This is our first installment of a blog Encoda will host. We invite participation from our clients and any others who wish to subscribe in the comments below.

It is a banality to state that a medical practice is also a business. It is not a banality to state that as a business, the nature of business—and not your medical knowledge—is the largest looming threat to your practice. And it is not a banality to state that one of the most important issues for a business—an issue that is not immediately apparent and is underappreciated—is to decide what you are going to do inhouse and what you are going to subcontract to vendors. In other words, what makes sense not to do. Every repetitive task you take on, whether you sense it or not, is an ongoing project. It requires a plan, an allocation of resources that includes money, physical resources, personnel, and your mindshare.

You don’t do your own janitorial service. That’s an easy one. There is little to gain by taking on the persistent need to vacuum, dust and empty trash cans.

Encoda is a business too. We face this issue just as you do. Our take on what we should do inhouse as opposed to subcontract has evolved over the years. In retrospect it has always evolved. It will continue to. The environment changes. You cannot ignore these changes. What made sense yesterday does not always makes sense today. You were not wrong yesterday. The trick is not to be wrong tomorrow.

It can take a while for that to bubble up. Even after it bubbles up, it is hard to give up old solutions. We are wed to them. But it is necessary. Imagine running a company like Apple: yesterday’s solutions are worthless today, and today’s solutions will be abandoned tomorrow.

You used to have a server under a desk. You don’t anymore. Encoda used to own and manage its own servers. Even though we know a great deal about computers, we have not for five years run our own servers. We cannot do it as well or as economically as companies that do nothing else.

Every second we spent on making server decisions and managing servers took us away from designing software, supporting our clients, and, for the last several years, doing the billing for our clients.

The biggest out- or co-sourcing decision for a medical practice is billing. Does it make sense to do it inhouse or should you use an RCM company? If the medical delivery business were like most other businesses, the answer would be easy. You would have a checkout desk and a congenial person with a tin box who collected cash, checks, and processed credit cards. That is the way medical practices used to do business from the time of Maimonides to 1965.

The prestigious McKinsey Group wrote a seminal paper in which they said the payment system in American healthcare is the most complex in the world and they calculated the cost at 15% of the total revenue of its service providers—while the average of every other business sector is 2%. They were not speaking about unfavorable liquidation (writing off denials or short-pays). We have seen that be as high as 7%. Add that to the 15% and you get 22%.

Largely unknown is that the many of the most successful large service providers in these other sectors, outsource their billing. Chances are the recurring bills you get from utility companies including gas, electric, phone, and cable are not calculated and sent by these utilities.

They are outsourced. There are myriad such billing companies.

A major reason our sector is so complex and expensive is there is no other business in the world in which the consumer of the service provided is not the customer. Your consumer is the patient. Your customers are, for the most part, insurance companies. That is not going away anytime soon.

There is no other business in the world that invents over 5,000 Simon Sez codes to justify not paying you or short paying you. Heck, there is no other business in the world which compels you to bill your customer (a healthcare insurer) an amount of money that they and you know and agree they won’t pay. Thus code CO45—the contractual adjustment. What is that all about?

For every penny an insurance company doesn’t send you they have to send a code. Pennies cost a penny. Codes cost nothing. That is why even though there are only 100 pennies in a dollar there are up to 5,000 codes for each of those pennies.

In subsequent documents we will provide a rubric for you to make an informed analysis on this subject. Many readers will not be able to use this rubric because they will not have the data to create actionable information—alarming in itself.

We invite your responses and ideas. If you wish to receive an email link as we put up new whitepapers you can subscribe below. You do not have to be our client to even read this blog site, but you do have to register to either comment or receive email alerts on new posts.

Be well.

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