Outsourced Medical Billing: What's Driving the Recent Trend?

by  Find-A-Code™
Jan 18th, 2023

Medical billing in the U.S. has historically been kept in-house for the most part. Hospitals, private practices, etc. have hired their own medical coders and billers, preferring to maintain tight control over the process. But things are changing, and they are changing in a big way. Outsourcing is the latest trend. 

How big is outsourced medical billing? A recent market research report shows that revenues among medical billing companies came in at just over $11 billion in 2021. Estimated growth through 2032 sits at about CAGR 16%. That would make the total U.S. market worth more than $55 billion just a decade from now.

So why the surge in outsourced medical billing? Believe it or not, the COVID pandemic may have something to do with it.

COVID Forced the Digital Revolution

Many aspects of healthcare delivery remain more cumbersome than they ought to be. Unfortunately, healthcare has been slow to respond to the digital revolution embraced so willingly by so many other industries. But healthcare was forced to start getting on board when the COVID pandemic struck.

Providers had no choice but to transition to remote medical coding and billing. They had to accelerate their own adoption of digital technologies just to keep things running during COVID shutdowns. And now that the door has been opened, there is no closing it.

In addition, medical providers of all sizes are looking to streamline their operations. Streamlining offers the opportunity to save money and increase efficiency at the same time. Do both and revenue should also increase.

Hospitals Outsource Most Often

In terms of who is driving the current outsourcing trend, most of it is traced back to hospitals. According to the recent market research report, outsourcing among hospitals will grow at just over 17% – more than a full percentage point higher than the industry average.

It makes sense that hospitals would lead the outsourcing charge. Hospitals have long sought to save money and increase efficiency wherever possible. Outsourcing medical billing and coding seems like a no-brainer at a time when it's no longer necessary to keep staff on site.

As long as a hospital is going to accept remote medical coding and billing, why not go the extra step and simply outsource it to a third-party provider? Outsourcing alleviates the hospital's responsibility to hire, retain, and compensate coding and billing staff.

It's a Matter of Specialty

Like outsourcing anything else, outsourcing medical billing and coding is really a matter of taking advantage of specialties. A hospital's specialty is not coding and billing. It is treating illness, disease, and injury. Billing and coding is a necessary task for running the hospital's business, but it's an ancillary task.

Another factor mentioned by the market research report is the trend toward digital accounting. Healthcare providers are moving their accounting platforms into the digital environment by way of cloud-based accounting platforms, automation, and other means. It appears as though embracing the digital transformation in accounting is leading at least some providers to throw in medical coding and billing as well.

By outsourcing to specialists, healthcare providers enjoy more efficient coding and billing. In theory, they also enjoy greater accuracy. Increased efficiency and accuracy combine to generate faster and more accurate bills, thereby leading to faster reimbursement.

Medical billers still need to know all the ins and outs of billing, coding, and HIPAA compliance. But in a third-party scenario where the work is outsourced to a specialist provider, the same work can be done better. Providers are figuring that out. The result is the outsourcing trend we are seeing now.