# Advice on Setting Up a Medical Billing Service.



## Pam Brooks (Aug 8, 2011)

I happened upon this article from http://www.medicalbillinganswers.com/ this morning as I was doing some research about Revenue Codes. I apologize to the author...I couldn't see who wrote this to give proper credit, but it's well written and addresses a number of questions I've seen on this board. 
I'm posting it here, because I think it's probably the most accurate and straightforward advice I've ever seen in regards to setting up a billing company.


*Setting Up A Medical Billing Service*​ 

*Question:* I've been thinking about starting a medical billing service of my own. I thought about taking one of those internet courses, then buying the software. It sounds lucrative; is it a good business venture? 


*Answer:* There are many people who believe getting into medical billing on their own is a good idea. I hate to break it to you, but it's not. The field of medical billing can be very complicated, and if you don't have any real background in doing it, taking a few classes isn't going to help you in the real world. 
Fact number one: Learning what all the different insurances may need takes at least a good six months. And that's if you're doing it on a daily basis. *Medicare* is a good example; they're always changing the rules, so you never fully know it all. If you get set up with a practitioner who mainly only bills one insurance, you might have a fighting chance to at least do a good job, but for the rest of it, you will get confused, and the last thing practitioners want is someone else messing up their cash flow. Also, you should have at least a general knowledge of *CPT* and *diagnosis codes* and their relationship with each other, because you won't have the luxury of asking for help if you're on your own. 
Fact number two: If you're lucky, *85 to 90%* of all the claims you initially bill will be paid fairly quickly; it's that other 10 to 15% you have to worry about. Without a good background, trying to understand *d*enials, or the reasons a claim isn't being paid by an insurance company, can be confusing. Not only that, but the numbers will continue to grow because a practitioner, hopefully, will keep steady the number of patients they're seeing. At a certain point, if you're not proficient enough, you'll probably start cutting corners, going for the big dollars instead of trying to collect everything, and at that point you're going to be in trouble, without knowing how to get out of trouble. 
Fact number three: There are a lot of other companies out there already billing for most of these practitioners, and unless you can prove that you're better, you're never going to get them to switch over to you. If you're new, without any pedigree, you're just going to spend a lot of money without the chance to make any of it back. Not only that, but you need to make sure you have the time to do both billing and marketing. 
Fact number four: Even if you get a physician to do the billing for, if you don't get the right kind of physician, or multiple physicians in the same field, your not going to make a lot of money. Here's a perfect scenario. 
You get to do the billing for a physician who generates $250,000 a year in revenue. Most billing companies get between 7 and 10% of actual cash collected, not off revenue. So, if you get a physician whose charges are fairly close to what the top insurance pays, let's say the most cash you can collect in a year is 90% of that. 
Now we're down to around $225,000. Divided by 12, that comes to $18,750 a month. Now, let's subtract another 10% for claims that are denied, and we'll make it easy and let you have the same dollar amount each month because, oddly enough, the figure will start to drop at a certain point as there will be more work for you to try to get to. 
That now takes us down to $16,875 a month. Even at 10%, that means you'll possibly earn around $1,688 a month; if you're relative new and can only get 7%, you're down to $1,181 a month, or around $14,000 a year. 
The thing is, that $250,000 a year is an extreme number for most physicians who you have a legitimate shot at getting as a billing client. The big boys, surgeons, aren't going to take a chance with you doing their billing. The people you're going to possibly get are solo practitioners, mainly family practice physicians who, on their best day, might see enough patients to generate, on average, $700 a day. Yup, that's correct, as it works out to maybe 15 patients a day, if they're lucky. And they're not going to do that every day. And they're not going to give a full 52 weeks a year either; bring that down to 48 weeks at best. 
So, you'll have to make it up in volume, multiple physicians, which means you have to be prepared to be able to separate the accounts by provider number, which now means you need some kind of accounting and bookkeeping background to help you manage it all, and you also have to pay for all of your supplies on your own, of which billing forms will probably be the most costly (though you may be able to bill most of your items electronically), and you'll have to determine with your physician if you're also handling secondary self pay claims, in which case that's going to bog you down even further. 
In other words, there's a lot to consider before you undertake such a project. This doesn't mean it can't work out, though. I know a few people who started medical billing on their own as a part time side job while holding down a full time job, and eventually built up their clientele to a point where they could leave that job and work their business full time. However, all the people I know who did it had a healthcare background of some type already, so they were ahead of the game. This means they already knew about insurance, procedure coding, diagnosis coding, pricing, denials, how to fill out a claim form, when an insurance number didn't look right, etc. 
My recommendation would be if this is something you really want to do, try to get at least a year in at a place that does medical billing, whether it's a physician's office, hospital, clinic, etc. Hopefully you won't end up in a place that only bills one type of insurance; you need some kind of variety to help get your feet wet. Medical billing can be fun, but it can also be very challenging. Get some kind of experience first; otherwise, you'll fall on your face, and you won't be the only person upset with you.


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## PJBrooks (Aug 8, 2011)

*thank you*

thank you for informing me about the information was very helpful.


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