How Much Does it Cost to Outsource My Medical Billing?

If you are thinking about outsourcing your billing or changing billing companies, one of the first things you want to know is how much it will cost and what you can expect for that fee. If you’ve already met with a couple of companies, then you probably know that it is hard to compare rates from one company to the next without doing a lot of research.

As the founder of a pediatric billing company, I have met with dozens of practice owners and talked with them about what to consider when evaluating a contract.  There are many things to compare and consider before choosing the company with the lowest cost.

The percentage amount can vary and I have seen a range of 2.5% to 8%. What determines this is usually where the billers are located (US-based or overseas) and what services are offered.

Read on to understand what factors contribute to a higher or lower rate, critical questions to ask to make sure there aren’t any hidden costs, and how to consider profitability rather than cost.

Note: Billing costs can vary widely, and there are several models out there. The most common is a percentage of collections so that is what we will focus on here, but other models include per-claim invoicing, add-on billing for referrals or eligibility checks, hourly invoicing, or a hybrid of these models.

What Factors Influence the Cost?

The location of the biller. Will the team working on your account be in the US or overseas? When the billing team is overseas, the cost can come down significantly. Check out this post for more things to consider before hiring an overseas team.

Rejections and denials fixes. Will they work on these or send them back to your team to fix demographics or coding? Companies charging less may not be willing to see if they can fix simple problems, causing payment delays and extra tasks and follow up for your team.

Claims scrubbing and review handling. Do they take responsibility for reviewing the codes entered and making sure the correct modifier and payer guidelines are met, or do they expect your team to know the rules and code appropriately? If they notice something like a missing office visit, will they investigate and make sure it gets billed? Companies that just send the provider codes are likely missing things that could be billed or they are causing unnecessary denials if they fail to follow payer guidelines.

Involvement in patient inquiries. Will they get involved in complicated insurance questions from patients or leave it to your team to research and advise? Companies with lower rates may not be involved with patient inquiries at all, which can leave your team with extensive payment research to complete, and be frustrating to patients.

Amount and timeliness of communication. How timely and accurate are the answers to your questions? Do they have standards around how long it will take them to get back to you? Premium billing companies will get back to you right away and will have a high level of service for responses.

Clear, actionable reporting. Will you get actionable insight into what is going on in your practice and how your billing compares to others they work with? More sophisticated billing companies know that making numbers actionable and meaningful will allow you and your team to set appropriate goals and priorities in your office.

Practice insight through information sharing. Can they give you insight into what is going on in other practices and how they are handling situations, like adding the new vaccines to their office or how they execute a flu clinic? Companies specializing in pediatrics can provide insight into how other practices facing similar concerns are reaching their goals so that you can learn from the greater pediatric community.

What Are Other Things That May Impact Pricing?

What payments are included in the percentage model? If the percentage is applied to patient collections and/or incentive payments, this can significantly impact what you are paying for billing services.

Is the percentage based on charges or collections? Generally, you should only be paying when you are paid, so this should be based on collections, but I have seen some companies base their percentage on charges.

Does the company have a monthly invoice minimum? If you have a very small practice or are just starting up, there may be a monthly invoiced minimum up to $1,000 or even more.

Does the billing company use its own software that the client needs to subscribe to? If so, there may be extra costs involved that they expect you to cover. Other companies will do their work in your system so that you own the information and don’t have to incur extra subscription costs.

What Else Needs to be Considered?

Keep this in mind: you get what you pay for. When considering a company that charges 3% vs. a company that charges 6%, you may be tempted by the lower percentage. Still, it is highly likely that the results and level of service with the higher cost service will significantly impact the bottom line of your practice.

Let’s look at a test case. Here is a case of two billing companies, one with a US-based leadership team but an overseas biller that charges 3% and one with their entire team in the US that charges 6%.

Even if the US-based team only collects 5% more than the overseas team, you still experience better profit with the US-based team. This increase is conservative, though. Based on my experience, when we have taken over for other services, our clients see an improvement of 15% – 30% in collections.

If you are trying to decide whether or not to make a change and cost is a major factor, it is perfectly reasonable to ask the company you are thinking about working with to log in to your EMR and tell you what they would do differently so you can make sure you are making the right decision on who to work with.

Trying to create a true apples-to-apples comparison of billing services is no easy task. You may be tempted by a lower price only to find out after getting started that your team is still left with a lot of work and follow up.

At Altus, we keep the expectations of both sides very clear and detail it in our contract so with any company, this can be a great place to start. Check out our guide for services that we believe every biller should be providing.

If you want more information about our costs and what is included, click here to send an email inquiry.