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Summary: Cost of Medical Billing Services
In general, a business can expect to pay recurring fees that can vary from fixed rates of $4 to $6 per claim or percentage based charges such as 5 to 10 percent of collection per claim for third party medical billing services. This is in addition to $870 to over $10,000 in set-up and administration fees.
These prices will vary based on whether you use a cloud hosted Software as a Service (SaaS) provider or an on-site solution.
Table of Contents
What is Outsourced Medical Billing?
Running a business requires much more than expertise in the service that you are providing. For example, it takes one set of skills to be a medical practitioner, but running a successful medical practice is a different challenge entirely which requires different talent. Outside of the medical practitioners themselves, the second most important aspect for any practice’s success is finance and billing. Without proper billing and payment management, medical practices will find it hard to be financially sustainable.
Because medical billing is a complex task requiring significant attention to detail, there are many third party vendors on the market who can provide billing expertise and management services. This frees up the leaders and managers of a medical practice to focus on what matters most to them—providing quality care.
Benefits of Medical Billing Services
Billing for the medical field is a much more complex process than for most other industries. With medical billing, navigating the insurance payment process can be difficult in and of itself, not to mention the necessary work of maintaining a steady cash flow, understanding the payment system, and training up the employees who will be responsible for conducting the billing. Outsourcing medical billing to a third party service alleviates these tasks entirely so that practitioners can spend more time helping patients and less time managing the business aspect.
1. Increased Revenue
All too often, medical practices are incorrectly charging patients or insurance companies for services offered. This can be because the practice fails to collect co-pays or deductibles, under-codes the insurance forms, or forgets to follow up on denied claims. Worse, internal medical billing can be rife with fraud - the National Health Care Anti-Fraud Association estimates that as much as $300 billion is lost each year due to medical billing fraud.
Utilizing a third party service ensures that billing is done correctly and legally by finance and billing experts. Their expertise can remove the headache of conducting billing internally while letting practitioners rest easy knowing that the billing service has the experience and skill to maximize revenue.
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2. Better Support
It can often be difficult to staff internal billing departments adequately to ensure consistent cash flow. Hiring and training can be expensive and difficult, and for small practices, if one member takes time off, billing speeds can be significantly cut—reducing your revenue stream.
Using an external billing services allows for organizations to streamline their business by not having to hire billing employees or pay the human resources overhead that comes with a larger staff.
3. Do What You Love
Not everyone is born to run a business, nor do they enjoy doing the administrative tasks that come with managing a medical practice. Outsourcing time intensive business processes such as billing allows for members of the organization to focus on improving customer experience, care practices, and improving the practice as a whole.
4. Cheaper than In-House Billing
While paying a third party to handle billing sounds expensive, it is typically cheaper than having an internal billing department. With internal billing, you are paying not only the salary of your billing employees, but their healthcare, taxes, training, and ancillary office costs. These employment costs typically come at the price of lower quality billing that is often not as accurate as outsourced, professional firms. A business switching from an internal billing department to an external vendor can increase their revenue by $201,600 on average.
SaaS Medical Billing Compared to On-Site
One major factor determining the cost of a medical billing service is whether you use a cloud based SaaS platform or a more comprehensive, on-site solution. Depending on the type of organization you run, one type of billing solution may be more effective than the other.
1. SaaS Medical Billing
In the growing age of technological connectivity, SaaS platforms are becoming more commonplace across a range of business services. For example, many SaaS companies provide Electronic Health Record (EHR) services in addition to billing, payroll, and other medical management functions all in one bundled software package.
With an SaaS solution, the medical practitioner pays a monthly fee in order to access the online program. This fee is usually based on a “per user” model with varying rates depending on the size of your office. With SaaS solutions, there is little to no hardware installed on-site and the interface typically requires minimal training for employees to operate and input the required data. The complex work, filing, and billing is done by the software program or a remote member of the third party service, so minimal training is required for use by in-house staff.
SaaS solutions are a cost effective way for small to medium sized organizations to outsource billing services because the client is paying an affordable per month rate as opposed to high upfront costs that come with other methods of third party outsourcing. However, these platforms tend to have limits in what services they can provide and how well they can tailor to your business’ specific needs. For these reasons, extremely large, enterprise level firms may opt of an on-site billing service solution.
