Billing services are a great solution for some practices and a disaster for others. What makes the difference? Your specific needs and the selection criteria you use are critical in making the right choice. Beyond that, you need to evaluate the performance of any billing service you consider and understand exactly what services you're purchasing. Here are some guidelines that can reduce the potential for disaster when you decide to turn over your billing functions to a third party.

Understand what a billing service can do

Before deciding whether outsourcing your billing would help your practice, be sure you know what a billing service can offer you. Different firms provide different services and equipment, but they typically include the following:

• Data entry of patients' demographic and billing information, charges, receipts and adjustments;

• Production and submission of claims, both electronic and paper-based;

• Production and mailing of patient statements;

• Collection and tracking of payments from third parties and patients;

• Purging of inactive accounts;

• Production of management reports;

• Installation of computer terminals and printers so the practice can perform queries, update records, schedule appointments, and generate demand reports, demand statements and superbills.

Identify your needs and wants

Next, carefully document the specific functions and characteristics of your current billing system. These include how the system tracks patient demographics, how it handles data entry, how it generates paper and electronic claims, its collection features, its ability to generate standard and customized reports — and everything else you find important. Think about what you like about your current system, what you don't like and what features you wish it had. Then use that information to develop a list of the features you want from a billing service's system.

Identify potential sources

The process of researching billing services is time-consuming but essential. Don't rely on splashy ads you see in trade journals or telemarketers promising the best of all worlds. Begin your research by turning to reliable people you can trust.

Probably the most helpful sources of information are local family practices of similar size, style and complexity. Ask them what billing services they use and how satisfied they are with the relationships. (You can wait until somewhat later in the process to delve into these relationships in more detail.) In addition, you may also want to turn to professional organizations related to practice management or your local hospital's physician services company for advice.

See what they have to offer

Examine the features of each billing service's system and how they would relate to your practice. Would data entry be systematic and audit procedures reliable? Would reports be easy to generate on-site, and would customization be available? How difficult and costly would it be to add a physician to the system? How responsive is the billing service to industry changes, such as revisions to the HCFA-1500 form, and what costs would be involved for you? What does the service offer in terms of electronic claims submission and sending statements to patients? Get concrete answers to these questions — and questions about anything else you expect from the billing service that may be out of your control once you convert to its system.

The flexibility of the service's procedures are also important. For example, would you be required to use a certain format for your encounter forms? Would you be required to provide batching reports? If so, does the billing service provide standardized forms? How is information transmitted back and forth between the service and its clients, and how is that information verified and audited? Remember, no question you have is insignificant, and all should be answered to your satisfaction.

It's useful to develop a matrix listing the features and services you've decided you need from a billing firm as well as the features and services that each company you're considering would provide. This will help you compare the various firms more easily.

Go beyond reference checks

Once you have a short list of billing services, talk in more detail with people at primary care practices that have been clients of those companies for more than three years. Get answers to these important questions:

• Does the billing service live up to its commitments?

• How smooth was the conversion to that service?

• Did the practice encounter any hidden costs or surprises?

• Does the service's customer support meet the practice's needs at least 95 percent of the time?

• How well does the company solve problems?

• How attentive is the company to special needs?

• What, if any, problems has the practice encountered?

• Does the company stay on top of changes in the industry?

• Would the practice recommend the billing service without reservations? If not, what are the reservations?

Next, ask to visit one of the practices. Assess how it uses the company's billing system and services. Is this application similar to what you need and would expect, based on your research? Does the practice's billing staff seem proficient with the system, and do they have confidence in it and the company's services? How do billing staff members rate the billing service's support and responsiveness?

Make gut feelings part of your judgment

The final component of the selection process is the relationship factor. Don't underestimate the value of your gut feeling about the billing service. If you have difficulty gathering information from a company, you're likely to keep having problems communicating with it over time. By the same token, if one vendor is particularly accommodating and you develop a good working relationship, factor that into your decision making.

Conversion schedules and contracts

Once you make your selection and negotiate the terms of the deal, two important steps remain. First, the billing service must give you a conversion schedule and help you identify the resources necessary to complete that process. This schedule and the ability to implement it are critical to a smooth conversion.

The final step is to review and sign the contract. Be sure the billing company's services and the terms you agreed to are clearly defined so you can hold the company accountable for its performance. In addition, have an attorney review the contract to ensure that it protects your practice adequately.

Selecting a billing service requires great attention to detail and as much objectivity as possible. After all, when you outsource your billing, you're putting the financial stability of your practice in someone else's hands. Remember that a vendor's past performance is probably the best indicator of what you can expect in the future.