Starting a medical claims processing business can be an interesting and profitable opportunity for different types of professionals. Medical claims remain one of the most valuable sources of data for healthcare organizations. All-payer claims tend to feature detailed diagnosis and procedure information for any billable patient visit.
Therefore, if you’re good with people, detail-oriented, and organized, starting a medical claims processing business may be a perfect fit for you. The industry is expected to grow over the next few years, with more practices considering the benefits of outsourcing medical claims processing.
In addition, the U.S. Bureau of Labor Statistics noted that medical claims processing jobs will grow by 15% within 2014-2024, and this rate is much faster than the national average for job growth. Since medical claims processing services are more in demand than ever, there is an inviting opportunity for you to expand your company in the upcoming years.
Steps on How to Start a Medical Claims Processing Business
Table of Content
Conduct Market Research
Right before you start a medical claims processing business, it is very necessary to research the industry holistically. Take your time to research if there is a need for third-party claims processing in your area. Take a look into your competition as well. Conduct detailed research about other outsourced medical claims processing services in the area.
Know who their clients are, and whether or not there will be new clients who will require your service. You can also reach out to local medical practices and ask about their medical claims processing needs. This will help you realize the local demand for outsourced claims processing services in your area.
a. Who Is Your Target Audience?
Have it in mind that the target market for a medical claims processing business can be as diverse as the field of modern medicine. In this line of business, any healthcare provider is a potential client. You can choose to offer your services to family practitioners, providers of every specialty from geriatrics to pediatrics, chiropractors and osteopaths, obstetricians and oncologists, proctologists, and podiatrists. You can also target mental health professionals, psychiatrists, and psychologists.
b. Is Medical Claims Processing a Profitable Business?
Yes, with massive demand and low costs, a medical claims processing business is, without a doubt, a profitable endeavor.
c. Are There Existing Niches in the Industry?
Yes, it is always advisable to narrow your focus and target specific types of practitioners and providers to ensure you take up a substantial share of the claims processing market. As a niche for your new business, there are the medical claims processing industry’s sub-sectors to consider. They include;
- Dental claims processing
- Mental health and psychiatric claims processing
- Family practices claim processing
- Cardiology claim processing
- Veterinary claims processing
- Chiropractor practices claim processing
Do not forget that each medical sub-sector will have its own claims processing and coding guidelines and procedures.
d. Who are the Major Competitors?
- Exela (formerly SourceHOV)
- BillingParadise
- ARDEM Incorporated
- IQ BackOffice
- Simply Contact
- Clario Tech DMCC
- GroupOne
- The Contact Company
e. Are There County or State Regulations or Zoning Laws for the Medical Claims Processing Business?
Yes, medical claims processing businesses are expected to secure Local County and state business licenses. The fees for these licenses will surely vary from one jurisdiction to another but can be found on applicable city and county websites. Even home-based businesses are also mandated to obtain a local business license.
While there are presently no federal or state licensure requirements for medical billing companies, a few states like New Jersey, require registration and certification of third-party medical billers. In addition, don’t forget that rules and regulations in the healthcare industry tend to change quickly, therefore it is recommended you always check specific requirements in your state of the organization before opening a medical claims processing business.
f. Is There a Franchise for Medical Claims Processing Business?
- WCH service bureau: $45,000
- Gotelecare: $100,000
- Thriveworks: $25,700 – $89,280
- Claimtek systems: $12,000 – $28,000
- American business systems: $27,990
- Onyx – the business of medicine: $16,500
g. What Do You Need to Start a Medical Claims Processing Business?
