Medical billing services help healthcare practices maximize profits and cut down costs, time, and effort associated with billing. Medical billers offer only claim generation and submission services or a comprehensive package that includes patient invoicing and support, claim follow up, submission to secondary and tertiary insurance carriers, report analysis, etc.

In this article, we discuss how medical billers charge practices. Principal criteria that define a rate are average monthly claim volume, average claim amount, level of follow up expected, and types of services.

Percentage based agreement/pricing

Medical billing services can charge a rate of 4% to almost 16%. A practice that has 1000 claims averaging $100 each is charged more than one having 100 claims averaging $1000 each as 1000 claim submissions will consume more staff hours. Similarly, a practice that receives comprehensive services is charged more than a practice that only wants claim submissions.

In the percentage based pricing approach, the medical billing service charges a percentage of one of the following:

* actual collections

* gross claims submitted by the service

* total collections for the practice

Percentage of collections

In this pricing method, the medical billing service charges a percentage of the claims it has collected directly. This excludes co-pays, deductibles and other payments made at the office. This is a good payment option as the billing service's profitability is tied in with the practitioner's profitability. Follow up is rigorous to maximize collections.

Percentage of gross claims

In this pricing method, the medical billing service charges a percentage of the gross claims submitted to insurance carriers and other payers. While the billing service charges a percentage on the expected amount, the practice may receive a lesser amount from the insurance company after negotiation. Additionally, this pricing method does not offer any incentive for follow up on claims.

Percentage of total collections

In this pricing method, the medical billing service charges a percentage of the net receivables - claims, co-pays, deductibles, and any other payments. Holistic practice management companies typically use this payment strategy. These companies manage claim generation and submission, staffing, administration services, marketing, fee schedule negotiations, and more. There is an incentive to follow up on claims.

Pros and cons

Percentage based pricing on collections ties in the success of a medical billing service with that of the practice. The practice can also choose services as per their need and budget. However, with this pricing model, small claims of a few dollars are neglected as the medical biller's cut does not justify the costs of billing - postage, envelope, paper, printing, mailing, etc.

Flat fee per claim

In this pricing approach, a medical billing service charges a fixed fee for each submitted claim. Again, the rate is influenced by various factors. Basic claim submission and generation incurs a charge of $1-$2 per claim. Additional services hike the rate to $4-$7 per claim.

Though this pricing is cost effective, you should not undermine the importance of follow up. There can be bureaucratic problems or issues with insurance carriers that the practice will have to handle if they are paying the medical biller for basic services only. The flat fee will be charged irrespective of how a claim is paid out. Healthcare practices that have the personnel to manage follow up and associated billing tasks can opt for this pricing model.

Pros and cons

Fixed fee per claim pricing is cost effective for large claim amounts. However, there is no incentive for follow up and no means of verifying if the biller is actually doing it. If a practice has to hire new staff to manage tasks related to billing, the hiring and training overheads will be more than a higher rate paid to the medical billing service.

Hybrid approach

The hybrid approach allows practices to get the benefits of fixed fee per claim and percentage based agreements. Claims relevant to certain patient accounts or insurance companies are charged by percentage while the rest are charged a fixed fee. Many states ban percentage contracts as illegal. Honest medical billing services use the hybrid approach to tie their success to the practice's success while respecting state legislations.

Select a pricing method that suits your practice needs and budget. Compare the costs of hiring a medical billing service to that of hiring and training in-house staff for the job.

Source: Essay UK -

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