Starting a Healthcare Business – Help Doctors Slash Their Billing Costs

By: Patrick Phillips, Founder and CEO of American Business Systems, LLC

(Article originally published in Billing Coding Magazine – Dec/Jan 2014)

As Founder of the nation’s largest network of independent medical billing companies, I have found that doctors can reduce their costs of billing by up to 50% – by outsourcing to a billing specialist.

Now wait a minute. If you currently do the billing for a doctor, you may be thinking you will lose your job if the billing is outsourced. But my experience and the experience of the hundreds of people who have started or are just now starting a healthcare business in our network nationwide have proven otherwise. Usually a doctor can save money by outsourcing their billing and increase their revenue by utilizing their current staff to help them see more patients.

After all, a medical provider earns their income from seeing and working with patients, not in billing the insurance companies and government agencies. By the time they bill those entities, they have already earned their pay by seeing the patient. The billing is just a necessary evil of their profession. You could be the hero and show the doctor how they can reduce costs by outsourcing and increase revenue on the front end.

In fact, most office managers and staff will tell you that the best part of their job is when they are asked to help with the clinical side of the office, helping with the patient care. The billing is not the highlight of their day.

If you are a doctor, you know that your biggest fear is that you will “lose control” of your money by turning the collection of that money over to someone else. Whether that person is in your office or outside your office does not matter. If they are competent and trained to bill and collect as much as possible from the insurance companies and Medicare and Medicaid (and the patients), it really doesn’t matter if they are doing this inside the office or outside.

Besides, as you will see later in this article, there are cloud-based systems that can give you all the “control” you want over your receivables and still allow you to focus on your core competency: helping patients get and stay well.

Face it: you, as the owner of your practice, do not have time (or even know how) to stay on top of all that is going on in your practice with patients and keep track of what is being billed (correctly) and what is being paid (accurately and maximally) by the payers. This is best left up to billing specialists.

Think about it. Most billers who are hired to work inside a medical practice have not had any formal or professional training in how to do the billing, work with the rejected claims, correct the errors, and resubmit the claims. Most billers learned what they do from the person who trained them – who was the person doing the billing before them, and so forth, back in time. Besides, they are only doing the billing for your practice. Additionally, most in house billers will be paid the same regardless of performance or amount collected creating low incentives to focus on collecting every dollar earned by the practice.

On the other hand, professional billing services do the billing for multiple practices, so they come across many more situations than the internal biller would ever come across. This helps the professional biller to learn to solve more problems and resolve more issues that a single biller could ever encounter in years of doing the billing for a single practice. Most professional biller’s agreements are structured in a way that ties their “pay” directly to the amount that the practice is reimbursed. This creates the right incentives to maximize the amount collected. A true “win-win.”

The New England Journal of Medicine says that market analysts estimate that 24 cents out of every dollar are wasted on administrative and billing expenses ( You can’t eliminate all these expenses, but you could cut them in half by outsourcing. Let’s examine some reasons why:

Technology costs can be virtually eliminated by outsourcing. Not just the initial cost of computers and practice management and billing software, but the ongoing costs of periodic upgrades to the system and medical codes. Then there are user fees, support costs, the cost of turnover training, technical help, and other hidden IT costs.

One busy doctor says he spends a minimum of $50,000 annually supporting his software programs, updating software, licenses, and paying an IT consultant to manage and handle these functions for his practice (The Medical Entrepreneur by Steven M. Hacker, MD).

Outdated billing systems cause practices to lose huge amounts of revenue. A few years back, medical billing was much simpler and rejection rates from insurance companies were in the single digits. Payers seem to change the rules more often and it is hard for the older billing systems to keep up with the changes. So, denial rates are averaging around 34% nationwide, for most physicians. And up to 40% of all rejected claims are never resubmitted for payment, according to the American Academy of Professional Coders (

This means a lots of time and money is spent on follow-up, and some office billers are just swamped with new claims and don’t have time to do proper follow up on all the rejected claims. Professional billing services excel in follow up and deal with all insurers and government agencies like Medicare on a regular and timely basis.

And, with the right cloud-based software system, rejection rates are below 2% in most cases, if the billing is done by professional billing services who are dealing with this daily.

High turnover in personnel costs practices big time. Various surveys done by the Medical Group Management Association ( show that the average cost of recruiting, hiring, and training a new employee is around $3,800. With the average practice seeing 3 to 5 new hires per year, this can take a chunk out of the bottom line quickly. Having a professional billing service can avoid this cost completely. And, since they are doing the billing for several practices, they can effect savings by spreading the costs among all their practices, rather than having dedicated billers in one office.

And, consider that your current staff may be torn between medical and administrative functions and may not be able to show the degree of flexibility required to efficiently carry out the medical billing, coding, submitting, and realization of medical claims.

Given the rate at which the medical billing and coding norms are undergoing transition (think ICD-10), your staff, already grappling with inadequate time, might not be able to match up to the demands of radical billing and coding changes.

Patients are going to be paying higher deductibles under the new ACA rules. This means that the $60 billon in bad debt that is written off on what patients owe will certainly grow. McKinsey & Company ( says that physicians typically collect only about 50% of patient outstanding balances.

A modern, efficient billing service can collect up to 98% of the money patients owe, especially if they are using the technology available to collect payments online and directly from patients’ credit cards and checking accounts. This gives the patients options to make paying their balances easier, which means more of them will do so.

Wayne Paul, CPA, says in the forward to my book (Cash Crunch to Cash Flow: How to Get More Money Faster into Your Professional Practice … and Plug the Hidden Leaks that Are Draining Profits) that “medical practices should outsource as many routine tasks as possible, especially when it costs less than doing it internally.”

In summary, to maximize their profits, doctors should focus on their core competency and outsource the rest. Call us today to find out about starting a healthcare business with ABS might be the right move for you!

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