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Thursday, October 20, 2005

Medical Billing Services: Percentage Vs. Flat Fee Pricing Structures

As the business of running a medical practice becomes more competitive, many practices are turning to a third-party medical billing service for cost effective solutions to maintain maximum profitability. In evaluating any medical billing service agreement there is an array of factors that should be taken into consideration - pricing of services is principal among them. This article compares the two most common pricing approaches offered by medical billing services – Percentage Based Agreements and Flat Fee per Claim – and identifies some of important points to remember when selecting a medical billing service provider.

Percentage Based Agreements: Probably the most common approach to pricing by medical billing services is the percentage based agreement. In this type of agreement, the medical billing service’s fees to the practice are based on a percentage, usually in one form or another of the following:

  • Percentage of collections,
  • Percentage of gross claims submitted by the billing service,
  • Percentage of total collections for the overall practice.
With the first type above, percentage of collections, the medical billing company charges the practice only on net received for those claims in which it has directly assisted in collections (typically excluding monies collected at the office, such as co-pays, deductibles, etc.). This is the purest example of how a percentage based agreement will tie the medical billing service’s success to the practice while safely limiting it to that which they have some measurable ability to affect. This type of percentage based agreement benefits the practice by its “self-policing” quality- the medical billing service only makes money when the practice makes money.

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