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How the Medical Billing Outsourcing Market Is Going to Expand

Hospitals and independent practitioners, much as they may deny it, usually run as businesses. Even if their end goals aren’t the same as other private enterprise, private practice operates in much the same way as other private sector industries. What this means, of course, is that the billing department is the lifeline for healthcare. More and more, however, hospitals and doctors are outsourcing their billing to third-party companies.

Despite the importance of finance to healthcare providers, hospitals may receive as little as 10% reimbursement for healthcare procedures. In an industry where turning away non-paying customers is rare, this means that hospitals and doctors need to save every penny they earn. This, then, is the impetus for the rise of outsourcing in the medical billing industry.

Valued at $6.3 billion in 2015 alone, medical billing outsourcing is predicted to grow tremendously over the next decade. Spurred by increasing medical needs and spending in the developed world, medical billing is now a multinational industry.

Medical Billing – An Overview

Billing is often confused with coding in medicine. Don’t be confused, however, as the two refer to very different processes.

Medical billing involves the claims, cost calculations, and collections for medical services rendered to a patient. Medical coding, on the other hand, is interpreting clinical documentation created over the course of treatment.

Billing Technology

Medical billing is essentially complex data management. This requires IT resources set up in order to handle large amounts of networked information for a healthcare providers patient base. Good billing software, however, makes this much easier by providing the following features:

  • Claim Processing. This is critical for reporting insurance claims immediately and receiving reimbursement as fast as possible.
  • Eligibility Verification. Determining whether or not a patient is insured should be done before procedures. Many customers have no idea they’ve lost coverage until after the fact. This ends up in unpaid bills, and large debt.
  • Electronic Superbills. The superbill allows centralized data collection for all patients at a provider. By turning these electronic, they become much easier to track and understand open claims.
  • Electronic Remittances. Good software lets you directly interface with insurance companies in order to track data effortlessly and accurately.
  • Payment Reminders. Electronic bill collection notices remove the need for the collection letter. If used in addition to traditional collection, this also allows more regular reminders of open bills.

Software solutions provide much needed relief to overtaxed in-house billing departments. They’re also fundamental to the growing outsourcing industry, allowing dedicated teams to focus exclusively on the billing-side of medical care.

Outsourcing Growth

Though in-house billing may be preferable for some doctors and hospitals, a 2015 study from Grand View Research found that 95% of independent physicians believe outsourcing to be the best choice for billing. Whatever the ideal may be, doctors are turning more and more to outsourcing their financial services. Grand View’s 2015 research suggests growth of up to $10 billion in value by 2024.

Further research from Transparency Market Research suggests that:

Thus, the market for medical billing outsourcing will see steady growth, driven by the changing needs of healthcare providers, insurers, and other ancillary entities (both public and private). With a thrust on technology to streamline operations and manage transactions with greater transparency, the role of IT is becoming pivotal. As IT departments become necessary for the smooth operation of the healthcare industry as a whole, billing services, too, will likely be in demand.

Put more succinctly: outsourcing will grow between 8-9% within the next decade, and technology is playing a big role in how this growth plays out.

Market growth comes as doctors and hospitals are no longer able to afford the expenses that go into maintaining in-house service. As medical facilities lack dedicated IT infrastructure, trained staff, or the return on investment needed to afford largescale billing operations, they outsource to a growing number of agencies dedicated to this exact purpose.

Other push factors for outsourcing include increasing healthcare spending in the developing world, and the inability of many facilities in these countries to support their own medical billing infrastructure. Growth is likely to be strongest with small to mid-sized healthcare providers whose own facilities are not large enough to handle their workload. To quote Transparency again:

Developing regions such as Asia Pacific are likely to be vital to the global medical billing outsourcing market in the coming years. The growing geriatric demographic in emerging countries in the region has been a vital driver for the healthcare sector, while it has also led to growing demand for ancillary support services such as medical billing outsourcing and electronic health records. Due to the steady investment in the healthcare sector in developing countries, the industrial web around healthcare is likely to grow, ensuring steady growth prospects for the medical billing outsourcing market. Several entities in the healthcare sector in developing regions lack the financial as well as technological resources to set up their own IT taskforce; this is likely to remain a key driver for the medical billing outsourcing market in the coming years.

Though growth will most likely proceed, there are a few challenges to continued growth, as stated by Transparency Market Research:

The market could be restrained from reaching its full growth potential because of an ever-shifting and disparate regulatory landscape. Considering that some of the leading vendors in the global medical billing outsourcing market have a multinational presence, they are compelled to remain responsive to any changes in the regulatory scenario in each country. Likewise, data migration issues could stunt the market’s growth to some degree.

Regulations like the ICD-10 coding system require more dedicated billing resources from hospitals than they may be able to provide, fueling further investment in outsourcing.

What Impact Can Medical Billing Outsourcing Have on Healthcare Providers?

Outsourcing means removing tasks a provider’s staff can’t accomplish. It can also improve cash flow by optimizing collections – a critical task for cash-strapped hospitals. At the same time, however, it reduces any one practice’s control over their own finances, as well as reducing transparency within the office.


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