Medical Billing Services: Percentage Vs. Flat Fee Pricing Structures

Nowadays, running a medical practice business has become more competitive as most practices are ultimately turning to 3rd party healthcare billing services to ensure more profitability and generate cost-effective solutions. Many factors are considered when you want to evaluate medical billing agreement, and the pricing of the billing service is one such factor. There are two common pricing methods included in medical billing services.

Percentage-Based Agreements

The most common method in medical billing service is percentage-based agreement. It is an agreement where the fees of medical billing services to the practice are made on a percentage basis. To get a good reimbursement, billing companies work hard and follow all secondary claims and insurance claim denials. In this approach to medical billing, the fee structure is made based on the provider's net revenue. So collections are tied directly to the net compensation for billing services providers. It is based on the following forms-

% of collection

%of the total collection for the overall practicing

% of the gross claims as submitted by billing service

Advantages of Percentage Based Agreements:

It directly ties the success and favorable outcome of the billing company to the success of billing practice if it’s based on the collections.

Billing practice services are needed for potential short-term savings.

The Disadvantage of Percentage Based Agreements: 

The short-term savings collected by keeping certain billing activities within billing practice can cause long-term costs in case of additional staffing.

This method doesn’t address smaller claims vigorously. For instance, a patient invoice of $5 and medical billing practice can lose money while pursuing a claim. When you add the cost of paper postage, envelopes, and staff time spent on mailing, printing, and stuffing, the cost will be somewhere $0.40. 

Flat Fee per Claim:

This is another method of pricing that is provided by the medical billing services. The billing company charges a certain fixed rate of the dollar in flat-free pricing for every claim that has been submitted instead of considering the size of the claim. Flat fee per claim pricing varies from percentage-based agreement based on the extent of services and volume of claims provided. Fee per claim medical billing service in its basic form may offer submission services and claim generation for as low as one dollar or two per claim. It can also involve other services such as patient invoicing, follow-up, carriers, etc. Such additional services can increase the cost ranging from$4-$7 on per claim. Compared to the percentage method, the flat fee per claim is more cost-effective.

Advantages of Flat Fee per Claim:

This pricing approach is more cost-effective, especially in the case of highly-priced claims of individuals.

The Disadvantage of Flat Fee per Claim: 

When carrier follow-up is included within this service, there are chances of little incentives to be earned by the medical billing company on submission of initial claims. It is also not possible to evaluate whether the medical billing service is rigorously following up or not.

The billing practice should manage and solve in-house when the payer and carrier follow-up is not involved within this service. The process of training or hiring new individuals can increase the overhead cost.

Medical coding Hyderabad brings forward endless employment opportunities for students who want to pursue a stable career in the medical billing and coding sector. We offer medical coding training, which equips you with the industry-standard knowledge and increases your opportunity to get hired.

by SANTOSH GUPTHA