect for services rendered has changed over the years. Virtually all payors, for example, now prefer electronic claims, which are less expensive to process and provide faster turnaround than paper claims. For example, Medicare can process an electronic claim in about 14 days, while a paper claim takes about 28 days.

Moreover, a growing number of hospital systems and medical practices are implementing electronic medical record (EMR) systems. Although these systems further spur technologic advancements in billing and collection software, particularly in compatibility and data analysis, they are costly and can affect the bottom-line. In healthcare systems, costs associated with payment and collection systems can soak up 30 percent of revenues, while the financial services industry has an automated billing system that takes only 3 percent of revenue.

If you are considering whether or not to implement an electronic billing system for your practice, you should first perform a thorough revenue cycle evaluation to determine where inefficiencies and opportunities to eliminate waste exist. Once the revenue cycle process has been streamlined from start to finish, you will be in a better position to determine to what degree the new technology may be able to enhance the billing and collection process.

Technology is a means to an end, so it is vital that you clearly define what the technology is supposed to do within your practice. Poorly implementing technology or selecting a technology for the wrong reason can cause your efforts to fail and ultimately have a negative effect on the practice.

Third party or in-house?
The next step is to decide whether to keep your billing and collection system in-house or have a third party handle this process. Either choice has its own advantages and disadvantages, and each practice must decide what is best for its particular needs.

Consider contracting with a third-party billing service if your office has a high turnover rate among coders. A billing service will allow you to shift staff to other areas and/or eliminate some positions, thus reducing overhead. A third-party service may offer suggestions about how to code more accurately, enabling your practice to better bill for the services delivered. A billing service will also remain current on changes in healthcare regulations and with individual payors.

Billing services can be expensive, however; some charge up to 8 percent of revenues collected. Also consider the learning curves for both the billing service and your practice as you each learn the other’s routines. Some changes may be required for the relationship to be fully beneficial.

Practices that have highly experienced coders may find an advantage with an in-house system. An in-house billing system allows you to maintain control of your data and operational procedures.

Two types of in-house systems are available: installed or Web-based. The advantages of a Web-based system include remote access from any location and continual updates by the host company without the need to install new interfaces on your practice’s individual computers or network. Using an installed billing system can mean a faster initial turnaround on your accounts receivables compared to using a Web-based billing service, because the learning curve associated with an in-house system (that is, learning the software) is often less steep than the learning curve associated with two companies—your practice and the billing service—learning to work together.

System components
A billing system should have at least three main components: claims auditing, explanation of benefits analysis, and payment comparisons. Claims auditing is sometimes referred to as claims “scrubbing”—the process of checking for mistakes in patient information and coding before submitting the claim to the payor. Claims auditing also makes sure that all of the appropriate fields are filled in the claim. Advanced auditing systems can compare the Current Procedural Terminology (CPT) or International Classification of Disease (ICD)-9 codes and alert the coder if a modifier may be missing or the wrong CPT code is used with a particular ICD-9 code or vice versa. These systems can even compare the codes against a patient’s age, the diagnosis, and other factors to see if they are reasonable for the particular claim.

Explanation of benefits analysis evaluates the reason for a claims denial. These analyses can sort denied claims in a multitude of ways and can be customized to fit your needs. You may realize through this analysis that you have done everything correctly and the payor is responsible for the denial. In such cases, your practice may then decide to no longer accept that payor.

Finally, some software programs provide benchmarks to allow you to compare how well your practice is doing compared to other, similar practices. Such comparisons can be useful in determining whether to make changes. Payment comparison analyses compare the amount of payment received to the amount that is due. If a payor is continually underpaying you for services, you have evidence to confront the payor and seek payment for what you are due. If several doctors within the practice are affected, this can substantially affect your cash flow.

Although a system that includes all three components—claims auditing, explanation of benefits analysis, and payment comparisons—may be ideal, some software programs may not offer them as a standard package and may require upgrades at additional costs.

Another technology that is becoming popular is real-time adjudication, whereby the medical office and patient know their financial responsibility before the patient leaves the office. Collecting at the time of service is more efficient than trying to collect days, weeks, or months later. Several payors are offering this service, so check to see if the billing and collection system you are considering is compatible with this service.

Software vendors are not only introducing new technologies, but also improving on those they already carry. These include upgrades offering the ability to run more complex algorithms to provide specific metrics for a practice. Vendors are continually trying to improve the efficiency of data integration with EMR systems to minimize coding and billing errors. They also can provide custom data analysis specific to a medical practice’s particular needs.

J. Brian Gill, MD, MBA, is a candidate member working at the Nebraska Spine Center. He can be reached at jbgill@nebraskaspinecenter.com

Links to information on billing and collection systems:


  • Curtiss ET, Eustis S: Computer Assisted Coding of Medical Information: Market Opportunities, Strategies, and Forecasts, 2007 to 2013. Lexington, Mass., Wintergreen Research, Inc., 2007, p. 246.
  • Grace S: Technology: Sorting out your billing. Physicians Practice October 2007; p 91.
  • Anthony R: Technology: Don’t Be Denied Physicians Practice Jan. 2008; pp 51-56.