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With any service business you get the
flexibility of choosing your fees and the
method to which you arrive at those fees.
There are a few methods to choose for and we
will go over a few of them below. Please
note that in some states there are laws that
prohibit physicians and healthcare providers
to enter into any fee-splitting
arrangements, to see if you are in a state
or
working in a state that has fee-splitting
laws, login to our subscriber area and go to
the favorite shortcuts section and click on
"Pricing your Services" which will bring up
the various states that prohibit providers
from entering into fee-splitting
arrangements as well as some sample case
precedents.. There you
will find the states, and the verbiage from
the state law/ruling. If you are not a
subscriber you can subscribe by visiting us
at
www.billerswebsite.com. So let's talk
about the various methods of coming up with
a fee schedule and the various pro's and
con's of each one. We will then go over a
basic formula for calculating these various
methods.
Methods of Pricing
1.
Percentage - This is
probably the method most widely used, the
advantage to providing percentage based
charges is the "incentive" offering to the
provider. The methodology that you don't get
paid unless they get paid. This is usually
appealing to providers because you have the
"incentive" to collect maximum revenue. The
disadvantage is that there is more potential
to have a part in fraud, abuse and error in
the name of trying to gain maximum revenue.
The benefit, obviously is that you have the
same advantage the practice does by ensuring
maximum reimbursement.
2.
Fee per Service
- A few years back this was
also known as the "Per claim fee" but our
industry has evolved and grown to allow
billing companies to be much more productive
in the entire reimbursement process and
provide clients with various other services.
A billing company that provides claims only
may have a fee structure of let's say $5.00
per claim. Another fee might be for benefit
verifications and eligibility check, for
example; $2.00 per patient. Another service
that might be charged separately is patient
statements. I think you get the idea. The
pro's to this method is that you will be
reimbursed for each task, coming up with
these fees can be justified by figuring out
approximate time per task, costs of each
task and an amount you would like to make as
profit, you also get to provide your clients
with a menu selection of services so that at
any time they can add or change services and
only a simple adjustment of your contract is
necessary. One of the disadvantages to this
method is that there might be additional
work the client would like done that has not
been thought about or perhaps that you do
not offer. Another disadvantage might be
that providers will "feel" as
though they
are being nickel and dimed. You
will need to set a fair fee structure that
would cover certain tasks such as taking
patient phone calls related to their
statements, answering staff questions,
talking to insurance carriers, or the use of
any other time which could occur in regards
to the overall reimbursement.
3.
Flat monthly Fee
- With a flat monthly fee this makes billing
your clients very simple. The flat fee can
be determined a combination of ways. I like
the flat monthly fee because I can determine
what I want to make per hour and base it on
a time I will need to work on an account
monthly. To arrive at the flat fee amount
you can set an hourly rate you feel you are
able to receive. This will be determined by
various ways including experience and
geographical location and average salary.
Once you have that hourly rate set, you can
then determine the amount of time
(approximately) that account will need each
month. Like any other way of setting your
fees, you will need to have the practice
complete a practice analysis which will
consist of practice data such as average
claim volume, average managed care volume,
etc. The nice thing about creating a monthly
fee based on an hourly rate is that there is
not much "guess" work involved. You can
easily set the hourly rate for what you hope
to make per hour after expenses. Once you
have the completed practice analysis, an
overall idea of your hourly rate, you can
then estimate the amount of time needed on
an account. You can also create a sliding
scale to accommodate higher turn around
clients or new practices that are growing.
For example, you can set an additional flat
fee for new patients added. So if for
example your hourly rate is $25 per hour and
you know you need an hour to load and setup
5 patients, your sliding fee could be $25
for every additional 5 patients added. The
downside to this method is that you may have
a practice that closes periodically or is
not very busy, or is a small provider only
seeing a few patients a day. The pro's to
this method however and unlike the
percentage type billing or per claim
billing, is that you are getting paid for
all of your work regardless of the amount of
claims filed or the percentage of revenue
collected.
4.
The Hourly Rate/Fee
- This is much like the flat fee method,
only you are leaving the hourly rate and you
will have deducted your costs and expenses
prior to setting the hourly rate. This is
very simple and easy and assures your
business you are getting paid for all
of your time spent without having to
estimate. This also allows you to easily
charge a client for additional services such
as consulting, software training, etc. The
downside to this method is that a provider
will often see this fee and perceive that
he/she can have an in-house biller for a
lower salary without really seeing the
benefits of outsourcing, you will need to
work a little harder to incorporate those
benefits to your potential client.
FORMULA
So now we will come up with a formula. Using
this formula you can also get an idea of the
various ways to present your fees. This one
formula can work to price your services
hourly, monthly or even per claim because
your base will always be what you hope to
receive annually/hourly.
First, let's decide what you want to make
annually (be reasonable and practical). For
the sake of this example, let's use a figure
of $30,000 a year. Then add approximately
30% to that to cover taxes, and insurance.
That will come to an additional $9,000.00
per year. Add your fixed costs such as
utilities office supplies, liability
insurance, marketing and advertising
expenses. For the sake of this example we
will estimate this figure as $10,000.00.
Next, add your variable costs such as
clearinghouse fees, postage, telephone,
internet, etc. Let's estimate that cost to
about $5,000. Total this all and you come to
$54,000 as the annual gross income you will
require. (Remember this is based on a total
salary working approximately 40 hours per
week, the number of clients is irrelevant
unless you will be hiring additional
staff/employees). Now it is time to
take the formula we just created and come up
with an hourly wage. For our example we are
using an average of 40 hours per week. There
are 52 weeks in a year, which totals to
2,080 hours annually. Divide the 2,080 into
the $54,000.00 total we got in our example
and this will come out to $25.96 per hour.
Next, youcan round that up to $30.00 per
hour to create additional profit margin. Now
that we know your time is worth $30.00 per
hour we will use this as a basis for
calculating your fees.
As we mentioned earlier you will need to
have each potential client complete a
practice analysis (Subscribers can view
samples in our forms page and within our
marketing area). You will want to at least
get the following information: Dollar
volume per month, Claims per month and have
an
estimate of the amount of time it will
take to process those claims. We can then
calculate a per claim fee for a practice
that does approximately 400 claims a month.
If you estimate it will take you 4 minutes
per CLEAN claim, that means you can process
15 clean claims in an hour. Divide the 15
claims into your $30.00 per hour figure and
you come up with $2.00 per claim or $800.00
per month.
To calculate a percentage figure, take the
$800.00 per month and divide it into the
monthly collections amount, let's say that
it's $15,000. This will come to 0.05 or 5%.
Remember that these are only examples.
Income and potential earning is going to
depend on many variables such as your
experience, costs and average earnings
within your geographical location. The
formula however can remain the same.
Again, we remind you that there are still
states that prohibit healthcare providers to
enter into any type of fee-splitting
arrangement, so consult your state laws, or
subscribers may login to our area to view
these states, state law verbiage and sample
case precedents. A biller billing a client
based on a percentage of collections, in a
state where it is considered to be
"fee-splitting" is ultimately not working
with a contract, as the contract is
null-void if a provider is prohibited from
entering into that contract in that state.
If in doubt, consult an attorney.
If you do something different in your
business we'd like to know! Send us an email
at
pmrnc@billerswebsite.com Be sure to
include details on how you arrive at your
method of pricing.
FROM
OUR 11/18/09
Newsletter
Linda Walker
Copyright 2009. May not print or
redistribute without written permission.
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