So you want to start your own medical billing company? It’s a lucrative industry with a ton of potential, but also one that requires some specialized knowledge and an understanding of the healthcare system. Don’t worry though, I’m going to walk you through all the key steps for getting a medical billing business off the ground.
Just to lay the groundwork – medical billing is the process of submitting claims to insurance companies and getting reimbursed for the healthcare services provided to patients. As a medical billing company, you act as the go-between for doctors, hospitals, clinics, etc. and the insurance payers.
Your main role is to:
- Review medical records and documentation to accurately code procedures and diagnoses
- Submit claims to the correct insurance companies
- Follow up on rejected, denied or underpaid claims
- Ensure providers get fully reimbursed for their services
Got it? Good. Now let’s dive into how you can start your own medical billing operation.
Finding Your Niche
The first decision to make is what segment of the medical industry you want to serve. You could go broad and offer billing for all types of providers – physicians, hospitals, surgery centers, labs, etc., or you could niche down into a specialty like billing just for dentists, pediatricians, psychologists, etc.
There are pros and cons to each approach. Picking a niche allows you to become an expert in that field’s codes, rules and requirements. But it also limits your potential customer base. Going broad means you can market to more prospects, but need a wider knowledge base.
My suggestion? When starting out, niche down into one or two specialties for which you already have some experience or connections. Get really good at those. Then, once established, you can start expanding into other areas of medical billing, much like what we’ve done at Medwave.
Crunch the Costs
Next, you need to figure out your startup costs to ensure you have enough cash reserves.
The two biggest expenses will be:
- Billing software and IT infrastructure
- Hiring certified medical coders and billers
On the software side, you’ll need a full medical billing and coding solution. This is not cheap – expect to pay $10,000 to $20,000 or more just for the base software package and IT setup. Many billing companies opt to license this type of software through a monthly fee.
Then you have staffing costs. Certified medical coders need to be brought on to review patient records and assign the proper medical codes. After that, you’ll need medical billers to actually submit the claims and follow up on payments.
In a new, bare bones operation you may just need 1-2 certified coders and 1-2 billers to start. But staffing costs can ramp up quickly as you acquire more customers.
You’ll also need to factor in:
- Office space and equipment
- Marketing expenses to acquire customers
- Malpractice insurance
- Potentially hiring a healthcare law expert
All-in, it’s not unreasonable to need $75,000 – $150,000 in startup capital to launch a professional medical billing company on solid footing. A business plan and funding might be in order.
Scope of Service Agreements
With your niche selected, startup funds secure, software in place, and credentials being processed – next you’ll need to line up clients to actually do the billing for!
You’ll be working on a B2B basis – signing up medical providers like doctor’s offices, clinics, hospitals, etc. as your customers that you’ll be billing insurance companies on behalf of.
To bring on a new client, you’ll draw up a Scope of Service agreement that outlines the billing services you’ll provide, your fee structure for revenue sharing or flat rates, software/IT responsibilities, compliance requirements, terms of the contract and more.
This contract is what governs your working relationship. It’s how you get paid for billing out their claims and revenue cycle activities. So having a rock-solid Scope of Service agreement reviewed by a healthcare lawyer is an absolute must.
Here’s a quick overview of common medical billing fee models:
Percentage Revenue Sharing
With revenue sharing, you negotiate to receive a percentage of the total collections your billing efforts generate for that provider. The typical range is 4-10% of revenues.
For example, if you bill out $100,000 worth of claims and get paid by insurance, you’d keep $5,000 to $10,000 as your cut. The remaining $92,000 to $90,000 goes to your client (the provider).
Revenue sharing aligns incentives – you only get paid by generating real cash payments for your clients. So you have skin in the game working hard to maximize revenue.
However, the income is variable. You have to estimate your expected collections in order to forecast revenue projections.
Flat Rate Fees
The other option is to simply charge clients a flat rate for your billing services. Fees could be structured monthly, annually, or based on adhering to certain performance standards.
For instance, you may charge $2,000 per provider per month for medical billing. Or $1.50 per claim submitted. Or an annual fee of $30,000 to handle all billing activities.
Flat rates make revenue easier to project since fees are pre-determined. However, your income is capped unless clients are willing to pay more.
Many billing companies use a hybrid model – with a base flat rate to cover operational costs, plus a percentage revenue share to incentivize high collections.
Getting Certified MBs and Coders
Remember – medical coding and billing is an extremely specialized skill set. You’ll need staff with proper training and credentials to be taken seriously by both providers and insurance companies.
For medical billers themselves, most have an Associate’s Degree or have passed an AAPC, AHIMA or similar certification exam demonstrating medical billing and coding competency.
The most common certification is the Certified Professional Coder (CPC) exam administered by the AAPC. There are also specialty certifications around areas like outpatient, emergency department, and risk adjustment coding.
For coders reviewing medical records and assigning codes accurately, the gold standard is CPC certification. Certified medical coders may also have additional credentials for physician-based, hospital-based, risk-adjustment or specialty surgery coding.
Most employers require 1-2 years of real-world experience on top of certifications before hiring medical billers or coders.
The Claims Cycle
So you’ve finally gotten established, signed your first clients, and hired a team. Congratulations! Now the real work can begin – the medical billing claims cycle.
Here’s a quick overview of how the process works:
- Your medical coder receives patient charts and records from your client provider. These document the diagnoses, treatments, procedures, medical history and more that were rendered.
- The coder meticulously reviews all notes, determines the applicable medical codes using CPT, ICD, and HCPCS code manuals, and assigns codes to that patient visit.
- This coded data file goes to your medical biller, who runs it through your billing software to generate a “claim” showing all codified procedures, patient info, provider info, etc.
