How to Start a Medical Billing Business
If you are thinking of starting your own business, you may have considered medical billing. Whether you have experience in medical billing or not, it’s a fairly inexpensive business to start, and you can work from your home and be your own boss. If you enjoy working online and have an eye for detail, a medical billing business may be for you.
Medical billing professionals take the doctor’s notes to accurately interpret and assign the correct CPT (Current Procedural Terminology) procedure code, so they get reimbursement from patients, health insurance companies, and Medicare, and Medicaid. This process involves high liability if mistakes are made due to laws like HIPAA. Because it is complex and time-consuming, these companies outsource their medical billing to businesses that handle all of the functions for them. Medical billing companies use processes and systems to streamline the billing to make it simpler and avoid errors. The billing company handles not only the billing but also insurance claims, collections, and management of the entire process.
Demand for medical billing services has increased significantly, and medical coding changes due to the pandemic increased it even more. According to IBIS World, the medical billing industry has increased 12.2% for the last five years and brings in $4.9 billion annually. Medical billing services are not particularly vulnerable to economic fluctuations because it is not a consumer-driven industry, and the demand for the healthcare industry does not decrease in times of economic downturns.
The medical billing industry is expected to increase by 5.7% by the end of 2021. Code changes and increasing telehealth services continue to make the billing process more complex, driving more medical providers to outsource their billing. Medical billing companies must be focused on keeping systems and skills up to date to stay current with laws and procedures.
Target customers for a medical billing company are healthcare providers, which include medical practices of any specialty, physicians, dentists, urgent care centers, laboratories, medical testing facilities, hospitals, and nursing homes.
Skills, Experience, and Education Useful in Running a Medical Billing Business
There are several specific skills that you will need to have or acquire in order to run a medical billing business.
- Medical billing training. Medical billing requires knowledge of billing codes and medical terminology, and therefore training is a necessity. The completion of most billing certifications takes between 9 to 18 months.
- Medical office experience. While not required, having some experience in a medical services environment will be valuable. Since medical billers directly influence when and how much doctors get paid by insurance companies, you’re more likely to win clients once you have some practical experience under your belt.
- Computer and software experience. You will be doing everything online and working with complex software, so the experience will give you a lower learning curve.
- Business knowledge and experience. You will need to have some basic knowledge of marketing, contracts, finance/accounting, and human resources.
- Sales. You have to be able to make a sales pitch when you contact medical providers to offer your services.
- Customer service. You’ll need to be able to build rapport with your customers so that you retain them as customers and gain repeat business and referrals.
Checklist for Starting a Medical Billing Company
If you’re thinking about starting your own medical billing business, there are a few things you should keep in mind. Here is a checklist of the essentials to get started.
Step 1: Write a Business Plan
After coming up with the idea, the next step in starting your medical billing business should be to write a business plan. The business plan will make you focus on some important aspects of the business, such as who your customers are, how you plan to reach them, projecting sales and expenses, your value proposition to use for marketing, and more. You’ll also need to do some research to calculate exactly what your startup expenses will be.
Not only will a bank require you to have a business plan if you need financing, but multiple studies have shown that having a good business plan increases the odds of starting a successful business. Writing the plan helps you think through all the aspects of the business and then serves as a guide as you begin.
Related: How to write a business plan
Step 2: Name the Business
Finding the perfect medical billing business name can be challenging. Not only does the name have to reflect what you do and be appealing to customers, but it also has to be available to use. You can check your state’s website to see if the name is available and register your name. Your name should make you stand out, reflect your brand, and tell potential customers exactly what you do. For a medical billing business, keep it short and simple.
Step 3: Choose a Business Structure
A business structure (also referred to as a business entity) refers to how a business is legally organized to operate. There are four primary business structures to choose from, which include the sole proprietorship, partnership, corporation, and Limited Liability Company (LLC). Each type of entity has its own pros and cons, such as liability exposure, costs, and administrative requirements.
When deciding on which business structure is best for a medical billing business, it normally comes down to the sole proprietorship and Limited Liability Company.
A partnership opens the owners up to unnecessary personal liability because if a partner does something to get the business sued, or runs off with cash from the business, the other partners are personally liable to repay.
The corporation can be a good choice to minimize liability risk because it separates the business assets from the owner’s assets. If the corporation is sued or certain business debts can’t be paid back, the owners aren’t personally responsible to repay them. The downside to the corporation is that it is more complicated than all the other entities and requires more administration than the LLC. If you plan on raising a lot of investment though, the corporation is usually the better choice.
That leaves the sole proprietorship and LLC.
The sole proprietorship is the least expensive and easiest entity to start which is appealing. The downside is the owner is personally liable should anything happen to the business, which is an important consideration. The LLC offers the ability to operate as a sole proprietorship with the liability protection of a corporation. Depending on the state, the cost to form an LLC runs from $40 – $500, which is pretty inexpensive for protecting the owners from business-related lawsuits and certain debts.
Related: Guide to forming your LLC
Forming an LLC sounds complicated and expensive, but using an entity formation service guides you through the process so you know it was done right.
