The most common way billing services charge providers for their services is with a percentage of the receivables. This is often based on what is actually paid by the insurance carriers and sometimes the patients depending on the agreement between the billing service and the provider. This type of arrangement often works well for both as it is an incentive for the billing service to do a good job as their pay depends on it. There are both advantages and disadvantages to this way of charging the provider.
First of all, in some states it is illegal for the provider to enter into such an agreement as it is considered fee splitting and prosecutions have resulted. It is not common for providers to be prosecuted for entering into this sort of arrangement but it is a possibility and should be considered. Two states we know of that have fee splitting laws in effect are Florida and NY. So as a billing service you may think you are off the hook because it is only illegal for the provider to enter into this sort of arrangement but not so. The problem for the billing service is that you have entered into a contract that is illegal and unenforceable. So if you end up in court for any reason such as the provider didn’t pay you for the last three months, basically your contract may not even protect you at all. It can be found to be an illegal contract and not enforceable.
So what’s a billing service to do? Why not consider flat fee billing? Most billing services do not want to consider it as they don’t know how to come up with a reasonable flat fee and providers are used to being quoted a percentage so they can’t compare your price as easily. So if we tackle these two objections, you can start offering a flat fee instead of a percentage and you may find many advantages.
When a doctor objects to a flat fee for his billing instead of a percentage it is usually just because he can’t compare it to other offers. Some providers are not aware that this practice is illegal and when they find out that it can get them in trouble they want to hear about other alternatives. A billing service can explain to the potential provider that they do not ever want to steer a provider toward an action that could be considered illegal or get them in trouble. They are here to help the provider and to keep the provider from doing anything that unintentionally that could be considered a problem later on.
Even if you are in a state that allows percentage billing it can be an advantage to the provider to know up front what it is going to cost him or her every month to have someone taking care of the billing outside of the office. From a billing service standpoint I much prefer a flat fee so I know what I can expect each month. With a flat fee I have a much better idea whether or not we are making a profit on that account. When charging a percentage it can fluctuate enough to leave you wondering if the account is worth the work. There are many circumstances that can affect payment that were in no way caused by the billing service who still did the full amount of work, but because the income was down that month, the billing service doesn’t get paid either. Here’s an example.
We had a provider sent his information by fax a couple times a month so we didn’t see him often. He moved his office and didn’t tell us. By the time we found out, so did Medicare who stopped his payments as they will if mail can no longer be delivered to the address they have on file. We filed a new 855I for him and waited three months for his application to process before he started receiving Medicare money again. We also waited three months before we could bill him again.