For some practices, especially the ones that handle multi-speciality physicians and patients, the burden of administrative tasks of running the practice often becomes equal to or even more than the clinical care itself. You did not enter medicine to spend your evenings fighting with clearinghouses or deciphering denial codes. Yet, you have to deal with revenue cycle management to sustain your business. A point comes when it becomes too hard to manage with in-house teams, and outsourcing becomes inevitable.
If you can identify the right time to make this switch, you can save yourself a lot of time, money, and pain. Because too long can lead to unrecoverable revenue loss and compliance risks, and in the end, even outsourcing will not be an option anymore.
That’s why we have created this guide to help you find that point. We have shared some signs that might suggest that it is time to get help from professional medical billing and RCM companies. So, let’s start.
1. Your Denial Rate Is Creeping Above 5%
A rising denial rate is often the first and most painful symptom of your inability to handle medical billing. You might have the strongest in-house billing team, but if the efficiency and interoperability between different departments are not good, then denials are bound to happen. Every denied claim represents unpaid work and the additional labor cost required to rework it. If your practice is not actively monitoring this metric, you are likely losing significant revenue.
For a healthy practice, the industry standard for denials should be under 5%. If your reports show denial rates approaching double digits, it indicates your in-house team lacks the time or expertise to scrub claims effectively before submission.
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2. Days in Accounts Receivable (A/R) Exceed 40 Days
How long does it take for you to get paid after a patient visit? The “Days in Accounts Receivable” (A/R) metric is the definitive pulse check of your revenue cycle’s speed. When this number creeps up, cash flow tightens, making it difficult to cover overhead like rent and payroll.
So, what is the benchmark for this? Well, in the industry, the golden benchmark of days in A/R is 30 days. Some people accept 40 days as well. However, If your practice is consistently seeing A/R days stretch beyond 45 or 50, your internal team is likely falling behind on follow-ups. Old A/R is difficult to collect; the longer a claim sits, the less likely you are to ever see that money.
3. Your Net Collection Rate Is Below 90%
It is not enough to bill for services; you must actually collect the payment. The net collection rate measures what you collected versus what you were contractually allowed to collect. In-house teams often struggle to pursue every dollar due to competing priorities.
Data indicates a stark contrast in performance here. In-house teams often achieve collection rates between 60% and 70%, frequently writing off small balances or difficult claims because they lack the bandwidth to pursue them. In contrast, top-tier outsourcing firms typically achieve collection rates of 85% to 95%.
4. You Are Facing Chronic Staffing Challenges
Managing a billing team is expensive and risky. If your lead biller quits, goes on medical leave, or retires, your cash flow can grind to a halt instantly. Finding qualified replacements is not getting any easier.
The healthcare industry is currently facing a significant talent gap, with a reported 30% nationwide shortage of medical coders. On top of this, it is simply too expensive to hire a billing team for the long term. And if you are just starting your practice, then this problem becomes worse.
5. Overhead Costs Are Consuming Too Much Revenue
Many providers believe keeping billing in-house saves money. However, when you calculate the total cost of ownership, like salaries, benefits, payroll taxes, software licensing, clearinghouse fees, and office space, the math often tells a different story.
Industry analysis suggests that the true cost of in-house billing typically runs between 7% and 10% of net collections. Conversely, outsourcing fees generally range from 4% to 10% of collections, with most falling in the 5% to 8% range. Because this is a variable cost (you only pay when you get paid), it converts a high fixed overhead into a flexible expense that scales with your revenue.
It is better for practices, and especially new practices, to get medical billing from a reputable company. But don’t fall for traps. Select a company that not only does good marketing, but is also good at actual billing.
Wrapping Up
That’s it, the 5 major signs that tell you that it is a good time to outsource medical billing and RCM operations. Doing medical billing and coding in-house feels attractive, but in the long term, it is almost always not a good choice.
You might not see all of these signs in your practice. However, even if 2 or 3 signs are there, then you know what to do. If you are falling behind, begin vetting potential partners who specialize in your medical specialty.
