Medical Billing Services: Percentage Vs. Flat Fee Pricing Structures

Because the enterprise of working a medical apply turns into extra aggressive, many practices are turning to a third-party medical billing service for price efficient options to take care of most profitability. In evaluating any medical billing service settlement there may be an array of things that must be considered – pricing of companies is principal amongst them. This text compares the 2 commonest pricing approaches supplied by medical billing companies – Proportion Primarily based Agreements and Flat Charge per Declare – and identifies a few of essential factors to recollect when deciding on a medical billing service supplier.

Proportion Primarily based Agreements:

In all probability the most typical strategy to pricing by medical billing companies is the proportion primarily based settlement. In such a settlement, the medical billing service’s charges to the apply are primarily based on a proportion, normally in a single type or one other of the next:

  • Proportion of collections,
  • Proportion of gross claims submitted by the billing service,
  • Proportion of whole collections for the general apply.

With the primary sort above, proportion of collections, the medical billing firm expenses the apply solely on web acquired for these claims by which it has straight assisted in collections (usually excluding monies collected on the workplace, akin to co-pays, deductibles, and so forth.). That is the purest instance of how a proportion primarily based settlement will tie the medical billing service’s success to the apply whereas safely limiting it to that which they’ve some measurable skill to have an effect on. The sort of proportion primarily based settlement advantages the apply by its “self-policing” quality- the medical billing service solely makes cash when the apply makes cash.

In our second sort, proportion of gross claims submitted by the billing service, the apply is charged a proportion of the full quantity submitted to insurance coverage corporations and different payers. This may be tough for 2 causes. First, the speed billed to an insurance coverage firm is just not at all times the identical because the negotiated price that will likely be paid. So a seemingly aggressive proportion from one medical billing service might be drastically totally different from one other medical billing service relying on the place the proportion is utilized. Second, a number of the incentive talked about above is eliminated for comply with up on claims as there isn’t a tie-in to the outcomes of medical billing service’s submissions.

With a proportion of the whole collections for the general apply, the billing service expenses for the full web acquired by the apply. It consists of co-pays, deductibles, and some other monies collected on the workplace, not simply by the service. This association is mostly discovered with full-scale apply administration corporations who not solely deal with medical billing however may also administer staffing, scheduling, advertising and marketing, payment schedule negotiations, and so forth. On this association, the medical billing service might be pushed by incentive to comply with up on claims with payers, however good points some safety to its revenues by the opposite sources of cost coming into the apply.

Charge Variability inside Proportion Agreements:

A medical billing firm will think about a number of variables in defining the speed charged to the apply in a proportion primarily based settlement. Charges can vary from as little as 4% to as excessive as 14% and even 16%! Elements influencing this variability embrace declare quantity and common greenback quantity of claims, in addition to service concerns like stage of comply with up carried out by the medical billing firm, whether or not or not affected person invoices will likely be despatched by the billing firm, and lots of others. Let’s check out some examples of how these variables affect medical billing service charges.


Concerning declare quantity and greenback quantity, let’s think about the instance of apply A and apply B. Each are searching for a medical billing service providing declare technology, provider comply with up, affected person invoicing and cellphone assist. The common declare for apply A is $1000 they usually common of 100 affected person encounters monthly. Observe B has a median declare of $100 with 1000 encounters monthly. Whereas the gross quantity billed is similar, the distinction is staggering for the billing firm who might want to undertaking practically 10 occasions the employees hours for apply B to yield the identical return as from apply A.


With respect to companies supplied, let’s think about apply C and apply D. Each practices common round 1000 claims monthly, and every declare averages round $100. Now, apply C is searching for a billing service to deal with full declare lifecycle management- provider comply with up, submission to secondary and tertiary insurances, affected person invoicing and assist, report evaluation, and so forth. Observe D collects affected person balances on the workplace so they do not require invoicing companies, they usually plan on doing the provider comply with up themselves. Thus Observe D solely requires the medical billing service generate and submit preliminary claims to carriers, and possibly submit just a few secondary claims every month. On this instance, the gross claims submitted is roughly the identical, however apply C may anticipate a payment considerably increased – doubtlessly double that of apply D – because of the in depth work concerned in offering these different assist companies. (Consider apply D will even want to think about extra staffing to carry out these actions in-house, which can more than likely not offset the price of permitting the skilled medical billing firm to handle the method.)

These two examples clearly display the essential components that affect the charges when contemplating proportion primarily based medical billing companies. Whereas there are quite a few negotiating factors the place a apply can save on basic prices, they need to think about what different prices could come up later to handle the companies not offered by the medical billing firm.

