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Why Medical Billing Fees Have Nothing to do With Medical Billing or When is a Medical Billing Servic - By: David George, Posted on: 2008-03-29

I’ve been in the medical billing business for a little over seven years - certainly not my longest endeavor (but certainly one of my most interesting). If I were to try to classify my 25 plus years of business experience I would have to lump everything under the heading of “Moneymaking”. You see, I’ve had the good fortune of running businesses in some highly competitive industries (medical billing included) and regardless of my official title, job description or employer, my true function was to simply generate as much profit as possible – period.

That’s not to say maximizing profits involves treating people poorly, offering poor service or inferior products – quite the contrary. Some of my past employers were industry leaders that employed lots of people, paid taxes, donated to charities and generated profits in free and ultra competitive markets. How? By simply giving the consumer what they wanted, when they wanted it, distributed in way they could conveniently buy it - often. The trick is – and here’s the hard part – that regardless of the business’ size, product/service or overhead, it has to make enough profit to sustain itself.

That’s also not to say that every endeavor I’ve undertaken has been successful. On more than one occasion I’ve been involved with a business that was - ahem - less than profitable (read no longer in business); and even the business novice knows how that story ends - as one door closes another door, blah, blah, blah. But let’s stay on point.

The lesson I took away from my working career’s “road bumps” is that on more than one occasion the business had a good product or service but tried to compete solely on price. And that leads me to the “toilet paper” reference I made in this article’s title. This strategy turned the product or service in to a commodity – something marketed to the uninformed consumer solely on the basis of price rather than quality or value.

The effect of which is to homogenize a product category in the mind of the consumer; allowing a company to gain or maintain market share by simply putting out as much of a product as possible for the lowest possible price. A tactic used in the airline, automobile, technology and paper product industries - just to name a few.

Unfortunately this strategy has found its way in to the medical billing industry and there are several losers of this sales tactic – the health care provider, the provider’s patients and the billing services. Just Google “medical billing” and you’ll see what I mean. The medical billing companies doing this “limbo dance” market their services solely on price – 6%, 5%, 4%, etc.

And why not? These medical billing services shrewdly recognize that health care providers are consumers too and a percentage of providers will make a buying decision as important as entrusting the stewardship of their cash flow to the lowest bidder. To commoditize the medical billing industry is in the best – albeit short term - interest of these medical billing services. As long the target market – health care providers – believe that all medical billing services are essentially the same differentiated only by price; these medical billing services mistakenly declare themselves the winner.

But exactly who wins? Simply put, everyone loses. Let’s start with the medical billing industry. Most medical billing services are sole proprietorships or partnerships being operated from a home office. These medical billing services – domestic and overseas - are most likely struggling to attract clients and are attempting to build a client base by undercutting competition. Other small billing services follow suit and before long fees for the entire medical billing industry are being artificially suppressed by medical billing companies that are really just fishing for clients.

Let’s look at the math. A one person medical billing service arbitrarily charging a health care provider 5% of collections (because everyone is seems to be charging 5%) on payer reimbursements averaging $50 per patient is generating roughly $1.88 per claim after tax. Depending upon the time committed to providing other non-revenue generating services to the health care provider the owner will be lucky to generate a profit that warrants the continuation of the business.

Consider the effect on the health care provider’s business. Many health care providers falsely believe that medical billing services hired on a percentage basis are in essence working on a commission and therefore highly motivated to collect every possible penny for the provider. The truth is that medical billing services earn 95% or more of their revenues on the front end or claim filing stage of the revenue management cycle. Given a choice between revenue generating activities – claim filing – and non-revenue generating activities – aged claim reconciliation - the billing service can and will choose the more profitable activity based on manpower limitations.

Finally, the patient suffers. Patients do and should expect their out-of-office experiences with the provider to be on the same level as their in-office experiences. Claim issues are of great concern to patients – particularly older patients. In the mind of a patient, claim issues reflect poorly on the health care provider and can prompt a patient to seek care elsewhere.

So here’s the bottom line……

Medical billing services need to understand their costs and develop a pricing plan based on their profit goals – not on arbitrary percentage rates developed by a “competitor”. In other words, resist the temptation to take on an unprofitable client – allow them to choose a competitor and drive that medical billing service out of business.

A medical biller must be able to accurately project the manpower involved in taking on any new client and charge accordingly. For every potentially bad client there are many more reasonable health care providers interested in striking mutually profitable partnerships. Market your services to attract these clients.

Health care providers must realize that they will ultimately get what they pay for. Outsourcing the revenue management process is not for everyone. Many health care providers, particularly those starting new offices, should consider keeping their medical billing in-house at least for the short term.

Article Source: http://articleowner.com

The author, David George, is an expert in electronic medical billing services and account receivable management. He specializes in significantly improving the cashflow, revenues and profitability of physician practices accross the country. David also authors the Start a Medical Billing Service blog offering tips, tricks and advice for medical billing and coding entrepreneurs.

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