Do you want to start a medical billing & coding business but don’t understand the model? If YES, here is how medical billing companies work and make money.
People who don’t really know about medical billing and coding will be wondering how this line of business really works. If you are amongst this group of people, then you need not wonder anymore because this article will give you most of the basic information you need on how medical billing companies work and of course how they make their money from the business.
How Medical Billing Companies Work
Medical billing and coding business owners process and administer medical insurance policies and claims. They help doctors and other healthcare providers collect payments from insurance companies and Medicare. Most of the operators in this industry operate on a large scale and therefore provide a variety of services such as claims adjustment, risk and consulting.
Hospitals are one of the largest clients of medical billing companies and they provide the highest revenue especially with the rising healthcare costs which has caused profits to decline for hospitals and has seen them turning to medical billing businesses to help them manage their revenue.
Even though this line of business is somewhat green and still viable, but the challenges are why most hospitals and doctors’ offices prefer to outsource their medical billing processes; 95 percent of most independent physicians have stated that they prefer outsourcing their medical billing processes to running one in house.
Service Offerings of Medical Billing Companies
Ideally, medical billing and coding companies make their money by offering the following services;
- Medical insurance claims submissions
- Medical insurance billing and coding
- Medical insurance claims adjustment
- Back-office, administrative support and consulting
- Claims processing
How Medical Billing & Coding Companies Charge and Make Money
Medical billing services businesses make money by charging their clients for services rendered and they charge their clients via any of these three methods:
- By percentage billing method
- By per claim billing method
- By hourly billing method.
By Percentage Billing Method
The percentage basis is generally used by medical insurance billers (MIBs) who do full-practice management or a combination of patient billing and claims billing. Just as the name implies, the medical insurance billers (MIBs) charges the provider a percentage of the money they collect per month as opposed to the amount of money they bill.
Please note that the percentage you charge will depend on several variables: the going rate in your part of the country, the sort of procedures your doctors are providing and their patient volume.
You are not expected to charge uniform percentage especially in cases like personal injury that take so long to pay. Here, you may be required to charge a higher percentage of the claim, usually 10 percent and above, whereas routine Medicare claims are billed at anywhere from 5 percent to 10 percent.
- By Per-claim Billing Method
Some Medical billing and coding companies prefer to charge on a per-claim basis rather than by percentage. In the united states of America, medical billing companies usually charge their clients between $3 and $10 per claim. Ideally, this method is convenient for medical billers whose workload comprises mainly of straight claims billing with little or no practice management tasks et al.
Please note that if you decide to adopt this method as a medical billing practitioner, you will be charging your clients per claim billed rather than per claim collected from them. In order to make profit and still not scare away clients, it is expected that you conduct proper feasibility studies and market research to know what your competitors are charging per claim.
If you are new entrant in the market in your location, it is advisable to fix your price a little bit below the market average so as to easily attract clients. That is one of the easiest means of attracting clients to test your brand. With this type of billing method, it is easier to draw up a financial projection of the number of doctors or hospitals that you are working for.
This is how billing per claim works;
For example, if one of your clients (a doctor or hospital) is billing 300 claims per month, which when multiplied by 12 months, comes to 3,600 claims. If you decide to charge $10 per claim, your gross annual income will be $36,000.
If you are lucky to be working with 10 other doctors or hospitals at the same rate, then your annual earnings will be $360,000. This is the reason why some medical billing companies prefer to charge per claim.
- By Per Hour Billing Method
Charging clients via per hour billing is no doubt one of the easy to use and of course generally acceptable billing method that medical billing companies in the United States of America make use of.
As the name of this method implies, it means that you can only charge your clients based on the hours of work you put in. That is, if you are working with a doctor that only puts in 8 hours a day or 40 hours a week, then you can only be paid when the doctor is on duty.
Interestingly, this method of billing is ideal if you are working with a client whose billing rate is so low that charging per claim or on a percentage basis is nowhere feasible. No doubt, some clients irrespective of the number of hours they put in would still prefer this type of method because it is kind of a well – accepted way of paying in the United States and in other developed countries.
Please note that in order to fix an ideal price via this per hour billing method, then you must be ready to conduct market research and feasibility studies. You just have to know what is obtainable in the location where you intend locating the business.
For example, if you decide to charge per hour, and the average in your location is $30 per hour and you work for 8 hours, then you are expected to make $240 a day and if you choose to work 5 days of the week, then you will make $1,200.
Experts project that the trend in the medical billing and coding industry will experience steady growth over the next five years, as the growing senior population creates demand via Medicare. So also, the number of insured people will rise in line with healthcare reform, as people with pre-existing conditions are able to receive insurance.
The growing senior population will keep driving demand for industry services over the next five years, helping revenue blossom for medical billing and coding companies.