- Computer system with printer and internet connection
- Fax machine
- Software or business opportunity
- Clearinghouse
- Reference material
- HCFA 1500 forms
- Voice mail or answering machine
- Office supplies
- Postage
- Technical support
- A reliable business phone system
Memorable Medical Claims Processing Business Names
- Healthcare Calculator
- Efficient Health First
- Medical Invoice Group
- Hope Claims Processing
- Medcount Industries
- Vermont Claims Services
- Quick Medical Settlement
- Arthur Medical Solutions
- Vital Medical Processing
- Zoom Physicians Billing
- Click Medical Finance
- Accurate Medical Billing
- Styles Medical Billing
- Premium Health Numbers
- Touchscreen Auditors
- Prime Billing Services
- Dental claims and billings
- VN Medical Billing
- Statistical Healthcare Solutions, LLC
- Winner Billings
Register your Business
a. What Type of Business Structure is Best for Medical Claims Processing Business?
Only very few healthcare businesses ever operate as a sole proprietorship. Always remember that your choice of business structure is very vital for numerous reasons including protection from potential liability. A good number of medical claims processing companies are structured as limited liability companies.
Note that this business structure offers the owner protection from liability for the debts of the company, and offers flexibility in ownership, taxation, and distribution of profits. A limited liability company is quite cheap and easy to form.
b. List Steps to Form an LLC
- Choose a Name for Your LLC.
- File Articles of Organization.
- Select a registered agent.
- Decide on member vs. manager management.
- Create an LLC operating agreement.
- Comply with other tax and regulatory requirements.
c. What Type of License is Needed to Open a Medical Claims Processing Business?
Have it in mind that the permits and licenses you need to start your medical claims processing business will surely vary based on the state and town where the business is located. Note that some common local, state and federal registrations a medical claim processing business may need include a sales tax permit and an Employer Identification Number if you intend to hire employees.
d. What Type of Certification is Needed to Open a Medical Claims Processing Business?
- Certified Medical Reimbursement Specialist
- Certified Coding Associate
- Certified Professional Coder
- Certified Medical Insurance Specialist (CMIS)
- Certified Billing and Coding Specialist (CBCS)
- Certified Coding Specialist (CCS)
- Certified Professional Biller (CPB)
e. What Documents are Needed to Open a Medical Claims Processing Business
- HCFA 1500 forms
- Assumed name certificate
- Employer Identification Number
- Operating agreement
- Insurance
f. Do You Need a Trademark, Copyright, or Patent?
There might be no need to file for intellectual property protection since you can start and run this business without having to challenge anyone for using your company’s intellectual properties in any way. Howbeit, if you are looking to protect your company’s logo and other documents or software that are unique to you or even jingles and media production concepts, then you can consider filing for intellectual property protection with the USPTO.
Do your Cost Analysis and Budgeting
a. How Much Does It Cost to Start a Medical Claims Processing Business?
The cost of starting a medical claims processing business can be quite low. If you choose to work from home, then you don’t have to worry about leasing office space as there’s virtually no inventory. Most expenses are office equipment and software, and many of these you may already have access to or can buy used to save money.
However, depending on the size and scope of your new company, you may spend anywhere from $1,000 to $10,000 to start your medical processing business.
b. What are the Cost Involved?
- A reliable computer: $500 – $3000
- A printer and fax machine: $150+
- Software licensing: $1500-$3500
- Software upgrades: $500-$3500
- Backup hard drives: $50-$150
- Ethernet switches and wires: $50-$100
- IT support: $100+ per hour
c. What Factors Determine the Cost of Opening a Medical Claims Processing Business?
- Business license and permits
- Business structure and registration
- Insurance
- Rent, renovation, and furnishing of your workspace
- Choice of software
- Number of employees
- Advertising and marketing plan
- Miscellaneous
d. Do You Need to Build a Facility?
You don’t really need a facility to start a medical claims business. Note that medical claims processing can be done on a small or large scale. Right from the comfort of your home, you can get a medical claims processing business up and running with a laptop and basic accounting and claims processing software. Bigger businesses will require staff, ranging from 5 to 10 employees up to thousands, and then a facility.
e. What are the Ongoing Expenses for Running a Medical Claims Processing Business?
- Software
- Insurance
- Utilities
- Office supplies
- Labor costs
f. What is the Average Salary of your Staff?
