Medical Billing

Medical billing is a necessary part of any medical practice, doctor’s office, clinic or hospital.

You probably know that for every single medical procedure, diagnosis and treatment, there is a medical code assigned to that service.  The job of a medical biller is to translate that code into a numeric value or dollar amount. That dollar amount, also known as a medical claim, is what is submitted to the patient’s insurance company. The insurance company will accept or deny the claim and send it back to the medical biller.

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The Basics

The job of a medical biller is very similar to that of a lawyer: they represent their client (the medical practice) and seek to maximize the amount paid for the services their client provides.

Medical billers must be in constant communication with the patients and insurance companies in order to ensure their client gets paid. Most medical billers are highly incentivized to maximize their clients’ revenue because their fee is based on a percentage of that revenue.

The duties of a medical biller vary based on the size of the practice and the number of claims that are submitted.

Most medical billers handle the following:

  • Use coded data to produce and submit claims to insurance companies
  • Work with insurance companies, healthcare providers, and patients to get claims processed and paid
  • Review and appeal unpaid and denied claims
  • Verify patients’ insurance coverage
  • Answer patients’ billing questions
  • Handle collections on unpaid accounts
  • Manage accounts receivable reports

It is important to know that there is usually more than one way to code a medical service. If you are a medical practice, you want to hire a medical biller who knows how to code in a way that will maximize revenue for your practice. An in-house staff person who is trustworthy and knowledgeable in negotiating insurance claims is probably your most cost-effective option. But if you are low on resources, and your staff is already swamped with other office responsibilities, consider hiring an outside medical billing service.

Biller vs. Coder

The job responsibilities of a medical biller and coder are closely related, but they serve two different roles.

Medical Biller

The main duties of a medical biller include:

  • Create claims based on codes provided by medical coder
  • Maximize reimbursement for each claim
  • Stay current on various insurance guidelines and requirements
  • Ensure timely reimbursement
  • Handle patient collections
  • May work independently, but regularly interact with insurance companies

Medical Coder

The main duties of a medical coder include:

  • Review healthcare provider reports of patient visits
  • Translate reports into appropriate codes
  • Track and report codes within medical software
  • Maintain familiarity with International Classification of Diseases (ICD) and Current Procedure Terminology (CPT) codes
  • Translate medical services into CPT codes
  • Ensure all coding is accurate
  • Maintain certification in CPT coding and other required specializations
  • Communicate with physicians and other healthcare workers

In-House vs. Outsource

A common question that medical practices ask is: Should I keep my medical billing in-house or outsource it?

As the insurance industry gets increasingly complex, more and more medical practices are choosing to outsource their medical billing. In many cases, it’s the best financial option. But, not always.

Here are some factors you should consider before choosing to outsource your medical billing:

  • Age of your business
  • Size of your workforce
  • Volume metrics
  • State of your practice’s finances

Keeping that information in mind, scan the list below for the pros and cons of both options.

In-House Medical Billing

  • Control: When medical billing is in-house, YOU have control over your finances. Confidentiality and security issues are less of a concern.
  • Investment: If you’ve spent a lot of money and time on medical billing software and training your staff, it may not be worth the money to make the switch.
  • Proximity:  If you have a medical billing question, you can just walk down the hall and ask your staff. No long hold times over the phone or trying to get a hold of the right person in a huge medical billing company.
  • Cost: The cost to pay your staff’s salary, benefits, software and training often exceeds the cost to outsource. Take a look at the numbers. The size of your business is usually the biggest factor.
  • Liability:  Your staff isn’t perfect and often times, they are overwhelmed and underpaid. You may find they have been ignoring encounter forms, discarding super-bills, or failing to appeal claim denials due to a lack of time or knowledge.
  • Support Issues:  When one of your staff gets sick, goes on vacation, takes leave, or quits, your operations and cash flow can be stalled.

Pros and cons of in-house medical billing

Outsourcing Medical Billing

  • Increase Cash: Medical billers work on your behalf to maximize your revenue. They go to bat with the insurance companies to make sure you get the best rate for the services you provide.
  • Expertise: Medical billers are experts in the insurance field. They have been trained on the ins and outs of the industry and know how to aggressively negotiate, appeal and make collections on your behalf.
  • Highly Incentivized: Because they are paid a percentage of your total revenue (usually 7-9%), medical billers are highly motivated to make you more money. If you don’t get paid, they don’t get paid. It’s a win-win for both parties.
  • Less Control: When a third party takes over your medical billing, you are going to have less control and sometimes, less knowledge of how insurance claims are being handled. Some doctors prefer to ‘pass the headache’ to someone else, but others may not.
  • Variable Cost:  Because medical billers get paid a percentage of your practice’s total revenue, it can be difficult to budget your monthly expenses. During slow months, you will obviously pay less to the medical biller, but in busy months, you will pay a lot more.
  • Hidden Fees: Take a careful look at the fine print of a medical billing company’s contract. Ask directly about additional fees. Often times, there is a $250 initiation fee.

