Billing costs are typically performed for a percentage of “net receipts” of the healthcare providers practice. The percentage is usually a fixed percentage for a given time frame of approximately one to three years and is calculated by dividing the amount they need to achieve a reasonable profit, by the amount of revenue they expect to produce for the healthcare provider. The billing service cost divided by revenue equals the billing percentage.
Let’s say you are a physician that performs 200,000 exams that generate 250,000 CPT codes each year and you expect your practice to generate $9,000,000 in receipts. If the cost to provide medical billing services is $2.50 per procedure, your total billing cost would be $550,000 (number of procedures multiplied by the cost per procedure). So, in this case the billing percentage would be 6.25% (billing cost divided by revenue). Below are variables to consider when it comes to figuring out how much you should be paying for medical billing services.
- Commercial Payor Contracts: Reimbursement can vary between commercial payors as can terms of your agreements such as timely filing requirements, procedures requirement pre-authorization, excluded procedures, payors’ right to unilaterally change reimbursement schedules, right to sell your rates to other networks, and many others.
- Mix of Patients: Since Medicare and Medicaid generally yield less than your commercial patients, the amount you receive per procedure will vary based on your demographic mix.
- Physician Fee Schedule: Some healthcare providers charge less for procedures than what their commercial contracts approve for certain procedures.
Billing Cost Variables
- Active and timely confirmation that all procedures performed are in the billing process
- Qualification and certification of coders
- Quality and efficacy of “clean claim” filing
- Time and resources applied to front end electronic data interface management
- Consistently low denied claim rates
- Resources applied to actively and successfully resolving denied claims
- Metric driven analysis of workflow and resolution to variances
- Investments to automate manual processes
A qualified and accountable billing service such as APEX can realistically increase revenue up to 25% to 35%. Today, many specialty clinics, hospitals, private practices, and physician groups are finding a medical billing service is often more cost effective than in-house billing. When considering outsourcing your medical billing, be sure to get a full breakdown of ALL costs, especially if you are entering a service contract. Always ask for references.