- Chief Executive Officer: $52,340
- Accountant: $41,670
- Medical Billing Specialist: $39, 745
- Customer Service Executives: $32, 780
g. How Do You Get Funding to Start a Medical Claims Processing Business
- Bootstrapping
- Small business loan
- Investors
- Crowd-funding
- Government grants
- Venture capital
Write a Business Plan
a. Executive Summary
Efficient Health First is a new medical claims processing firm well-positioned to assist local health care providers in Austin in offering sound practices that will guarantee business success and, in turn, guarantee quality health care for their clients and families. At Efficient Health First, our initial plan is to focus on just claims filing and processing, but will grow to diligently pursue our goal of providing one-stop physician medical office management.
b. Products and Service
- Complete patient record setup.
- Electronic and manual medical claims filing.
- Patient billing.
- Claims posting and patient record updating.
- Collection services.
- Complete practice analysis.
- Assistance in negotiating health care contracts.
- Automated transcription service.
- Volume discounting
c. Mission Statement
Our mission at Efficient Health First is to become a top medical claim processing firm dedicated to helping medical practices become more efficient and save money by offering them the platform to out-source their insurance processing and medical billing to an expert claim processing service.
Vision Statement
Our vision at Efficient Health First is to become a full-service medical claim processing business with individual pricing.
d. Goals and Objectives
- To obtain one account by the end of month three.
- To process 1,500 claims a month by month 14.
- To become well-known as a local industry expert in the field of medical claims processing.
- To inculcate other additional services to our initial offering of medical claims processing
e. Organizational Structure
- Chief Executive Officer
- Accountant
- Medical Billing Specialist
- Customer Service Executives
Marketing Plan
a. SWOT Analysis
Strengths
- Robust software
- Excellent workflow processes.
- Top-notch customer support.
Weaknesses
- Initial costs for software development.
- Inadequate marketing budget
- Time and resources it will take to turn non-technology physicians into willing consumers of computer medical technology.
Opportunities
- A massively growing industry.
- Increased margins as the customer base grow
- Potential mandates by insurance companies to leverage electronic filing.
Threats
- Uneven negotiating power of insurance companies.
- Future competition from another medical claim processing firm
- Security/confidentiality concerns regarding electronic filing.
b. How Do Medical Claims Processing Businesses Make Money?
Medical claim processors tend to leverage one of three methods to bill their clients:
- Percentage of the amount collected: This method is most often used by medical claims processors who offer full-practice management or who process both patients claims processing and billing claims processing. However, don’t forget that you claim a percentage of the total amount collected not the total amount billed.
- Per claim basis: This tends to work best for medical claims processors who just do claims with no other practice management tasks.
- Hourly rate: Have it in mind that this method is most often used when the claims processing of a client is so low that neither percentage nor per-claim methods are profitable.
c. Payment Options
- Payment via bank transfer
- Payment with cash
- Payment via credit cards
- Payment via online bank transfer
- Payment via check
- Payment via mobile money transfer
- Payment via bank draft
d. Sales & Advertising Strategies
- Contacting the medical practice for the first time.
- Identifying the gatekeeper and making contact with them.
- Mailing or dropping off information
- Scheduling an appointment for a presentation
- Offer niche medical billing services
- Seek referrals and testimonials
- Develop a robust digital marketing strategy
- Hire a content specialist or graphic designer
- Distribute newsletters and direct mail
- Implement a nurture campaign
Financial Projection
a. How Much Should You Charge for your Service?
According to reports, the industry-standard rate is $4 to $6, per claim. If a company charges fees as a percent of total fees collected, then the fee can range from 5% to 10%. Meanwhile, a good number of medical claims processing firms charge upwards of 15%. Hourly rates are rare in this modern age but may range from $20 to $50 per hour. Also, note that you can charge a flat fee per clinician or an initial fee plus a percent of sums collected on claims.
b. How Much Profit Do Medical Claims Processing Business Owners Make a Year?
