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  • Writer's picturePatientStudio

Deciding Between In-House and Outsourced Physical Therapy Billing

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As a physical therapy practice owner, managing your billing and revenue cycle can be a complex and time-consuming task. Many physical therapists and practice owners are highly trained and educated to provide exceptional care to their patients, but they may not have the expertise or resources to effectively handle the billing and reimbursement processes. This is where outsourced physical therapy billing comes into play. In this comprehensive guide, we will explore the benefits, considerations, and outcomes of outsourcing your billing needs to a specialized billing company.

Whether you are a startup or a well-established physical therapy practice, you will face the crucial decision of managing your medical billing for physical therapy. One of the prominent dilemmas is whether to keep your billing in-house or to outsource it to a professional physical therapy billing company.

In-House Billing: Pros and Cons

Advantages of In-House Billing

1. Control Over Billing Process

When you keep your billing in-house, you have immediate access to your financial data. Assuming you have the billing "know-how", you can promptly check the status of denied claims, patient responsibility, generate reports, and follow up as needed. This direct control can provide a sense of security and immediacy.

2. No Service Fees

When you manage your billing in-house, you eliminate the need to pay service fees to a third-party billing company. Fees are often percentage based, depending on total reimbursement or gross revenue.

3. Patient Experience

Assuming the staff members are efficient and knowledgeable, having staff in-house can be a more positive patient experience. Patients can feel more comfortable paying, communicating and working with the friendly staff they see in office. Compared to the alternative of contacting a "unknown" billing company and paying a third-party.

Invoice on laptop screen

Disadvantages of In-House Billing

1. Risk of Falling Behind

In-house billing can become overwhelming and extremely time consuming. This can lead to delays in billing, negatively impacting your cash flow. Depending on your process and billing software the added burden of managing claims can lead to errors, denials and problems with patient collections.

2. Additional Cost of Staffing and Training

While you save on service fees, you will incur costs related to hiring, benefits, and training of your billing staff. These costs can quickly add up, especially when you consider the need for ongoing training due to constantly changing medical billing regulations.

3. Risk of Errors

Without continuous training and updates, your in-house team might not stay up-to-date on the latest billing rules and regulations, increasing the risk of errors and denied claims. When there is an problem or error, how can in-house staff resolve problems or find answers? If they are the only employee, they could be set up to fail.

4. Lack of Resources and Experience

If your in-house team lacks experience, the billing process can become a trial and error endeavor. Are you willing to have you practice be the "guinea pig" for inexperienced billers? Information about billing isn't readily available on public forums and websites. How will inexperienced billers with little direction get their questions answered?

5. Lack of Insight

Many practice owners believe that by brining a physical therapy biller in-house they can increase visibility into the state of their revenue cycle. This statement may be accurate if the owner is also responsible for billing. However, it is important to note that this situation is not very common. Without a reliable reporting mechanism, owners are unaware of the actual status of their claims and accounts receivable. How can they determine which denials are being addressed? How can they track reimbursement time or net collection rate?

The True Cost of In-House Billing

When considering whether to keep your billing in-house or outsource it to a billing company, it is crucial to evaluate the true costs associated with your current billing processes. In-house billing may seem cost-effective at first glance, as you have control over staffing and payroll expenses. However, there are hidden tangible and intangible costs that can significantly impact your practice's financial health.

Tangible costs of in-house billing include staff hourly wages, employer taxes, benefits, software expenses, clearinghouse fees, and statement fees/postage. These costs can add up quickly, especially when considering the need for continuous training and updates on payer regulations and rules.

Moreover, there are intangible costs associated with in-house billing, such as increased rejections and denials, a decrease in net collections and cash flow, and an increase in patient bad debt. In-house billers may struggle to keep up with the ever-changing insurance landscape, leading to missed opportunities for reimbursement and financial losses for your practice.

Woman working on dual monitor computer

Outsourcing Your Billing: Pros and Cons

The Benefits of Outsourced Physical Therapy Billing

Outsourcing your physical therapy billing to a specialized billing company offers numerous benefits that can positively impact your practice's financial health, operational efficiency, and overall patient experience. Let's explore the key advantages of outsourcing:

1. Aligned Incentives

With outsourced billing, the service provider's revenue is often tied to the performance of their billing efforts – the more money the practice makes through successful claim reimbursements, the more the billing company earns. This creates a natural motivation for the billing service to diligently pursue even the most challenging claim denials, ensuring maximum revenue for the practice. In contrast, an hourly employee may not share the same level of motivation. Since their compensation is disconnected from the practice's revenue outcomes, they may have less incentive to invest the extra effort required to follow up on tough claims. This can lead to a tendency to cut corners, as the hourly model does not directly reward employees for going above and beyond, especially in complex billing scenarios.

2. Expertise and Specialization

Billing companies that specialize in physical therapy billing have a deep understanding of the unique requirements and complexities of the industry. They stay updated with the latest payer regulations, coding changes, and industry trends. By leveraging their expertise, you can ensure accurate coding, timely claim submissions, and optimized reimbursement rates.

3. Increased Revenue and Cash Flow

One of the primary goals of outsourcing billing is to increase your practice's revenue and cash flow. Specialized billing companies have proven strategies and systems in place to maximize reimbursements, reduce denials, and minimize payment delays. Practices that outsource their billing can see a 5-10% increase in net collections (Kareo).

With their dedicated focus on billing and collections, they can drive higher net collections and improve your practice's financial performance. According to the American Academy of Family Physicians (AAFP), claim denial rates range from 5% to 10%, while outsourced billing companies tend to maintain rates below 5%.

