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Medical Billing: A Buyer’s Guide

What is Medical Billing?

You probably already know that for every single medical procedure, diagnosis and treatment out there, 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.

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. But most medical billers handle the following:

  • Unpaid/denied claim research
  • Insurance appeal processing
  • Billing collections
  • General insurance/patient inquiries
  • Communication with insurance carriers and their changing policies
  • Accounts Receivable issues
  • Practice management

In-House vs. Outsource

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

In many cases, outsourcing can save you time and money, but that’s not ALWAYS the case. Refer to the chart below for a comparison of the pros and cons of both options.



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. Here are some things you will want to consider:

  • 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 include:

  • 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 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.

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 HIPPA requirements?
  • What is your average claim submission time frame?

There are also many things to avoid when choosing a medical provider.

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