Pros and cons of outsourced medical billing


Types of Service

If you decide to outsource your medical billing, the next question you should ask is:

What type of provider do I need?

There are plenty of medical billing services out there and each company offers different services.

General Practice vs. Specialty

If you work in a GP, then you will want to find a medical billing provider that handles general practice claims. If you work for a specialist, you will want to hire a medical biller who has experience in your specialty. As the healthcare and insurance industries become increasingly complex, it’s almost impossible for one company to be experts in every area of medicine. There are always ‘tricks of the trade’ within each specialty, so find someone who knows the ins and outs of YOUR field.

One-Stop Shop

Many medical billing services are beginning to offer an all-in-one approach which combines medical billing, consulting, and IT management. This eliminates the need to hire a separate company to manage software and IT issues. All-in-one companies usually cost more because of the additional services they provide, but if you want a streamlined solution, this might be the best fit for your practice. 

Note: Pay attention to the background and experience of all-in-one companies. In some cases, you will find they have plenty of expertise in IT, but limited expertise in medical billing. You want someone who has experience in both.

Local vs. Offshore

While many of the medical billing providers are located offshore, there are also local providers. If you are shopping purely by price, an offshore billing company is going to be your least expensive option. There are plenty of reputable offshore medical billing providers, but do your research before signing a contract. Some offshore companies have little understanding of how to successfully navigate the healthcare system and insurance appeals process within the United States. Additionally, it can be challenging to communicate with a representative whose first language is not English. If you prefer a local provider who is ‘just down the street’ then you might have to pay more, but the level of service and availability may be worth it. It depends on the priorities of your practice.


How Much Does It Cost?

Medical billing companies make their money by charging a percentage of a practice’s net revenue, net collections, OR net claims.  Every provider does it differently, which can make it tricky to do a price comparison. Generally speaking, they charge an average fee that ranges between 4% and 10%. 


  • The higher your claims, the lower percentage you will pay.
  • The more patients you see, the lower your rate.
  • The lower your cost per claim, the more you will pay (flat-fee may be best in this case).

Common fee structures

  • Amount collected
    The medical billing service receives a percentage of claims that the medical practice has collected on.  This does not include deductibles, co-pays, or other in-office payments. Many practices prefer this option because it directly correlates to profit earned.
  • Total claims submitted
    Fee is based on a percentage of gross claims that are submitted to insurance providers and other debtors are charged. The downside: there is little incentive for the medical billing provider to aggressively follow up on submitted claims.
  • Total collections processed
    Collection fee is based on a percentage of net collections, which includes deductibles, co-pays, claims, and other in-office payments. This is a popular choice among medical practices because it provides greater incentive for the billing service to follow up on claims.
  • Fixed rate
    Charge per claim, which can range from $1 to $2 per general practice claim, but as much as $4 to $7 for specialty claims. This fee structure may save your practice money up front, but it offers little incentive for the medical biller to follow up on claims.
  • Hybrid
    Charge a percentage of claims submitted on specific accounts or insurance providers, while other claims are charged at a fixed rate. This is becoming a popular choice for medical practices as more states consider percentage billing an illegal practice.

The Bottom line: Do the numbers. If their fee does not offset your net collections, it’s not worth your money.


Choosing a Medical Billing Provider

Once you are ready to start shopping for a medical billing service provider, here are some helpful questions to ask:

  • How long have you been in the medical billing industry?
  • What is your specialty?
  • How many years of experience do you have? (medical billing, IT, specialty, etc.)
  • What kind of training does your staff receive?
  • What type of software do you use? Do you require that clients use your software?
  • What is your fee structure (% of net revenue, % of collections they bring in, % of claims, etc.)
  • What is included in your service (credentialing, appeals, collections, etc.)?
  • What is your average collection rate? Processing rate?
  • How do we contact you when there is a question? What are your hours of availability?
  • Do you have a limit to the number of times you will re-submit a denied claim?
  • Do your clients have complete access to your reports?
  • How do you ensure that your company adheres to HIPAA requirements?
  • What is your average claim submission time frame?

What to Look For

In many cases, outsourcing your medical billing will give you the most bang for your buck. As experts in their field, a medical biller’s primary job is to maximize revenue for your practice by knowing the coding system and using it to work in your favor.