4. Cost Savings

Contrary to popular belief, outsourcing your billing can result in significant cost savings compared to managing it in-house. While there is a fee associated with outsourcing, it is often lower than the combined costs of staffing, training, software, and other overhead expenses. Outsourcing eliminates the need for continuous staff training on payer regulations, reducing the risk of errors and rework.

5. Scalability and Flexibility

As your practice grows, so do your billing needs. Outsourcing allows you to scale your billing operations effortlessly. Billing companies have the resources and infrastructure to handle increased claim volumes and adapt to changes in your practice's size and complexity. They can efficiently handle seasonal fluctuations and provide the flexibility to accommodate your evolving needs.

6. Improved Efficiency and Productivity

Outsourcing your billing frees up valuable time and resources for your staff to focus on patient care and practice growth. Billing companies handle time-consuming tasks such as claim submissions, follow-ups, and payment posting, allowing your team to dedicate their expertise to delivering quality care. This improved efficiency leads to enhanced patient satisfaction and increased referrals.

7. Compliance and Risk Mitigation

Payer regulations and compliance requirements are constantly evolving. Non-compliance can lead to claim denials, penalties, and audits, putting your practice at financial and repetition risk. By outsourcing your billing, you can rely on the expertise of billing professionals who stay abreast of regulatory changes, ensuring that your practice remains compliant and protected.

Choosing the Right Physical Therapy Billing Company

When selecting a PT billing company to handle your physical therapy billing services, it is crucial to consider several factors. Here are some key considerations:

1. Experience and Reputation

Look for a billing company with a proven track record in the physical therapy industry. Consider their experience, client testimonials, and industry reputation. A reputable billing company will have a history of success in maximizing reimbursements and maintaining strong client relationships.

2. Technology and Software Capabilities

Ensure that the billing company utilizes advanced medical billing software. The billing software should capable of integrating with your existing integration with electronic health record (EHR) and/or practice management system. Additionally, check how patients make payments. Can they easily complete a payment online? Go through the process yourself to ensure a quality patient experience.

3. Services Offered

Evaluate the range of services offered by the physical therapy billing company. Apart from basic billing and collections, look for additional services such as insurance verification, claim scrubbing, denial management, and reporting. A comprehensive suite of services ensures that all aspects of your revenue cycle are effectively managed.

4. Communication and Customer Support

Effective communication is key in any business relationship. Ensure that the PT billing company offers responsive and transparent communication channels. They should provide regular reporting and updates on your practice's financial performance. Consider PT billing services company that handles patient phone calls regarding questions on bills.

5. Pricing Structure and Return on Investment (ROI)

Understand the billing company's pricing structure and how it aligns with your practice's financial goals. While the cost of outsourcing is an important consideration, it should be weighed against the potential increase in revenue, cost savings, and operational efficiencies that outsourcing can bring. Look for a billing company that offers a transparent pricing model and can demonstrate a positive ROI.

What is the ROI on outsourced physical therapy billing services? A high quality billing services provider will provide a 95%-99% net collection rate with. This is typically a 20-25% improvement for an average physical therapy practice.


Transaction Type

Annual In-House

Annual Outsourced

Billing Staff Salary




Billing Software




Clearing House Fees




Total Cost



Gross Collectable




Net Collections




Services Fees




Total Revenue



Total ROI


Key Performance Indicators (KPIs) for Outsourced Physical Therapy Billing

The most important aspect of revenue cycle management is reporting. Without reporting, a business owner has no way to measure the efficiency of their billing or determine where to focus efforts. To measure the success of your outsourced billing, it is essential to track and monitor key performance indicators (KPIs). These metrics provide insights into the effectiveness and efficiency of your billing operations. Here are some KPIs to consider:

1. Days in Accounts Receivable (A/R)

The average number of days it takes to collect payment after the claim submission. A lower number indicates faster reimbursement and improved cash flow.

2. Net Collection Rate

The percentage of billed charges that are collected after adjustments and write-offs. A higher net collection rate indicates better revenue cycle management and effective reimbursement strategies.

3. Denial Rate

The percentage of claims denied by insurance payers. A lower denial rate indicates efficient claim submission processes and accurate coding practices.

4. Clean Claim Rate

The percentage of claims submitted without errors or missing information. A higher clean claim rate indicates streamlined billing processes and reduced rework.

5. Average Reimbursement Time

The average time it takes to receive payment from insurance payers. A shorter reimbursement time indicates efficient follow-up and payment posting practices.

Tracking these KPIs and analyzing the trends over time can help you evaluate the performance of your outsourced billing and identify areas for improvement or optimization. (And if you cant track any of these, that might also indicate the need for a billing services company)

Questions to Ask When Interviewing a Billing Services Company

There are no right or wrong answers to these questions. However, it is important to understand what is included in the fees and what may be considered "a la carte." It is also important to know what kind of staffing will be necessary to ensure that the billing company receives the information needed to process your claims and get them paid.

  • Who is responsible for verifying the correct usage of modifiers?

  • Who will take patient phone calls regarding questions on bills?

  • Who is responsible for authorizations?

  • Who pays for mailing statements?

  • Is any work done by third-party contractors?

  • Is any work done by individuals outside the United States?


Outsourcing your physical therapy billing to a specialized billing company offers numerous benefits, including increased revenue, cost savings, improved efficiency, and compliance assurance. By partnering with a reputable billing company, you can leverage their expertise, technology, and resources to optimize your revenue cycle and focus on providing exceptional patient care. Assess your practice's needs, evaluate potential billing partners, and track key performance indicators to ensure a successful and profitable outsourcing experience. Remember, outsourcing your billing can be a strategic decision that propels your practice's financial success and growth.

Looking for help with billing? Schedule a chat with us at PatientStudio!

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