Medical Billing Pricing Models Explained: 2.5% of Collections vs. Flat vs. Per-Claim.

You have decided to outsource your medical billing process, and now you are comparing medical billing services pricing, sent to you by many medical billing outsourcing companies.

Here you see a distinct pattern in these medical billing pricing models. Some companies charge 2.5% of your total collections, while some offer fixed monthly fees, and the rest charge a third of the bill per claim.

All these companies promise to handle your billing, but which one makes the most financial sense for your practice is something that you should look for. You see, the offers can be lucrative when you compare the quoted prices and choose to go for the lowest one. But the numbers don’t always tell the complete story.

For instance, a per-claim fee can add up as your claim volume grows, a flat monthly fee may come with volume limits, and a percentage-based model can become more expensive as your collection increases. That is why you need to consider what’s included in the fee and whether additional charges are applied.

So, before you sign with any of these medical billing companies, knowing the difference between these medical billing pricing models helps you understand what you’re really paying for.

On that note, let’s compare the 2.5% of collections, flat-fee pricing, and per-claim billing to help evaluate your options and choose the right option for your practice.

So, without further ado, let’s get started!

Medical Billing Pricing Models Explained

Now, it is important to understand that each of these models works differently. And interestingly, the one model that makes sense to you the most will most likely depend on your monthly collections, claim volume, and the services included in the agreement.

So, before you start comparing quotes from different companies, let’s have a look at how medical billing companies charge for services and what you need to consider with each option.

On that note, here is a table to help you understand these models better:

*Note: The suitability of each model depends on the contract, practice workload, and services included.

Now, as you can see, each model has its own advantages and disadvantages. For example, a percentage-based arrangement may work when the fee structure aligns with your collections, whereas a flat fee can make monthly budgeting easier. Per-claim pricing, on the other hand, ties your billing expenses directly to the number of claims processed.

Which Medical Billing Pricing Model is Best for Your Practice?

Choosing the right medical billing pricing model is something that completely depends on your practice’s size, claim volume, collections, and budget. So, instead of focusing only on the quoted rate, here are some of the factors that you must consider before making any decision.

• Practice size and claim volume: If your practice processes a consistent number of claims each month, per-claim medical billing pricing can help you with estimated costs. However, as claim volume grows, your total expenses may increase as well; that is why considering your current workload and the expected growth before choosing a model is necessary.

• Monthly collections: If you prefer fees tied to the revenue collection, a percentage of collections medical billing may be worth considering. But check whether the company charges a percentage of total collections or applies a percentage of new collections fee based on specific contractual terms.

• Budget and cost predictability: If predictable monthly expenses are a priority, then flat-fee medical billing may be a perfect fit for your practice. Check that their quoted fee covers your expected workload or included volume limits, minimum charges, and additional service fees.

• Compare the same scope of services: When evaluating proposals, make sure that each company covers the same services, which include claim submission, payment posting, denial management, appeals, and accounts receivable follow-up. A lower quote does not always refer to offering the same level of support.

• Calculate total monthly and annual costs: Use your actual collections and claim volume to estimate what each proposal will cost over a month and a year. This would typically include onboarding fees, implementation costs, and any additional charges to make the comparison more accurate.

The key here is to not go looking for which billing model offers you the lowest rate, but which medical billing pricing model is best for a medical practice with your specific workload, budget, and billing requirements. So, comparing the complete cost and service scope before making your decision is the way to go.

What to Check in a Medical Billing Pricing Agreement

A medical billing pricing agreement includes everything that you need to know, and taking a closer look can reveal everything. However, for that, you need to look beyond what the quoted price is, what it covers, and what could add to your expenses later.

On that note, here are a few things that you need to check and make your decision around it:

• Included services and additional fees: Check whether the agreement covers claim submission, payment posting, denial management, appeals, and A/R follow-up. Something that you need to keep an eye out for is exclusions and additional charges for services that fall outside the agreed scope.

• Setup and technology expenses: Ask the medical billing company right upfront about their onboarding, implementation, clearinghouse access, billing software, and other technology expenses. Along with that, also ask if the prices are included in the quote or billed separately. These costs can affect the total expense, particularly during the initial months.

• Minimum charges and volume limits: Review whether the company requires a minimum monthly payment or sets limits on the number of claims or providers covered. Something that you also need to check is how fees change if your practice grows or your claims volume exceeds the agreed limit.

• Pricing adjustments and contract terms: Understand the terms and conditions under which the company can add or deduct something from your accounts. Review the contract duration, renewal terms, termination conditions, and any other fees associated with ending the agreement early.

• Reporting and performance tracking: You need an overview of your performance across the revenue cycle. Confirm what the outcome will be, which in this case is revenue, and how frequently you will receive those reports. Monthly reports on collections, outstanding accounts receivable, claim denials, and payment performance can help you evaluate whether the service is meeting the requirements you agreed upon.

• Request an Itemized Estimate: These are the things that you need to ask before you shake hands on the agreement. Ask for a breakdown based on your actual provider count, claim volume, collections, and required services. It makes it easier to compare proposals and understand the total cost rather than relying on the headline rate alone.

*Note: Take time to review these contacts carefully and avoid any unexpected expenses. Always choose a practice price arrangement that fits your practice.

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