Some popular LLC formation services include:
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Step 4: Select your Location
You don’t need an office to have a medical billing business, and many start as a home business. If you do choose an office location, you’ll need to consider your proximity to potential clients so that you can call on them and meet with them conveniently later after they’ve become clients. The location also needs to have adequate space, internet connection, and accommodations for your equipment and employees.
Related: Choosing a business location
Step 5: Apply for Business Licenses and Permits
There are no state or federal licensing requirements for a medical billing business, however, most providers are requiring that their billers be certified.
There will likely be general business registrations when starting your business. These permits and licenses can vary based on the state and town where the business is located. Some common registrations to research include a business license, sales tax permit, and an Employer Identification Number if you plan to hire employees.
Step 6: Find Financing
Coming up with a good business idea and having the skills to run it are one thing, but getting the funding to start a medical billing business is another. In order to get a loan, the borrower(s) will need to have good credit and be able to invest 15-25% of their money towards the total start-up costs. Startup costs for a medical billing business are mainly for equipment and software, so you are ahead of the game if you already have a computer and office equipment.
Step 7: Open a Business Bank Account
Keeping your small business and personal finances in separate bank accounts is important to track the income and expenses of your business and identify trends.
Many banks offer free business checking accounts, so be sure to find a cost-effective option for your business.
Step 8: Get your Marketing Plan in Place
The biggest challenge in a medical billing business is getting clients. As a startup, you will have to make multiple calls to medical providers to find one who is willing to try a new provider. You may have to start with small providers and offer your services at a slight discount to gain traction. Once you have a few clients, you will have more credibility and can look for a larger medical practice and charge regular market prices.
Some common marketing techniques for a medical billing business include social media marketing, online advertising, print advertising, and direct mail advertising. Developing a website can be a significant expense, but it can also give your medical billing business greater visibility online. Your main source of business, however, will be direct calls and visits to medical providers.
Every business is going to need a logo. Make a professional logo in no time with the free Canvaa logo maker!
Step 9: Get Business Insurance
There are several types of insurance to consider when starting a medical billing business. A few of these include:
– General liability insurance can help protect you from third-party claims of bodily injury and property damage.
– Worker’s compensation insurance covers expenses like medical bills and legal fees that a business might face if an employee were ever hurt while working.
– Property and casualty insurance protects you if your equipment is damaged.
The cost to insure a fish farm will vary depending on several factors. To get the most accurate idea of what to budget for insurance, request quotes from multiple providers. When comparing the quotes, consider not only the premiums but also how the plan exclusions, coverage limitations, and deductibles compare.
Step 10: Hire Employees
You may need employees to help you in your medical billing business as you grow your customer base.
In addition to salary costs, your budget will also need to include other employee-related expenses. Workman’s comp insurance, unemployment insurance, and paid time off are common expenses that a business will need to cover when hiring staff.
Related: Hiring your first employees
Step 11: Set up an Accounting System
Setting up an accounting system for your medical billing business is critical to the long-term success of your business.
Staying on top of taxes not only keeps the business out of trouble with the government but the numbers can be used to track and monitor trends and cash flow in the business and maximize profits.
The thought of accounting can be intimidating for a lot of new entrepreneurs. There are a number of ways of handling bookkeeping, from DIY to hiring a bookkeeper. These include:
- Pen and paper - Low expense, but difficult to track.
- Spreadsheet - Low expense, but easy to make errors.
- Accounting software - Medium expense, but owner typically inputs expenses. Some great accounting software programs include Freshbooks or Wave Accounting.
- Hire a bookkeeper - Higher expense, though very affordable at $100-$200 per month in most cases. A dedicated bookkeeper will probably save money because, in addition to handling all of the bookkeeping (so you can focus on the business), they also provide personalized tax advice and ensure the business is in compliance.
Find bookkeepers in your local area or use a service like 800Accountant.
How much does it cost to start a medical billing business?
The costs to start a medical billing business are relatively low compared to other businesses.
– Medical billing training $1,200
– Clearinghouse membership – allows you to directly submit claims to insurance companies – $100 – $300
– Medical billing software and licensing $2,500 – $10,000 depending on the size of your company
– Office supplies – $100 – $250
– Technology such as a computer, backup hard drive, scanner, printer, and fax machine $1,000 – $4,000
How much can a medical billing business owner make?
You should be able to make $1,500 on average per client per month, so if you are able to land five clients, you will make $90,000 per year. Keep in mind that you will have ongoing expenses for things like software updates and marketing.
Are there grants to start a medical billing business?
It’s extremely rare to find a grant to start a medical billing company. If you search for business grants, you will come across a lot of scams and misinformation. Occasionally an organization will offer grants to start a business, however, be skeptical and don’t provide any sensitive personal information or pay money to get more information.
Legitimate federal grants can be found at Grants.gov and you can check on your state’s economic development office to see if they have any grants available.
What is the NAICS code for a medical billing business?
The NAICS code for a medical billing business is 541219.
The NAICS code (North American Industry Classification System) is a federal system to classify different types of businesses for the collection and reporting of statistical data.
Related: What is a NAICS code?