The Cost of Medical Billing:

Could You Be Saving a Quarter Million Dollars?

The Cost of Medical Billing

Medical billing is what gets you paid. For independent medical practices, deciding between using in-house billing software and outsourcing to a third-party billing service can be a tough choice. Some physicians think outsourcing is a no brainer. It just makes sense to let the experts handle the claims. Other physicians like the sense of control that in-house billing gives them. For most physicians, though, it all boils down to cost.

So, when it comes to the cost of medical billing, could you be saving a quarter million dollars?

This hypothetical cost analysis is a good example. It assumes that a three-provider practice handles an average of 80 claims per day. This works out to 20,000 claims annually. At an average cost of $125 per claim, this is $2,500,000 in gross billing. Here’s a comparison of medical billing costs:

In-House Outsourced
Billing employee salaries $109,200

Two employees at a salary of $3,500 per month each + 30% in taxes and benefits

Software costs $7,200

($200 per physician per month)

Hardware costs $500 (printer and workstation) $500 (printer and workstation)
Training costs $5,000 $1,000
Direct claim processing costs $3,600

($100 per physician per month clearing house fee)


(7% of collections)

Percentage of gross billing collected 60% 70%
Collections $1,500,000

(60% of $2,500,000)


(70% of $2,500,000)

Total collection costs $125,500 $124,000
Net Collections $1,374,500 $1,626,000

This hypothetical practice can save in excess of a quarter million dollars by using a third-party billing service. The above data does not include the ancillary costs of in-house billing such as office supplies, office space, the extra manpower needed for patient billing support, and other miscellaneous expenses. It also does not take into account the hassle that in-house billing can entail. With radical changes underway in how providers will get paid (i.e., MACRA and healthcare reforms), staying on top of rules, regulations, and performance incentive plans can take up more of your time than you bargained for. The above table does include a modest 10% increment in the percentage of gross billing collected by outsourcing, which any good third-party billing service should be easily able to achieve.

An extra $250,000 in the bank is hard to ignore.

If you are still unsure whether outsourcing makes sense for your practice, consider yourself a good candidate to outsource if:

  •      Your collection percentage is subpar when compared to the average for your specialty
  •      Your billing process is not efficient and collection times are high
  •      Your collections have not increased with increasing productivity and higher gross billing
  •      You have trouble finding and keeping experienced billers and coders and employee turnover at your practice is high
  •      You’re starting a new practice (and looking at considerable upfront costs)
  •      You want to focus on patient care and leave the business end of things to the experts
  •      You’re not technology savvy and neither is your staff
  •      You don’t have an in-house IT person to handle hardware and software problems and upgrades

Each practice is different, and it’s impossible to unequivocally state that one formula will work best for everyone. However, if there is a nagging question on your mind that you may be spending too much on medical billing services, this is a simple way to analyze your costs. The results may surprise you. You could be spending too much on collections. Worse still, you could be leaving revenue uncollected.

Contact us to find out how we can save you money.

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