Medical Billing Percentage Pricing – An Understanding

Medical Billing Percentage Pricing An Understanding


Often when a Provider or Medical Group is looking to outsource their medical billing and collections for the first time, they are perplexed by the Percentage pricing model.  Since they have never outsourced before, and were depending on their own staff for handling the medical billing and collections activities, they are not in a position to understand the benefits of the ‘success fee’ model.  Another major area of confusion and concern will be on what services are covered under this model.  Let us discuss these concerns and try to make it easier in understanding this model of pricing:

Percentage pricing model:  The percentage pricing model is also called the ‘success fee’ model, since the outsourcing company gets paid for its services based on successful collections.  The collections that are included for the percentage calculations will typically be the Gross collections that include both payments from the Payers, Patients and Self-pay category.  The percentage pricing model is a ‘win-win’ situation, since the outsourcing company gets paid only based on the collections.  So the onus for doing everything possible to increase the collections of a Practice or Medical Group rests with the Outsourcing Company.

Scope of services covered:  The biggest disconnect with the Percentage pricing model occurs while understanding what all Services are included.  Typically all the Revenue cycle services will be included that include – Demographic entry (if applicable), Coding (if Providers do not code), Charge Entry, Claims transmission, handling the Transmission rejections, Payment Posting, AR follow-up and Denials Management.  Sometimes, Credentialing, Insurance Benefit Verifications and/or Patient calling can also be included for a slightly higher fee.

What are typically not included are Patient Statement charges, Software purchase and set-up charges, Document Management in either Software or in the EHR/PMS, Contract negotiation with the Payers etc.

Obviously, these are not ‘set in stone’ and can always can be customized per the Provider or Medical Group’s requirements.  One of the reasons why the Percentage fee is always customized and there are no standard rate cards, is due to this customization that is possible, along with variations in Specialties, Collections, Software etc.

Benefits:  There are many benefits associated with the ‘success fee’ model.  The primary one being, payment based on performance only.  Since the Provider or Medical Group pays based on the performance (Collections), the fixed costs of salary and benefits for internal billing staff get removed and the margins for the Practice/Medical Group increases.

The other benefit is that the medical billing and collections are now handled by professionals who have the singular mission of improving the Collections for the Practice/Medical Group, as their fee is dependent on it.  This eliminates wastage, improves efficiency and faster cash flows.

Overall, the Percentage pricing in outsourced medical billing is one of the best models, though there are a few States that do not approve of this model.  But at a national level, this model has gained wide-spread approval both from the Practices/Medical Groups and also the outsourcing companies.