Here are 5 things to look for when shopping for a medical billing provider:

  1. Security
    It is important to know how the company will handle the security of all your patient files. It’s surprisingly easy to violate HIPAA standards (whether intentional or accidental). If HIPAA standards are violated, your practice could be liable and therefore, penalized with some hefty fees.

    Ask the following questions:

    • Who will be handling the patient data?
    • What type of access will they have?
    • What kind of security measures will they put in place to ensure patient privacy?
  2. Fee Structures
    The average fee for a medical billing service ranges between 4% and 16%. Factors that determine total cost include the size of your practice, the number of claims you submit, and the monetary value of those claims. For example, if you have a smaller practice that submits only a few claims per month, but most of them have a high monetary value, you will pay a lower rate than a larger practice that submits thousands of claims per month at a low monetary value.

    It is important to ask a medical billing service about their fee structure because not all companies do it the same way.

  3. One-Stop Shop
    Some medical billing companies offer all-in-one service. Not only are they responsible for the medical billing within your practice, but they also manage your IT and billing software training. The pros of this model: it keeps things simple and streamlined. Cons: it’s more expensive and poses a greater security risk. But if you do your research, you can find a reputable one-stop shop. It’s just a matter of cost and preference.
  4. Specialty
    Just because a medical billing service is strong in one area of healthcare does not mean they are experts in all areas. As both the healthcare and insurance industries become increasingly more complex, many medical billing providers are choosing to specialize in one area of healthcare. For example, there are now medical billers in mental health, neurosurgery, pediatrics, ENT, etc. You want to find a medical billing provider who is knowledgeable in your area of healthcare so that they can successfully negotiate on your behalf.
  5. Customer Service
    You know the atmosphere of your practice. When considering a medical billing provider, you want to find someone that will be a good fit with the patients you serve. When shopping for a service, pay attention to the level of customer service they provide, either by phone or online. Put yourself in your patient’s shoes and ask: is this a good experience? You want to keep your patients happy and help them feel comfortable when dealing with benefits, claims, and other complex issues.

What to Avoid

You have taken an important step in improving the efficiency of your medical practice. You have decided to outsource your medical billing. You need an expert, someone who will advocate on your behalf. And, you want someone who will handle the drudgery of coding, billing, collecting, and working with insurance so that you can spend more time focusing on your patients. As you begin your search for a medical billing service, you want a reputable, fair priced, proven provider.

Here are 5 things to avoid when choosing a billing service:

  1. Cheap Rates
    Anytime someone is offering incredibly low rates, much lower than their competitors, you should be wary. It’s probably too good to be true. Find out the risks involved. Ask questions about their security measures, fee structure, and industry expertise. Most medical billing services have a steep minimum revenue requirement, which makes an incredibly low offer unlikely. Some companies offer one submission service per claim. That means they will not do the extra work to appeal, resubmit, or work on denied claims. Avoid those companies. They are not worth your money.
  2. Long-term Contract without Metrics
    Be wary of a long-term agreement without any performance metrics. Most billing contracts are subject to renewal each year based on the performance of the service. A good medical biller should make you money – more than you were making when your medical billing was in-house. That’s because their sole job is to negotiate on your behalf, getting you the best price for the medical services you provide. If they aren’t making you more money, find someone that will.
  3. Deceptive Fee Structure
    Pay attention to a medical billing company’s fee structure. Most services charge a percentage of collections that they are responsible for, i.e., payer reimbursement and patient balances. But some billing companies charge a percentage of net collections, in other words, the total revenue of your practice. This includes services that they were NOT responsible for, but brought in revenue.
  4. Offshore Service
    Offshore services are typically cheaper because they charge per claim rather than a percentage of total collections.  Remember, you get what you pay for.

    Some of the main complaints about a billing company that is based offshore include:

    • Difficulty in understanding the representative
    • Lack of knowledge and expertise of the US insurance system
    • Inability to stay up-to-date with payment changes
    • Transferred multiple times before connected with the right person
    • Privacy concerns
  5. All-in-One Service
    A one-stop shop in the medical billing world is a company that handles all of the medical billing for a practice, as well as medical IT, and practice management. A one-stop shop CAN be a great solution. However, keep in mind that these are complicated fields that are constantly changing their requirements and policies. That makes it difficult for any one company to stay on top of every area. Often, they can be lacking in one of these service departments. But not always. If you find a one-stop shop service you like, ask detailed questions about the background of their staff, the training they receive, and how they stay current on each facet of their job.

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