Professionals of Proportion Primarily based Agreements:

  • Proportion Primarily based Agreements straight tie the success of the billing firm to the success of the apply in the event that they primarily based on collections.
  • Practices can usually select which companies they require for potential quick time period financial savings.

Cons of Proportion Primarily based Agreements:

  • Quick time period financial savings garnered by holding some billing actions inside the apply can result in long run prices in extra staffing.
  • Small claims might not be addressed as vigorously. For instance, think about a $5.00 affected person bill with a medical billing service charging 8% on collections. The medical billing service would truly lose cash in pursuing the declare. Including up the price of postage, envelope and paper, in addition to employees time for printing, stuffing and mailing, it might be greater than the $0.40 that will finally trickle again to the service.

Flat Charge per Declare:

One other widespread strategy to pricing supplied by medical billing companies is what we’ll name Flat Charge per Declare. With flat payment pricing the medical billing firm expenses a hard and fast greenback price for every declare submitted, whatever the dimension of the declare.

Much like proportion primarily based agreements, flat payment per declare pricing can fluctuate considerably relying on the amount of claims and the extent of companies offered. In its most elementary type, a payment per declare medical billing service may present solely declare technology and submission companies for as little as a greenback or two per declare. On this case it might be the apply’s duty to comply with up on claims. After all flat payment per declare pricing also can embrace different companies akin to comply with up with carriers, affected person invoicing, and so forth. With these extra companies, practices may count on prices to extend to $4, $5 and even $7 per declare or extra.

Depending on the apply, the flat payment per declare might be price efficient, however must be thought-about fastidiously. Comply with up with insurance coverage carriers and the bureaucratic issues shouldn’t be missed. In some instances, as soon as the medical billing firm has submitted a declare, they may make a cellphone name or two; however they’ve executed the submission and the transaction is billable to the apply, no matter the way it’s paid out. Charge per declare pricing would not have the inherent incentive like some kinds of proportion agreements. Nonetheless, it may be the answer if in case you have the sources to handle the comply with up, or in case your familiarity with the medical billing service is robust sufficient to belief of their comply with up.

Professionals of Flat Charge per Declare:

  • Charge per declare pricing has the potential to be less expensive, notably on increased priced particular person claims.

Cons of Flat Charge per Declare:

  • If provider comply with up is included with this service, the medical billing firm has little incentive as soon as the preliminary declare has been submitted. Furthermore, it may be close to not possible to judge how rigorously a medical billing service is following up.
  • If provider and payer comply with up is just not included with the service, the apply should handle it in-house. Inevitably, hiring and coaching new employees or allocating time of present employees results in elevated overhead, usually offsetting the advantages of utilizing a medical billing service within the first place.

Hybrid Method:

The ultimate instance on this dialogue is what we’ll name the Hybrid Method, which takes benefit of proportion primarily based agreements and flat payment per declare strategy. By means of this pricing technique, a medical billing service may apply a proportion to sure insurances and affected person steadiness payments, then apply a payment per declare for others. This strategy is normally siloed by provider or declare sort, in that it might use the proportion for all claims to provider X, and flat payment for all claims to provider Y.

The hybrid strategy has develop into extra widespread in sure areas of the US over the previous a number of years as some insurances frowned upon proportion primarily based agreements. An instance was seen when the state of New York rendered proportion contracts on state Medicaid claims unlawful, requiring medical billing companies use the flat payment per declare choice. The precept concern arises from just a few unscrupulous billing companies who consider “up-coding”, or submitting false claims for increased priced companies, is the simple approach to elevated earnings. Whereas these few companies threaten to tarnish the fame of a whole trade, these bona fide medical billing companies searching for long-term development and profitability clearly notice that small good points gained from unlawful actions aren’t any approach to maintain a profitable enterprise.

In brief, the hybrid mannequin permits trustworthy billing corporations the prospect to tie their successes to that of the apply whereas respecting the considerations of these insurances guided by formal laws.


When medical suppliers and practices think about teaming with a medical billing firm, they’ve an array of choices. Flat charges per declare could seem less expensive within the short-term, however the potential for income interruption as a result of poor comply with up by the medical billing service supplier, or the necessity to rent and prepare extra in-house apply employees to deal with the comply with up by itself, will undermine the preliminary price financial savings to the apply. Agreements primarily based on a proportion of collections are self policing and make sure the medical billing service will pursue reimbursements rigorously.

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