Note that this will depend on the number of clients and the business location. However, at an average rate of $1,500 per client, you will make $90,000 per year handling five clients. Since the only investment in this line of business is the computer and an Internet connection as well as the medical billing software, this is a business that runs at a minimal cost of less than $100 a month. Every other thing you make will count as business profit.
c. What Factors Determine the Amount of Profit to Be Made?
- Business Size
- Number of Clients
- Marketing and Customer Retention Strategies
- Investment
- Pricing Model
d. What is the Profit Margin of a Medical Claims Processing Business?
Just like it was noted above, the profit potential in this business varies a lot but typical gross margins are between 5% and 10%.
e. What is the Sales Forecast?
- First Fiscal Year (FY1): $230,000
- Second Fiscal Year (FY2): $400,000
- Third Fiscal Year (FY3): $1,090,000
Set Up your Office
a. How Do You Choose a Perfect Location for Medical Claims Processing Business
Things to put into consideration when choosing a suitable location for a medical claims processing business include;
- Cost
- Demographics
- Basic Infrastructures
- Closeness to the market
- Competitors
- Licensing and permits
b. What State and City are Best to Open a Medical Claims Processing Business?
- Austin, Texas
- Philadelphia, Pennsylvania
- Columbus, Ohio
- Houston, Texas
- Cincinnati, Ohio
- Pittsburgh, Pennsylvania
- San Antonio, Texas.
c. What Equipment is Needed to Operate?
- Computer system with modem and printer
- Fax machine
- Software
- Clearinghouse
- Reference materials
- HCFA 1500 forms
- Phone
- Voice mail or answering machine
- Stationery and office supplies
- Postage
Hire Employees
Truth be told, putting together a team isn’t necessary for this business. However, if you want to grow your business, add medical billing specialists as fast as you can. They are the core revenue generators of any medical claims processing business.
Taking on new physician clients lets you expand your business without any limitation other than your ability to build a team around you. Ensure to only hire people that are qualified, honest, customer-centric, and are ready to work to help you build a prosperous business
Launch the Business Proper
The biggest issue with launching your medical claims processing business successfully is acquiring clients. As a startup, you will have to make numerous calls to medical providers to find one who is willing to try a new provider. Also, note that you may have to start with small providers and offer your services at a slight discount to grow traction.
Have it in mind that once you have a few clients, you will have more credibility and can look for larger medical providers and charge regular market prices. Also, don’t forget to keep your software and processes up to date as codes and laws change. You will have some ongoing expenses associated with this.
a. What Makes a Medical Claims Processing Business Successful?
- HIPPA Compliance
- Ongoing Training Opportunities
- Constantly Improving Technology and Services
- Detailed and Useful Month End Reports
- Securing Data
- Easy Access to Claims Data
b. What Happens During a Typical Day at a Medical Claims Processing Business?
Note that the owner of a medical claims processing business stays busy. It more or less falls on them to oversee day-to-day operations which include collecting delinquent accounts and creating payment arrangements with patients, monitoring patients’ payments, and following up with patients when payments do not arrive on time.
They can also subcontract business out to collection companies when payments cannot be collected within a reasonable amount of time. In this line of business, maintaining a Medicare bad-debt cost report, which tracks claims, billings, and collections is also very necessary. These businesses also initiate claims against estates for back payment of medical bills.
Medical claims processing companies are also tasked with maintaining an active list of contacts with numerous legal departments and law firms as well as local governments (e.g. clerk of the court), which is very needed and helpful during collection attempts. Medical claims processing companies also do normal bill collections by sending out bills for payments on behalf of hospitals, doctors, and other healthcare providers.
c. What Skills and Experience Do You Need to Build a Medical Claims Processing Business?
- Self-driven
- Customer service
- Dedication
- Sales
- Business knowledge and experience
- Computer and software experience
- Medical office experience
- Data entry skills
- Management skills
- Medical billing training