As healthcare providers continue to navigate the ever-evolving landscape of medical billing and revenue cycle management (RCM), many are turning to third-party medical billing companies to streamline their billing processes and improve their bottom line. Medical billing companies have emerged as invaluable partners for healthcare providers. These specialized companies facilitate the revenue cycle management (RCM) process and alleviate the burdensome task of navigating the intricate web of medical billing and insurance claims. However, one question looms large for healthcare providers seeking to outsource their RCM needs: How much do medical billing companies charge for their RCM services? This article will explore how much medical billing companies typically charge and what factors can influence these costs. By better understanding these costs, healthcare providers can make more informed decisions about which medical billing companies are the best fit for their specific needs and budget. Before exploring the costs, it’s essential to understand outsourced billing and RCM.
Outsourced medical billing companies charge 2 to 10% of the revenue for their services. But what is
outsourced medical billing? It refers to the process of delegating the responsibility of managing
medical billing tasks to a specialized third-party service provider. Instead of managing billing
in-house, healthcare practices can rely on experienced billing professionals with extensive knowledge of
billing codes, regulations, and reimbursement processes.
These services typically encompass:
The size of a healthcare practice and its specialty can influence the pricing structure. Smaller practices or individual practitioners may have different needs than larger healthcare organizations. Specialty practices with complex billing requirements may require additional expertise, affecting the overall cost.
The volume of claims processed by the medical billing company directly affects the pricing. Higher claim volumes often entail more administrative work, leading to increased costs.
The complexity of a provider’s billing processes affects the pricing. Factors such as the number of insurance carriers, varying fee schedules, and intricate coding requirements can increase the complexity of the billing tasks and subsequently impact the cost.
The level of technology and infrastructure provided by the medical billing company can impact the cost. Advanced billing software, electronic health record (EHR) integration, data security measures, and reporting capabilities may increase pricing.
This fee typically covers the initial setup, software installation, training, and billing system implementation. The one-time fee varies based on the medical practice’s complexity, the organization’s size, and the scope of services required. Medical billing companies may comprehensively assess a practice’s needs before providing a customized quote. The cost of establishing charges typically averages around $300 per physician. Billing companies may impose a fixed fee ranging from $1,000 to $1,500 for a medical practice with a few doctors. The expenses can be even higher for on-site solutions and SaaS systems.
It involves charging a regular fee, usually every month, to manage the complete RCM process continuously. SaaS platforms usually offer monthly pricing ranging from $25 to $125. Higher-end solutions or on-site vendors can charge as much as $3,000 to $6,000 annually. You can anticipate paying around $4 to $6 for flat costs per claim. While percentage-based rates typically fall between 2 and 10 percent.
This pricing model is less common but may suit practices with unique needs or irregular billing volumes. It is important to note that additional costs may be associated with the hourly rate model, such as software licensing fees, IT support, or additional services requested by the medical practice.
A per-claim pricing model charges a fixed fee for every claim submitted or processed. This structure
suits practices with a lower claim volume but may become expensive for high-volume providers.
However, there are ways through which companies charge from their healthcare providers, such as:
Some medical billing companies offer a fixed monthly or annual fee, irrespective of the revenue collected. This model provides predictability and can benefit practices with stable billing patterns.
This common approach involves charging a percentage (typically 2% to 8%) of the collected revenue. This
model aligns the interests of the healthcare provider and the billing company, as the latter earns more
when the former’s revenue increases.
Example: Suppose a medical billing company charges 6% of a healthcare provider’s
net collections. If the
provider’s monthly collections amount to $100,000, the billing company would charge $6,000 for their
monthly RCM services.
Some medical billing companies employ a hybrid pricing model that combines elements of both
percentage-based and fixed fee structures. They charge a lower percentage of net collections and a fixed
fee component to cover operational costs.
Example: Let’s say a medical billing company charges 4% of a provider’s net
collections and a fixed
monthly fee of $1,500. If the provider’s monthly collections amount to $80,000, the billing company
would charge $3,200.
According to a recent survey by Tebra, approximately 66% of medical billing companies express an increasing sense of optimism regarding the present condition of the revenue cycle outsourcing industry. But the question arises, with the current going rate of medical billing services, why should medical practices outsource medical billing services? Here is the crystal clear answer.
MedsIT Nexus outsourcing medical coding services has implemented the automated systems for claim generation, submission, and payment posting, reducing manual tasks and improving efficiency. With robust denial management strategies in place, outsourced medical billing teams proactively handle claim rejections, resubmissions, and appeals, accelerating the revenue collection process and maximizing reimbursements.
Managing an in-house medical billing department involves significant costs, including salaries,
benefits, training, infrastructure, and software expenses.
Outsourcing medical billing eliminates the need for these investments, allowing healthcare
providers to
redirect resources to core healthcare services. Additionally, outsourcing provides cost stability, as
healthcare practices can opt for flexible pricing models, paying only for the services utilized. This
cost efficiency allows healthcare providers, especially small and medium-sized practices, to save on
operational expenses while maintaining high billing accuracy and efficiency.
Outsourcing medical billing allows healthcare providers to tap into the expertise and specialization of professionals dedicated solely to billing and coding. These experts possess in-depth knowledge of complex coding systems, billing regulations, and payer requirements. Outsourced medical billing teams’ specialized expertise and experience lead to higher reimbursement rates and improved revenue generation.
By outsourcing, healthcare practices gain access to professionals who stay up-to-date with the ever-changing healthcare landscape, ensuring accurate claims submission and minimizing the risk of claim denials and rejections.
Managing medical billing internally often demands significant time and attention, diverting healthcare professionals from their primary responsibilities. Outsourcing relieves healthcare providers of administrative burdens, allowing them to dedicate more time and resources to patient consultations, treatment, and overall patient satisfaction. Outsourcing has many advantages, including better service quality and significant improvement in client happiness.
Outsourced medical billing companies specialize in maintaining compliance with industry standards and
regulations. They continuously train their staff on coding updates, billing guidelines, and payer
policies, reducing non-compliance risk.
According to the HIPAA Journal’s Healthcare Data Breach Statistics, an average of 1.94 incidents of
healthcare data breaches involving 500 or more records were reported daily in 2022. HIPAA violation
penalties
| TIER 1: (Unaware of HIPAA violation) | $100 to $50,000 per violation
Maximum $25,000 per year |
| TIER 2: (Reasonable cause that the entity knew about) | $1000 to $50,000 per violation
Maximum $100,000 per year |
| TIER 3: (Willful neglect of HIPAA rules with the violation corrected within 30 days) | $10,000 to $50,000 per violation
Maximum $250,000 per year |
| TIER 4: (Willful neglect of HIPAA rules and no effort to correct it) | $50,000 per violation
Maximum $1.5 Million per year |
Outsourced medical billing companies invest in cutting-edge technologies and infrastructure to streamline billing processes. They utilize secure cloud-based platforms that enable real-time access to patient information, claims data, and financial reports. These platforms offer robust data analytics capabilities, allowing healthcare providers to gain valuable insights into revenue cycles, identify trends, and make informed decisions.
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