As business of running a medical practice becomes more competitive, many practices are relying on a third-party medical billing service for cost effective options to preserve maximum earnings. In evaluating any medical billing service agreement there is a range of elements that must be taken into consideration - prices of services is principal among them. This article compares the two most usual prices approaches provided by medical billing services - Percentage Based Agreements and Flat Fee per Claim - and identifies a few of important indicate bear in mind when selecting a medical billing provider.

Portion Based Agreements:.

Probably the most common strategy to pricing by medical billing services is the portion based arrangement. In this sort of agreement, the medical billing service's costs to the practice are based upon a percentage, usually in one type or an additional of the following:.

Percentage of collections,.

Portion of gross claims sent by the billing service,.

Percentage of overall collections for the total practice.

With the first kind above, percentage of collections, the medical billing company charges the practice only on net gotten for those claims in which it has actually straight helped in collections (usually omitting cash gathered at the office, such as co-pays, deductibles, and so on). This is the purest example of exactly how a percentage based arrangement will tie the medical billing service's success to the practice while securely restricting it to that which they have some quantifiable capability to affect. This sort of portion based agreement advantages the practice by its "self-policing" quality- the medical billing service just generates income when the practice generates income.

In our second kind, portion of gross claims sent by the billing service, the practice is charged a portion of the overall amount submitted to insurance coverage companies and various other payers. This can be tricky for 2 reasons. First, the rate billed to an insurance coverage company is not always the like the negotiated rate that will be paid. So an apparently competitive percentage from one medical billing service can be dramatically various from another medical billing service depending on where the portion is applied. Second, some of the incentive pointed out above is gotten rid of for follow up on claims as there is no tie-in to the outcomes of medical billing service's submissions.

With a percentage of the overall collections for the general practice, the billing service fee for the total net received by the practice. It includes co-pays, deductibles, and other monies gathered at the office, not just by the service. This arrangement is most commonly found with full-scale practice management companies who not just handle medical billing but might also administer staffing, scheduling, advertising, fee schedule negotiations, and so on. In this arrangement, the medical billing service can be driven by reward to follow up on claims with payers, however gains some security to its incomes through the other sources of payment coming into the practice.

Rate Variability within Percentage Agreements:.

A medical billing company will consider a number of variables in defining the rate charged to the practice in a percentage based arrangement. Rates can range from as little as 4 % to as high as 14 % and even 16 %! Factors influencing this variability consist of claim volume and typical dollar amount of claims, as well as service factors to consider like level of follow up carried out by the medical billing company, whether or not patient invoices will be sent out by the billing business, and lots of others. Let's take a look at some examples of how these variables impact medical billing service rates.


Relating to claim volume and dollar quantity, let's consider the example of practice A and practice B. Both are trying to find a medical billing service offering claim generation, provider follow up, patient invoicing and phone support. The average claim for practice A is $1000 and they balance of 100 patient encounters per month. Practice B has a typical claim of $100 with 1000 encounters per month. While the gross amount billed is the same, the distinction is staggering for the billing company who will should project nearly 10 times the staff hours for practice B to yield the exact same return as from practice A.


With respect to services provided, let's consider practice C and practice D. Both practices balance around 1000 claims per month, and each claim averages around $100. Now, practice C is trying to find a billing service to handle complete claim lifecycle management- provider follow up, submission to secondary and tertiary insurances, patient invoicing and support, report analysis, and so on. Practice D collects patient balances at the office so they don't need invoicing services, and they intend on doing the provider follow up themselves. Therefore Practice D only requires the medical billing service create and send preliminary claims to carriers, and possibly send a couple of secondary claims each month. In this example, the gross claims sent is about the exact same, however practice C could prepare for a cost substantially greater - possibly double that of practice D - due to the considerable work involved in offering these other support services. (Keep in mind practice D will likewise should consider added staffing to carry out these activities in-house, which will most likely not counter the cost of enabling the professional medical billing business to manage the procedure.).

