DSO Patient Billing Centralization: Lessons from 1,400 practices

All DSOs plan for long term growth. Whether it’s through industry consolidation, de novo build outs, or practice acquisitions, the overarching strategy for increasing their institutional footprint is at the core of every DSO.

But along the path of every DSO pursuing growth is the decision of centralization. Do you centralize your operations or give full autonomy to practices?

When it comes to RCM and specifically patient billing, the decision of pivoting from one model to another might seem overwhelming.

It’s not uncommon for a DSO to have 50 offices of which 20 are on Open Dental, 10 are on a cloud-based solution like Denticon, a handful are on esoteric PMS software, and the rest are on some sort of Dentrix.

Juggling data from one system to another while having to manually manipulate spreadsheets to standardize reports is less than ideal for an organization. Remember that not all PMS systems are created equal, so finding one to migrate to that solves all your problems is seldom possible.

But deciding the RCM model to build their business on is a defining moment for a DSO. To centralize or decentralize patient billing should carefully take into account any and all specific organizational needs and goals.

Let’s take a look at the pros and cons of each approach.

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Centralized Billing for DSOs

DSO Billing Centralization - Pros:

• Process Consistency: Centralization enforces a standardized billing process across all DSO locations. With a core RCM team establishing SOPs for patient billing, there will be a reduction of process errors and improved accuracy over the eclectic measures from individual practices.
  
  
• Workflow Efficiency: By avoiding ad hoc methods for billing, centralized billing streamlines workflows, reduces redundancy, and allows for economies of scale that can complement growth objectives of your organization.
  
  
• Industry Expertise: Because centralization concentrates billing expertise in a specialized team, their specific industry knowledge and insight can drive higher efficiency from the top-down. This dynamic ultimately leads to high collections per office.
  
  
• Improved Cash Flow: With streamlined billing functions comes streamlined revenue collection. Centralized billing can lead to faster payment processing and reduced days sales outstanding (the other DSO).
  
  
• Enhanced Data Analytics: Finally, centralizing and consolidating data allows for better analysis of financial performance. This allows RCM teams to identify trends and opportunities for improvement.

DSO Billing Centralization - Cons:

• Compromised Patient Experience: Centralized billing poses a potential risk for longer service wait times for patients, and a less personalized experience for patients that can no longer work with local billing staff.
  
  
• Increased Operational Costs: Building a dedicated RCM team can be expensive. Those high initial setup costs for staffing and technology will be further exacerbated by ongoing maintenance of a centralized billing hub.
  
  
• Potential for Miscommunication: Communication breakdowns between the centralized RCM team and billing staff at individual practice locations can lead to billing errors and reimbursement delays. These instances of miscommunication can impact cash flow at both the local and organizational levels.
  
  
• Loss of Local Control: It’s the core tradeoff of centralization. Local staff at practices may feel a loss of control over their finances, patient interactions, and practice operations.

Decentralized Billing for DSOs

DSO Billing Decentralization - Pros:

• Improved Patient Experience: Local billing staff at individual practices can provide immediate assistance and address patient concerns promptly and without having to get approval from centralized teams.
  
  
• Increased Flexibility: With specific knowledge about their patient base, local staff at practices can adapt to specific patient needs and local conditions for the dental services market.
  
  
• Reduced Operational Costs: While highly variable when it comes to ongoing costs, a decentralized billing approach has the potential for a lower initial setup cost after the practice is onboarded with the DSO. Billing overhead can be mitigated if some controls are put in place to drive efficiency.
  
  
• Enhanced Local Control: Keeping all billing process decisions in-house, local practices retain control over their finances and patient interactions. The benefits here are processing speed and a sense of autonomy for local staff.

DSO Billing Decentralization - Cons:

• Process Inconsistency: When DSOs allow for different billing practices across all locations, the risk for billing errors and inefficiencies increases. The downstream effects of this are a lagging collection rate and a negative patient experience.
  
  
• Reduced Efficiency: Despite having more flexibility and speed, local billing teams often have the potential for duplication of efforts and lower productivity due to ad hoc billing  measures.
  
  
• Difficulty in Tracking Performance: Without the full picture of how individual offices’ collection outputs impact the organization, it is harder to analyze overall financial performance and identify trends in collection efficiency.
  
  
• Limited Expertise: Local staff may not have the same level of specific training, education, billing experience, or technological resources as a centralized and dedicated RCM team. Without institutional knowledge and expertise, local staff might rely on heuristic means for billing, which can lead to errors and payment delays.

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Lessons from 1,400 Practices and DSOs

From years of working with dozens of DSOs to solve patient billing paint points, we have gained insights into the best approaches that dental organizations need to optimize their revenue cycle management processes.

Ultimately the driving factors that determine if a centralized approach is best suited for any given DSO are size, structure, tech stack, and business philosophy. Determining where the balance lies for an organization is the tricky part.

Do you sacrifice the specific and local knowledge of individual practices in favor of a standardized and consistent billing policy? Do you prioritize cash flow over the patient experience? Do you want to risk incurring high upfront capital expenditures to build out a centralized RCM system versus having high ongoing operational costs of a decentralized approach?

These are all important questions to weigh when deciding whether to centralize any part of your RCM process. But what if we told you that there was a middle path that allows for the best of both worlds?

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The Answer: A Software-Augmented Hybrid Approach

At the end of the day, local office managers and front office staff will know the specific challenges and needs of their individual practice. But zooming out to how those processes, communication styles, and decisions impact at the organizational level is best left to dedicated corporate RCM teams.

Often it is tempting to let both parties have full autonomy and then find a way to bridge any process gaps, but this approach has its pitfalls. These include added operational costs, communication challenges, and inconsistent policy implementation. 

Consider instead a surgical application of specialized software in conjunction with specific staff reorientation. From monitoring and managing the patient billing processes of dozens of DSOs, we suggest a mixed approach that we call “software-augmented decentralization”.

Using the right RCM software for the job, a small centralized billing team can establish specific policies that are implemented and enforced via software integration with all satellite offices. Decisions on the conditions for billing patients, timing of sending statements and billing notifications, policies for adjustments and refunds–all of this can be conducted with RCM software like Pearly.

By centralizing certain patient billing functions, such as reporting analytics and policymaking, while allowing local practices to handle direct patient billing and collections via software, a hybridized approach can balance the benefits of centralization with the advantages of decentralization.

Your DSO can have its cake, eat it too, and keep on baking.

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