Pricing for medical billing

Medical billing services most often bill a percentage of the collections they bring in for your practice. This means that the amount they take in is completely dependent on their success: the more money they collect, the more they earn.

It's natural to try to get the lowest percentage you can. However, the real bottom line number for your business is your net income after you account for the billing service's fees: even though a better service might demand a higher percentage of your collections, their total collections can make up for that difference and still result in more income for your practice.

Keep in mind that one of the biggest differentiators between billing providers is how good they are at resolving denied claims and collecting on your outstanding accounts. Simply choosing the lowest cost option is unlikely to get you the best provider.

Example pricing

The percentage you pay can vary quite a bit, depending on a couple of factors. The most significant is the average volume and size of your claims. The more claims you bring in and the larger dollar amount per claim, the lower the percentage you'll have to pay. Surgeons, whose average claims run into the thousands of dollars, get charged less per claim than therapists who only get $25 to $40 per claim.

The total volume of claims is also important. A single psychologist who treats 20 or 30 patients a week will pay a much higher rate than a five-doctor practice that sees 150 patients or more. You'll have to work with the provider to estimate the total volume and average amount of claims you process to help determine your exact pricing.

The other major pricing component is which services you add onto the basic billing responsibilities. For example, including accounts receivable collections from patients instead of just claims handling can increase the percentage you'll pay. Faster turnaround of your claims or 24 x 7 support will also command a higher percentage.

Given those factors, the fees for medical billing services typically range from 4% to 8%, with most types of practices paying 5% to 6%.

You may also wind up paying additional set fees for patient statements, delinquency notices, data exports, and other activities. Make sure you get a full breakdown of all the costs associated with your account before you sign a contract.

Adding practice management software or electronic medical records packages can change how you're billed, in addition to how much you pay. Typically, those services are priced either with an upfront licensing fee or a per user monthly charge, independent of your collections activities.

Contracts

Billing services take some different approaches to contracts. Some prefer to put you on an auto-renewing 30- or 60-day contract. You may have to pay an upfront setup cost, but once you're up and running, you can use the service for as long as you'd like, and cancel any time with just 1 to 2 months notice.

Other providers prefer that you sign a longer-term contract: one, two, even three years. In some cases, the tradeoff is that the provider will assume the setup costs. This lowers your initial costs, but means you do have to commit to a longer time period. Be sure to weigh how comfortable you are with your purchasing decision before committing to a long-term contract.