A Clinical Analysis of Outsourcing Your Medical Coding

Updated on January 20, 2022

By Mark Wagner

You’ve had your tried and true internal coding department for years. You’ve accepted the annually increasing overhead factors of recruiting, training, salaries, benefits and physical plant requirements. You’ve dealt with these fixed costs through coding activity ebbs and flows. You’ve endured the intense retraining and possibly a cash flow interruption in the transition to ICD-10. Now your coding department functions at maximum efficiency and effectiveness. And you have the security of knowing you’ve got your own captive array of coders to handle all present and future coding requirements.

Well let’s take a clinical look at this rosy traditional coding department picture.

The Staffing Dilemma

While it may be comfortable and convenient to have an internal coding department, it’s seldom you have just the right number of coders to meet the precise number of charts at any given time. You have either idle coding capacity or the panic of a coding backlog. Either way, you’re paying fixed overhead for inconsistent productivity. And if you’re understaffed, you’re delaying your coded chart submissions to the insurance carriers, which means delayed compensation.

Besides the staffing overhead factors, there’s the human resource aspect of managing—recruiting, training and scheduling–an internal coding department.

By outsourcing you’d have trained, high-quality coders on a guaranteed, available-as-needed basis. No training expense, no full-time-employee-plus-benefits expense, no loss-of-productivity expense. You’d reduce your coding overhead, improve productivity and retain or even enhance your cash flow.

And none of the departmental management headaches.

The Cost of Currency

Coding, like medical procedures, has become a specialty. With the increasing number of medical diagnoses and procedures and the huge array of granular codes that ICD-10 now poses, coders must constantly train and stay abreast of coding distinctions to retain their accuracy, efficiency and currency–even if a coder is just responsible for a specific specialty.

Internally coded charts must be audited to make sure they pass compliance muster, which requires an additional level of staffing.

Outsource coding companies offer an always-current stable of medical coders. Plus they have a rigorous auditing process to check every chart for accuracy and compliance. The leading outsource coding companies boast in excess of a 95% chart acceptance rate by the insurance carriers. Plus, because of the intense ongoing training and certification of their coders, their coding often is more precise and nuanced to support more deserved compensation for your facility.

It’s Really a Business Decision

Whatever your endeavor—hospital, clinic, physician group or private practice, medical coding is the lifeblood of your revenue stream. The more efficiently, accurately and quickly you can process your coding, the more you can control and rely on that revenue stream. Outsourcing your coding could add to the reliability of your cash flow.

With the increasing pressures on any healthcare facility to reduce costs, eliminating coding overhead, especially in the case of a large internal coding department, may well be worth examining. The flexibility of an as-needed coder supply offers you a better correlation of expense to demand.

Even greater savings accrue with advanced domestic outsource coding companies which have configured relationships with offshore coding companies comprised of highly educated, well-trained and eminently qualified coders. Offshore coders offer much-reduced rates and when overseen by domestic managers these relationships can result in dramatically lower coding costs than in-house departments or purely domestic outsourcing. In fact, the savings along with the superb coding performance make it difficult to continue to justify a large in-house department.

Don’t Forget the Human Element

The numbers make a pretty compelling case to at least consider outsourcing your coding: Reduced overhead. Better processing. Possibly improved deserved compensation. More reliable cash flow. Fewer headaches.

But tearing down an ensconced in-house coding department creates cultural, emotional and political ramifications—despite its cost-saving advantages and sound business rationale.

Coding department managers hold hefty political clout within their organizations and fierce loyalty to their coders. It’s going to take some skillful social engineering to bridge the emotional and political abyss between the sound business reasons to outsource your coding and the ostensible human toll.

The Silver Lining

The accelerating expansion of the coding world has created an almost limitless demand for coders well into the future. Plus, many coders chose to depart the industry due to the increased complexities of the recent transition to ICD-10. So, with the endless coder shortfall, no qualified coder or coding manager should suffer unemployment.

Many outsource coding companies are desperate to acquire top-quality coders and would be delighted to employ your in-house staff, as long as they qualify. Plus, by going from an in-house coding department to an outsource company your people would often enjoy better salary, more time flexibility and even the opportunity to work at home. An attractive tradeoff, don’t you think?

Depending on the size and nature of your healthcare facility, outsourcing your medical coding may be a desirable and appropriate way to contain your business costs. Yes, at first blush it might seem culturally disruptive and administratively formidable. But you already outsource so many of our business disciplines—accounting, insurance, benefit and retirement plans—look at coding as just one more activity where you might be better served by going with expert outside resources.

Mark Wagner is President of KIWI-TEK (kiwi-tek.com), a privately held, 14-year old, total-outsource coding company providing healthcare facilities across the nation with customized coding and auditing solutions.

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The Editorial Team at Healthcare Business Today is made up of skilled healthcare writers and experts, led by our managing editor, Daniel Casciato, who has over 25 years of experience in healthcare writing. Since 1998, we have produced compelling and informative content for numerous publications, establishing ourselves as a trusted resource for health and wellness information. We offer readers access to fresh health, medicine, science, and technology developments and the latest in patient news, emphasizing how these developments affect our lives.