Starting a Medical Billing Business

February 27, 2013 | By | 3 Replies More

Starting a Medical Billing Business

A medical billing service helps physicians obtain payment from insurance carriers and patients by handling insurance claims, and provide information to help physicians to more effectively manage their practice.

Medical billing is a business that can easily be done at home, even on a part-time basis. However, running it as a business takes more than just the technical know-how: you need to know how to manage and run a business, market and promote to get clients and possess financial savvy to turn it into a success.

It is a business that has grown by leaps and bounds in the past decades. While demand is great, competition in the medical billing market is fierce. While there are a number of large and well-established firms dominating the market, the medical billing business has a lot of room for a small and home-based business entrepreneur.

Knowledge and Skills Needed to Start the Business

As a medical billing professional, you will provide the following services:

Preparing either electronic or paper claims to insurance companies, such as Medicare, Medicaid, and third party insurance’s, such as Blue Cross Blue Shield, Humana, Great West, etc.

  • Entering patient information into the software
  • Mailing patients’ statements
  • Posting payments
  • Following-up on all unpaid insurance claims, as well as appeals and denials
  • Conducting “soft” collection on non-paying patients (e.g. making phone calls and sending out past due statements)
  • Submitting reports to the doctor (e.g. number of patients per month, etc.)
  • Handling all patient billing inquiries

Medical billing is a business that requires specialized skills and knowledge that can only be gained through education and training. The first step when planning to enter this business is to enroll in coding and billing courses at your local college or a reputable home study program. Some institutions that offer medical billing and coding courses include Purdue University’s Professional Development Studies (which offer Administrative Medical Specialist), and Professional Career Development Institute.

When choosing your educational institution, make sure that the course offered will cover the following aspects of medical billing:

  • Learn basic medical terminology (e.g. key systems of the body; building medical words with prefixes, suffixes, and combining forms) · Understand an insurance claim’s lifecycle (e.g. developing the claim; procedures for patient interviews)
  • Basic claims process for medical insurance and third party reimbursements (e.g. how to manually file claims; general billing and optical scanning guidelines; reporting diagnoses: ICD-9-CM codes; tracing delinquent claims)
  • Using common insurance forms
  • Introduction to the national diagnostic and procedural coding systems.
  • Become acquainted with medical office computer software · Procedures and steps to appeal denied claims
  • CPT (Introduction, Guidelines, Evaluation and Management Specialty Fields such as Surgery, Radiology and Laboratory)
  • Understanding Medicare

The key to longevity and success in this business is to gain the trust and confidence of your clients ­ the doctors. Billing is the lifeline of doctors; hence they will only give their account to you if they are confident that you know how to bill their claims. They will not outsource their billing to someone coming in to this business with no experience or skills, as you may jeopardize the doctor’s chance to collect their income. Be prepared to provide references to potential new clients.

Starting a Medical Billing Business

Starting this business is just like any other business: you need to plan for it, set it up, know how to market your venture and sell to potential clients, manage the business and provide the best customer service that you can. The steps to starting a business entail the following:

medical billing businessPrepare a business plan. This is your roadmap to success. It will help you think through what you need to make the business a success, the resources you need to have, and the constraints you are faced. It will help you understand your market and determine your competition. Read articles on Business Plans.

Decide on a form of business. You can choose to have a sole proprietorship, partnership, a limited liability company (allowed in some states in the U.S.), or a corporation. Learn the advantages and disadvantages of each business form, and find which one is suited for you. Read articles on Business Structure.

Complete your business registration requirements, and other permits and licenses. This includes choosing your business name. Even if you will work from home, it is best to operate with all the legalities covered. Read our State by State Guide to Starting a Business.

Check out zoning requirements, particularly if you are operating a business from home. This is particularly crucial if you will be seeing clients in your home office, setting up an outside sign to announce your business, and will require constant parcel deliveries. Find out from your county or area if a home business is permitted, and what kind of businesses is allowed to be operated from home. If you don’t cover your ground, a complaint from your neighbor about too much traffic coming into your home can jeopardize your entire operation. Read the article Zoning Laws and Your Home Business

Set up your home office. Decide what part of your house you can use. A room would be best to help you keep all your files and records in one place. Get all the equipment you need, from computers to an additional phone line installed. Read articles on setting up your Home Office

Prepare your family. Get your family to support your decision to work at home. If you have children, plan on how their care could be provided when you are busy with your business. Read articles on work life balance.

Medical Billing Business Start-Up Costs

Including education costs, you may need about $3,000 to $5,000 to start the business. The cost of your new business will depend on the kind of start-up expenses that you will incur ­ e.g. whether you go first class with brand new equipment and supplies, or you go slowly and simply use everything that you currently own.

Start-up expenses include your:

  • Basic office equipment (e.g. computers, fax, modem and internet connection, back-up systems)
  • Furniture (chair and table, filing cabinets)
  • Office supplies (e.g. staplers, paper, bookends, diskettes, envelopes) · forms that you will need (e.g. HCFA, Medicare, and other insurance forms)
  • Coding and other reference books
  • Medical billing software

The medical billing software will be one of your biggest expense. Usually starting at $500, it is important that you research various medical software before you make a purchase. Ask for a demo before purchasing the product. Steer clear of companies that do not provide demo products that you can evaluate. Also, make sure that you buy software with ample technical documentation to help you figure it out.

Buy a software that can grow with your business. Avoid those that only allow you to handle only one physician or tax I.D. numbers (there are many unscrupulous vendors out there).

Another important factor in selecting the software vendor is the quality of their after-sales support. Check to see the kind of technical support available, and how much do they charge.

Marketing your Medical Billing Business

When starting a business, you have to be prepared to market it. You cannot simply start a business and expect people to find you and flock to you. In fact, the majority of your time will be spent looking for clients during your start-up phase.

There are various ways to market a medical billing business. The most important thing is networking. You must know potential doctors who may need your help and services. Check out the doctors that you and your family use. Introduce your business to them. Ask for referrals to other doctors they know who may need your services. Note, however, that networking takes time to bear fruit and you must be patient and continue to working on getting the word out about your business.

You can also send out mailings to doctors in your area. Send a letter with a brochure detailing the services that you offer. Immediately follow up your mailings with calls. If you can, set up a meeting with potential clients so you can personally present to them your business.

Another strategy is to try “cold calling” on the doctors, although you may not be able to talk with the doctor given their usual tight schedules. Instead, you can simply leave your business card and marketing materials to the receptionists. If the clinic or doctor’s office does not allow for soliciting, it would be best if you could just send out that particular office with a direct mailing piece.

Word of Advice: Avoid Medical Billing Scams

Those looking to start this business need to watch out for scams. The rise in demand for the medical billing business also increased the number of scams preying on hapless individuals, eager to go into a business the easier way. Many of these promoters offer software, training and technical support, even a list of potential clients, for the price of $2,000 to $8,000, and promise that they are able to find clients, start a business and generate revenues. They get the intended victim to believe that they will earn a substantial income and recover their investment in a short time. But instead, victims find that they are unable to find clients, have a hard time starting the business and the revenues promised to them are non-existent, it there is, it is not even enough to recover their investment.

If you believe the claims of business opportunity ads that you can start this business even with zero knowledge, then you are in for a great frustration. The unscrupulous advertisers often give assurance that no experience is required, that they will provide clients eager to buy your service, or that their qualified salespeople will find clients for you. This is the biggest fallacy of all.
Recommended Books on Starting a Medical Billing Business:


Jenny Fulbright

Jenny Fulbright

Jenny Fulbright is a writer for

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