With any service business you get the flexibility of choosing your fees and the method to which you arrive at those fees. There are a few methods to choose for and we will go over a few of them below. Please note that in some states there are laws that prohibit physicians and healthcare providers to enter into any fee-splitting arrangements, to see if you are in a state or working in a state that has fee-splitting laws, login to our members only area and go to the favorite shortcuts section and click on “Pricing your Services” which will bring up the various states that prohibitproviders from entering into fee-splitting arrangements as well as some sample case precedents.. There you will find the states, and the verbiage from the state law/ruling. If you are not a member you can subscribe by visiting us at www.billerswebsite.com. So let’s talk about the various methods of coming up with a fee schedule and the various pro’s and con’s of each one. We will then go over a basic formula for calculating these various methods.
Methods of Pricing
1.Percentage – This is probably the method most widely used, the advantage to providing percentage based charges is the “incentive” offering to the provider. The methodology medical billing companies offer to potential clients that says: “We don’t get paid until you get paid”. This is usually appealing to providers because you have the “incentive” to collect maximum revenue. The disadvantage is that there is more potential to have a part in fraud, abuse and errors in the name of trying to gain maximum revenue. The benefit, obviously is that you have the same advantage the practice does by ensuring maximum reimbursement. In some states it’s actually considered fee-splitting, and illegal for healthcare providers to enter into a contract based on a percentage of their revenues. We have a list of these states and resources within our subscriber area. Another disadvantage to medical billing companies is really common sense. Your working for free in some instances. Let’s for example discuss ICD-10. October 1st, 2015 is the deadline for being ICD-10 compliant. Physicians and healthcare facilities have been warned to keep six months to a year revenue in the bank to offset the anticipated revenue delays. If you are a billing company charging on a percentage, this means your revenue stream is effected as well. It doesn’t matter how hard you work on accounts or how long you work them. Your NOT getting paid until they do. This may be acceptable and standard practice in the medical billing industry, but is it really normal and acceptable practice in any other “service” driven industry? The answer is NO!
2. Fee per Service – A few years back this was also known as the “Per claim fee” but our industry has evolved and grown to allow billing companies to be much more productive in the entire reimbursement process and provide clients with various other services. A billing company that provides claims only may have a fee structure of let’s say $5.00 per claim. Another fee might be for benefit verifications and eligibility check, for example; $2.00 per patient. Another service that might be charged separately is patient statements. I think you get the idea. The pro’s to this method is that you will be reimbursed for each task, coming up with these fees can be justified by figuring out approximate time per task, costs of each task and an amount you would like to make as profit, you also get to provide your clients with a menu selection of services so that at any time they can add or change services and only a simple adjustment of your contract is necessary. One of the disadvantages to this method is that there might be additional work the client would like done that has not been thought about or perhaps that you do not offer. Another disadvantage might be that providers will “feel” as though they are being nickel and dimed. You will need to set a fair fee structure that would cover certain tasks such as taking patient phone calls related to their statements, answering staff questions, talking to insurance carriers, or the use of any other time which could occur in regards to the overall reimbursement.
3. Flat monthly Fee – With a flat monthly fee this makes billing your clients very simple. The flat fee can be determined a combination of ways. I like the flat monthly fee because I can determine what I want to make per hour and base it on a time I will need to work on an account monthly. To arrive at the flat fee amount you can set an hourly rate you feel you are able to receive. This will be determined by various ways including experience and geographical location and average salary. Once you have that hourly rate set, you can then determine the amount of time (approximately) that account will need each month. Like any other way of setting your fees, you will need to have the practice complete a practice analysis which will consist of practice data such as average claim volume, average managed care volume, etc. The nice thing about creating a monthly fee based on an hourly rate is that there is not much “guess” work involved. You can easily set the hourly rate for what you hope to make per hour after expenses. Once you have the completed practice analysis, an overall idea of your hourly rate, you can then estimate the amount of time needed on an account. You can also create a sliding scale to accommodate higher turn around clients or new practices that are growing. For example, you can set an additional flat fee for new patients added. So if for example your hourly rate is $25 per hour and you know you need an hour to load and setup 5 patients, your sliding fee could be $25 for every additional 5 patients added. The downside to this method is that you may have a practice that closes periodically or is not very busy, or is a small provider only seeing a few patients a day. The pro’s to this method however and unlike the percentage type billing or per claim billing, is that you are getting paid for all of your work regardless of the amount of claims filed or the percentage of revenue collected.
4. The Hourly Rate/Fee – This is much like the flat fee method, only you are leaving the hourly rate and you will have deducted your costs and expenses prior to setting the hourly rate. This is very simple and easy and assures your business you are getting paid for all of your time spent without having to estimate. This also allows you to easily charge a client for additional services such as consulting, software training, etc. The downside to this method is that a provider will often see this fee and perceive that he/she can have an in-house biller for a lower salary without really seeing the benefits of outsourcing, you will need to work a little harder to incorporate those benefits to your potential client.
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Again, we remind you that there are still states that prohibit healthcare providers to enter into any type of fee-splitting arrangement, so consult your state laws, or subscribers may login to our area to view these states, state law verbiage and sample case precedents. A biller billing a client based on a percentage of collections, in a state where it is considered to be “fee-splitting”, is ultimately not working with a contract, as the contract is null-void if a provider is prohibited from entering into that contract in that state. If in doubt, consult an attorney. In addition if you are marketing yourself or your business in a state that prohibits physicians from entering into these fee-splitting arrangements, you can earn an edge over your competition by bringing it to their attention.
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