- Your biller double checks everything, “scrubs” the claim for errors, and submits it electronically to the appropriate insurance company or government payer.
- The payer processes the claim based on the patient’s coverage and approved charges. They send back an Explanation of Benefits outlining what they paid, any deductible/co-pay due from the patient, and any denials or rejections.
- Your biller reviews the EOBs and posts all payments received from the payer to the patient accounts. The biller also initiates appeals and follow ups for any unpaid portions or outright denials.
- The billing cycle continues with sending statements to patients for any outstanding balances owed after insurance paid their portion.
There’s a lot of nitty gritty details involved in every step! But that’s the general flow of how medical billing works.
Your billers have to ensure every claim is coded compliantly, scrubbed for errors before submission, filed within timely filing deadlines, tracked and followed up on, and ultimately resolved to get your client every penny they’re owed.
It’s an ongoing cycle of claim —> submission —> payment posting —> follow ups. And it all has to be documented meticulously to keep providers compliant and their revenue streams healthy.
This is where having a great billing team with certified expertise really pays off.
The Revenue Cycle Never Stops
Medical billing isn’t something you just “Set and forget.” It requires disciplined revenue cycle management and continual follow up to maximize returns.
Even after a claim is billed out and paid initially, there are a ton of situations where you have to go back and re-work accounts to capture all rightful revenue.
Things like:
Underpayments
It’s very common for payers to underpay the allowable amount for certain procedures and diagnosis codes. Your team has to audit all payments closely, identify the underpayments, and work the appeals process to recoup that money.
Payment Denials
Even properly coded claims can get denied for a number of reasons – prior authorization issues, coding errors, payer mistakes, etc. Your billers have to master identifying root causes of denials, correcting, and re-billing those claims.
Monitoring Charge Capture
Your billers should also be monitoring providers to ensure they are accurately capturing ALL services rendered on patient accounts. Things like lab tests, injections, supplies and other chargeable items often slip through the cracks.
By reviewing charts, your billers can find unbilled items and get them added to the claim for full reimbursement.
Coding Audits
Likewise, coders should be regularly auditing past patient charts and claims looking for any coding errors, missing items, upcoding risks and other compliance threats. Good audit procedures keep you compliant and paid properly.
Following-up on Timely Filing
Insurance companies only allow a set “timely filing” window for when you can initially bill a charge (often 6 – 12 months after date of service). Your staff has to stay ahead of those deadlines on old unbilled accounts.
Appealing denials
When claims are initially denied, you only have a certain timeframe to properly appeal those denials with evidence and combat them with payers. Appeals require very specific documentation and arguments.
Patient collections
And you can’t forget about collecting money directly from patients! Chasing down those outstanding bills from patients is a whole other challenge.
The moral of the story? Medical billing is NOT a “Bill it and forget it” type of business. It requires meticulous monitoring of the entire revenue cycle from initial charge entry to final disposition of the claim.
The providers you work with are paying you to be that watchdog – maximizing their revenue, following up on underpayments, minimizing denials, auditing for missed charges, and more.
Staying On Top of Compliance
Last but certainly not least, healthcare regulations and compliance play a massive role in medical billing.
We’re talking:
- HIPAA privacy and security rules for handling Protected Health Information (PHI)
- Medicare / Medicaid regulations
- Proper coding standards from AAPC, AMA, CMS and specialty medical boards
- State and federal laws around claims practices, prompt pay rules, and more
- Mandatory annual coding, billing, and compliance training for staff
Violate any of these rules around PHI privacy, properly coding claims, filing processes or myriad other healthcare regulations? You and your clients could face extremely harsh penalties, audits, or even criminal charges in severe cases.
This is why having certified, credentialed staff with regulatory training is so crucial.
There are coders who focus solely on doing professional audits of other billing companies and providers checking for coding errors, improper billing practices, HIPAA violations, etc.
You have to build a culture of compliance around staying updated on changing regulations. Having good auditing procedures in place for both the clinical coding and billing process. Meticulous documentation trails. Firewalls in place to protect sensitive data.
The regulations are there for good reasons – to protect patient privacy, ensure claims are coded/billed accurately and properly, and prevent fraud or mistakes that could compromise the entire healthcare system.
Trust me, you don’t want to end up on the wrong side of a HIPAA or Medicare / Medicaid violation. So prioritize compliance from day one.
Don’t Try This Alone
Phew! As you can probably tell by now, starting and operating a professional medical billing company is no simple task.
There’s a lot of moving pieces to get going:
- Studying the industry and carving out a niche
- Securing significant startup capital
- Getting credentialed with payers
- Buying or leasing good billing software
- Hiring certified coders and billers
- Acquiring new clients through solid contracts
- Juggling the ongoing billing claims cycle
- Managing the entire billing revenue cycle
- Staying 100% compliant with a billion regulations
It requires a very specialized knowledge base. One that takes most people years of formal training to master the intricacies of medical coding, billing rules and regulations. So while the medical billing industry has tons of potential – don’t try doing this alone unless you have direct experience already.
Get the right team and credentials around you from the get-go. Consider joining an existing medical billing franchise or company first to learn the ropes. Read up and research like crazy before diving in. It’s just too risky and compliance-heavy a field to wing it without proper know-how. But with the right expertise and procedures in place? You can build a very lucrative medical billing business providing a valuable service to healthcare providers. Just take it step-by-step, nail down an operating plan, and don’t cut corners on having certified billers, complete credentials, and a culture of rigorous compliance.
Follow those rules, and you’ll be well on your way to launching a thriving medical billing operation in this constantly-growing industry.