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If you’re building a digital healthcare company you’re likely (and rightly) focused on patient care. If you’re a behavioral health telemedicine platform, your goal is to connect patients with the best-fit mental health clinicians. If you’re an at-home opioid consultation service, you’re seeking ways to safely administer medication-assisted pain treatment. Seems we were raised us with the simple axiom: build an accessible, clinically-proven service that improves patient outcomes and our healthcare system will automatically compensate you for your efforts.
But we know better than that.
While “front-end” patient care is critical, it is not sufficient. The messy “back-end” of the healthcare value chain must be solved—and just as importantly, integrated—for any venture to succeed. And as with everything about our healthcare system, the financial side of things is always messier than first assumed.
Medical billing is one part of that back-end story critical to get right. Part of a broader “revenue lifecycle management” process, it sits as the juncture between claims coding and accounts receivable. Simply put, it’s the individual, team or software protocol that asks the insurance company for money… and receives their response.
The process generally falls into two parts: (1) the front-end patient / provider interaction, and (2) the back-end provider / payer interaction.
When it comes to the front-end, you’re probably already familiar as a current or former patient. It starts with the provider checking your insurance information, which is usually some sort of intake form on a scribbled-on clipboard. This is where the provider knows if you have active insurance or a copay/deductible. Then during the actual clinical interaction, the physician sees you (in-person or virtually) and generates clinical documentation around what happened during the visit.
Post-visit, that’s when the back-end machine kicks in. First, the visit documentation gets turned into standardized codes (ICD-10, CPT, and HCPCS) by medical coding professionals. These codes along with information about the physician are taken from medical coders by medical billers and go into an electronic form (called 837P or 837Is) to be submitted to clearinghouses. These entities essentially allow for electronic claims submissions to virtually all of the payers through standardization. They will also check the claim for basic errors and will reject it if there are corrections to be made.
Once with the payer, they check the claim against the patient’s plan and the associated rules (e.g., was prior authorization obtained?). This is called the “claims adjudication” process and their decision is returned in the form of an Electronic Remittance Advice (ERA). Fun fact: it’s said that somewhere between 85-90% of claims are auto-adjudicated without people actually looking at it. Then the provider investigates out whether the claim was adjudicated correctly or not, and if they think not, they can appeal. And FINALLY, the payer sends the provider reimbursement and the patient a separate explanation of benefits (EOB) for what was covered.
Because there’s a lot that can go wrong here (and a lot at stake), there is an entire cottage industry of 3rd party medical billers who specialize in doing this for you. It’s such a complicated process fraught with error and misjudgment that the AAPC (or the artist f/k/a the American Academy of Professional Coders) providers a Certified Professional Biller (CPB™) certification, complete with an exam. These experienced individuals are trained to read claims codes and translate them into claims forms—either the CMS-1500 claim form and the UB-04 claim form to be exact—to maximize reimbursement from payers. To get a sense of how big this business is, healthcare providers spend over $250B each year on administrative overhead just to get paid by insurance.
In many ways this traditional model has worked sufficiently well for “mom and pop” practices. But for digital health providers operating at a different scale, there are two primary barriers to use this increasingly antiquated model:
This is where new entrants have come in to fill the void. These “3rd party API billers” take the series of often manual tasks and automates as many steps as possible through a series of rules engines optimized on historical claims data and integrated to the clinical workflow through modular APIs.
Now that we’ve established the what and who of medical billing, as a digital health startup you might naturally next ask yourself: how? As with other parts of your business, you’re confronted with the age-old question of build v. buy. In this section we’ll establish a simple framework for thinking about that question and run through a few examples.
First, the options.
Build v. buy is actually an oversimplification because from our experience we’ve seen four paths that companies have successfully chosen:
Selecting the path to choose ultimately comes down to where your company is in its organizational maturity, financial position, and willingness to take on the work of building functions outside of its core. But three questions, ceteris paribus, can help you navigate that decision:
3rd party digital billing APIs work well when the answer is “low” for the first question, and “high” or “moderately high” for the second two questions.
These companies work well when automating labor-intensive but ultimately repeatable tasks that don’t require complex patient experience use-cases. For example, Together Senior Health is a digital therapeutics and cognitive health company to drive better health outcomes for people living with memory loss. An established partnership with Medicare Advantage plans and clear requirements for prior authorization associated with an Alzheimer diagnosis means variance in outcomes should be relatively low, making Together is a prime target for 3rd party digital APIs. Outsourcing and process automation becomes a key source of comparative advantage versus a build option.
At the same time, if you are a digital technology startup with multiple paths to value with payers but without a single and scaled use-case, then either a traditional 3rd party biller or a more customizable internal billing solution might be the better approach. Kins, a digitally-enabled in-person physical therapy practice runs across many reimbursement use-cases, including traditional payer, employer and out-of-pocket. The nature of physical therapy and the wide segmentations of patient types, lends itself to requiring a more flexible reimbursement strategy that needs to adapt as the business grows.
Finally, a company whose product or reimbursement strategy is both nascent and can be optimized by data means a digital API beats out home-grown or traditional 3rd parties. How many of your patients are paying out put pocket for care? What clinical services administered prior to your intervention increases the likelihood and magnitude of reimbursement? Questions like these make a company like Springtide, an integrative, evidence-based autism center for children and their families a target customer. If, for example, a digital API biller is able to identify patterns in reimbursement effectiveness from analogous special needs or learning disability practice areas (e.g., ADHD, seizure disorders, sensory processing disorders, etc.), those insights can be integrated into Springtide’s reimbursement rules engine.
Before proceeding with vendor selection, first know that this is a relatively nascent space. Most players are either recent entrants in the past ~3-4 years or legacy healthcare platforms who recently expended into this offering. Despite this, digital API billers have a lot going for them including seamless and open-code APIs, strong founding teams, and a vested interest in your success (since they’re primarily focused on the start-up space).
The starting lineup:
Other niche and/or industry-focused players:
As a digital health-tech company, you’re likely needing to make major decisions every day. As with many of these decisions, there are no right answers, only optimal ones given the information at hand. That’s true here too. There’s a richness of choice among digital and non-digital billing services, but navigating the vendor selection process involves reflecting about a few guiding principles:
For more questions or any corrections, reach out to us at XYZ@elion.health.