How Much Does It Cost to Outsource Medical Billing?

Billing is an inevitable aspect of medical practice, and performing it accurately and efficiently is crucial to any organization. It’s no secret that medical billing diverts the time and attention of healthcare organizations from their practice. This is why many clinics opt for medical billing outsourcing. But how much does it cost to outsource medical billing, and does the cost align with your company’s budget? 

This article delves into the various aspects that influence the costs of outsourcing medical billing. It offers a comprehensive overview that can help healthcare providers make informed decisions. 

Factors that Affect the Cost of Outsourcing Medical Billing

Most medical billing companies impose a monthly fee between 3% to 10% of an organization’s monthly claims. Administrative fees per physician may also apply, and these usually start at $300. 

Understanding the cost implications of outsourcing medical billing is crucial for healthcare organizations aiming to optimize their operational efficiency. 

Considering the per-claim cost can offer a rough estimate of how much a medical billing company might charge per month. 

However, determining how much does it cost to outsource medical billing on average can be difficult since each medical billing company has their own payment structure. This is why we advise healthcare organizations to take into account the payment structure of the specific billing company in question. The factors that influence the cost to outsource medical billing are the following:

Complexity of Medical Practice

One factor that has the biggest influence on the overall cost of medical billing is the type of medical practice in question. Some medical specialties have more complex billing procedures and usually come with higher fees.

For instance, healthcare providers that offer surgical procedures or organizations that perform varied procedures will likely have higher billing costs than primary care organizations.

Volume of Claims and Patients

Typically, larger healthcare organizations pay a reduced percentage rate. This is due to their high volume of patients and, in turn, the higher volume of claims involved. In contrast, smaller organizations might incur higher fees as the billing company needs to allocate resources regardless of the volume of claims involved.

Services Required from the Billing Company

How much outsourcing medical billing costs also depends on the number of services performed by the billing company. Some companies may also handle additional services, such as license verification for credentialing. If these services are included, the price will likely be substantially higher. 

In some situations, a billing company may impose extra initial setup fees. This usually happens when the previous billing records require cleanup or transitioning. While such one-time costs might seem insignificant, including them in the overall pricing estimate is necessary.

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Determining the Cost of Outsourcing Medical Billing

While company size and complexity of billing are some of the initial factors involved in determining the price, other aspects may also influence the final cost. Availability and contract duration are some of the factors that help shape the cost of outsourcing medical billing. 

Healthcare organizations should remember that having a medical billing company on reach 24/7 will cost more than opting for a billing company that is only available during standard working hours.

However, we should also note contract duration plays a role in the pricing. Some medical billing providers intentionally make their short-term contracts more costly to deter clients from choosing them for temporary work. 

Different pricing models used by billing companies

Each billing company follows a specific payment structure or a combination of structures for their services.

Payment models such as percentage payments and fee-for-service structures are considered the most common. However, other models might be used depending on the situation.

Here are the types of payment structures you are most likely to encounter: 

Percentage-based fees 

The percentage-based model that some medical billing companies utilize is usually the go-to option for larger healthcare organizations. Medical billing companies that use this payment structure usually feature a 5% to 10% percentage range. 

Still, this can vary based on the company. In a percentage-based structure, the healthcare company will pay a given percentage of its total generated revenue. When considering a company with a percentage payment system, take the time to evaluate if the percentage charged is competitive in the industry before reaching a final decision. 

Per-claim fee 

Billing companies often include a fixed per-claim fee. This fee varies from one billing company to another. Some of the factors that determine the cost of per-claim fees include the number of services included within an insurance plan and the overall complexity of the claim.

This is one of the most straightforward methods, as it gives healthcare providers a chance to properly budget their expenses based on the average number of claims. However, the cost of follow-up claims and denied claims shouldn’t be overlooked. 

Hourly rate

The hourly rate billing structure is largely self-explanatory. When billing companies set out this payment structure, they expect healthcare providers to pay a fixed hourly rate fee for their services. Hourly rates mainly vary based on the experience and expertise of the billing company, but they may also depend on the complexity of the services involved. 

Fee-for-service

The fee-for-service model involves a fixed fee for the medical billing services provided. The fee is determined based on the services in question. Some companies charge a monthly fee, while others prefer per-claim charging. The complexity of the service determines the cost and the type of fee. 

Hybrid model

As its name implies, the hybrid model is a blend of the flat fee model and percentage-based payments. The flat fee usually applies to basic services such as claim submission and follow-up. The percentage-based payments are reserved for complex tasks like appeals and denial management services. 

This model strikes a balance between revenue-driven cost and predictability. However, healthcare providers should carefully inspect the terms to identify if this structure aligns with their needs and financial goals.

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Conclusion

Understanding the cost of outsourcing medical billing requires a multifaceted approach. Considering factors such as the complexity of medical practice, the volume of claims, and the array of services required is crucial. 

However, the pricing structure varies widely across different medical billing companies. Some may impose percentage-based fees, while others may charge an hourly rate or operate based on a hybrid model.

These factors make determining how much does it cost to outsource medical billing on average very difficult. Ultimately, the decision to outsource medical billing should align with the organization’s financial strategy and operational goals. Achieving this requires careful evaluation of all the factors mentioned previously.