2. On-Site Medical Billing
Unlike SaaS platforms, on-site solutions bring the billing services to your office. This can involve installation of servers and equipment as well as training for employees and your IT department for use and maintenance. On-site billing platforms typically charge high up front fees for licensing, installation, and training with low monthly fees for backend support.
Medical Billing Service Costs
For most medical billing services, there is a mix of up front, one time costs and monthly fees. These up front costs can cover training, set up, administration, licensing, and more while the monthly fees can be for the software subscription, minimum monthly charges for use, or per collection charges that are done at a flat cost or percentage basis.
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1. One Time Fees
In general, set up fees cost about $300 per physician. For larger offices with many physicians, billing companies may charge a flat fee starting at $1,000 per office. This can be higher for on-site solutions and lower for SaaS platforms. Additionally, SaaS solutions will have little to no hardware installation and training fees whereas on-site vendors will charge for these additional tasks.
2. Recurring Fees
Recurring fees can come in multiple forms: administrative fees that are typically charged monthly or annually, and billing fees that are charged on a per claim basis—either as a flat rate or percentage.
First, administrative fees usually cover software upkeep, support, or monthly subscriptions. For SaaS platforms, this can be as little as $25 to $125 per month, however, this price can go up to as much as $3,000 to $6,000 per year for higher end SaaS solutions or on-site vendors.
After administrative fees come the actual billing charges. Most vendors will either charge a flat dollar amount per claim that is handled while others may charge a percentage. For the flat costs, expect to pay $4 to $6 per claim while the percentage based rates are typically between 5 and 10 percent.
While per claim rates are the most common billing payment method, some platforms may charge an hourly rate based on the amount of time spent working on a claim. Be sure to think about how your medical practice does business to determine which payment method is most cost efficient for you.
When all costs and fees are taken into account, an organization can expect to pay roughly between $870 and $10,000 annually depending on which solution you opt for, the size of your practice, and the number of claims you work.
Medical Billing Collection Cost Samples
Some common SaaS solutions and their rates are listed below. Because the costs of on-site solutions vary based on the specific needs of the client, contact the on-site provider for a tailored quote based on your organization’s requirements.
- ADP AdvanceMD: 4 to 8 percent collections rate or $1.42 per claim.
- NueMD: Bundled billing and EHR services from $149 to $249 per month.
- Capture Billing: 7.9 to 10.9 percent with a one-time start-up fee of $1,297 and monthly minimum fee of $999.
- Kareo: $300 per month.
- Medical Billing Star: 5 to 7 percent per claim with an option to do solely coding for $.99 per claim
Other Cost Considerations
When shopping for a billing service provider, it is important to keep some things in mind.
1. Beware Excessively Low Costs
If a service provides a cost that is exceedingly lower than competitors, or is even a free to use platform, be aware that the quality of these services may not be up to the standards you require. These services may be performed by unqualified staff who are not as thorough as more robust and established providers. Whoever you hire as your billing service, remember that you are entrusting them with your finances—a key component of your business that will make or break your organization.
2. Avoid Excessive Fees
While some fees such as administration, training, and set up are common, avoid businesses that have an excessive amount of other charges such as clearinghouse fees, patient statement fees, or customer support fees. Always check with your prospective provider and ask for a quote on what the total cost would be while asking them to explain each and every charge.
3. Pay Attention to Monthly Minimums
While monthly minimum charges are common, be sure that your organization can afford to pay those rates regularly. This is especially important if you are a small firm or just starting out. Make sure your revenue is high enough to meet the minimum monthly fees while still being profitable.
Watch: How Much Does a Billing Service Cost?
Watch this video to learn about the two different ways a billing company will charge for their services.
When utilized correctly, medical billing services can provide a huge boost to a medical practice’s efficiency and bottom line while freeing up medical professionals to focus on other aspects of patient care. These vendors provide comprehensive, professional, billing expertise that would otherwise be extremely expensive to produce internally. Compare medical billing service rates today with our free tool to get started!