These two examples plainly show the fundamental elements that influence the rates when thinking about portion based medical billing services. While there are numerous negotiating points where a practice can reduce general expenses, they must consider what various other expenses might arise later on to manage the services not offered by the medical billing business.

Pros of Percentage Based Agreements:.

Portion Based Agreements straight tie the success of the billing company to the success of the practice if they based upon collections.

Practices can often select which services they need for potential short term savings.

Cons of Percentage Based Agreements:.

Short term cost savings gathered by keeping some billing activities within the practice can cause long term costs in extra staffing.

Small claims may not be dealt with as strongly. For example, think about a $5.00 client invoice with a medical billing service charging 8 % on collections. The medical billing service would really lose money in pursuing the claim. Adding up the cost of postage, envelope and paper, along with personnel time for printing, stuffing and mailing, it would be more than the $0.40 that would eventually drip back to the service.

Flat Fee per Claim:.

Another usual technique to prices offered by medical billing services is what we'll call Flat Fee per Claim. With flat charge pricing the medical billing business charges a set dollar rate for each claim sent, regardless of the size of the claim.

Just like portion based contracts, flat cost per claim pricing can differ significantly relying on the volume of claims and the extent of services provided. In its the majority of basic type, a charge per claim medical billing service might supply only claim generation and submission services for as little as a dollar or more per claim. In this case it would be the practice's responsibility to follow up on claims. Naturally flat fee per claim pricing can also include various other services such as follow up with providers, patient invoicing, etc. With these additional services, practices may anticipate expenses to enhance to $4, $5 or even $7 per claim or more.

Depending on the practice, the flat charge per claim can be cost effective, but need to be considered thoroughly. Follow up with insurance carriers and the bureaucratic issues must not be ignored. In many cases, once the medical billing company has actually sent a claim, they could make a call or more; but they've done the submission and the transaction is billable to the practice, despite exactly how it's paid out. Cost per claim prices doesn't have the fundamental incentive like some sorts of portion agreements. Nonetheless, it can be the solution if you have the resources to manage the follow up, or if your familiarity with the medical billing service is strong enough to rely on their follow up.

Pros of Flat Fee per Claim:.

Charge per claim pricing has the potential to be even more cost effective, specifically on greater priced specific claims.

Cons of Flat Fee per Claim:.

If carrier follow up is consisted of with this service, the medical billing company has little reward once the preliminary claim has been sent. In addition, it can be near impossible to evaluate exactly how carefully a medical billing service is following up.

If provider and payer follow up is not included with the service, the practice has to manage it internal. Undoubtedly, hiring and training new personnel or allocating time of existing staff results in increased overhead, typically balancing out the benefits of using a medical billing service in the first place.

Hybrid Approach:.

The final example in this discussion is exactly what we'll call the Hybrid Approach, which benefits from percentage based agreements and flat fee per claim approach. Through this prices approach, a medical billing service could use a portion to specific insurances and patient balance bills, then apply a charge per claim for others. This approach is generally siloed by provider or claim type, because it would make use of the portion for all claims to carrier X, and flat fee for all claims to carrier Y.

The hybrid technique has actually become more common in specific locations of the US over the past numerous years as some insurances frowned upon percentage based contracts. An example was seen when the state of New York rendered percentage agreements on state Medicaid claims illegal, requiring medical billing services utilize the flat charge per claim choice. The principle issue occurs from a few dishonest billing services who believe "up-coding", or sending false claims for higher priced services, is the easy method to enhanced revenues. While these couple of services threaten to stain the reputation of a whole industry, those bona fide medical billing services looking for lasting growth and success clearly realize that little gains won from unlawful activities are no way to sustain a successful operation.

Basically, the hybrid design enables honest billing business the chance to tie their successes to that of the practice while respecting the concerns of those insurances led by formal regulation.

If you enjoy reading this app, please take a moment to rate it by clicking the button below. This will support us for adding more and more valuable content. Thank you very much.