Author Topic: Can you make a profit by charging 4%?  (Read 22181 times)

tallmanusa

  • Full Member
  • ***
  • Posts: 123
Can you make a profit by charging 4%?
« on: November 01, 2012, 10:32:02 AM »
Can you make a profit by charging 4% of the net revenue?

This business is very price sensitive and doctors are always looking to cut costs. The going rate is around 6%; at 4% there would be no shortage of clients. I see some companies doing the same on Google ads. I will get nationwide clients through the same. I would charge $800 minimum.
I plan to do primarily e- claims through Kareo software, sub contract the billing/ coding to be done remotely.

Many people here are very experienced and know a lot more than me.

Thanks


PMRNC

  • Hero Member
  • *****
  • Posts: 4217
    • One Stop Resources & Networking for Medical Billers
Re: Can you make a profit by charging 4%?
« Reply #1 on: November 01, 2012, 05:38:23 PM »
I truly don't have a professional answer to this one and I'm not sure I am comfortable giving you my personal opinion on the subj.    There was this pretty big billing company going around advertising their 4% cheap rates and cheap is how they were perceived, I don't even want to continue the story except to emphasize the word "cheap".   I also have to disagree about doctors looking to cut costs. I haven't seen a doctor try and screw me down in YEARS. I don't have not done % based billing in years. Some are shocked even when I tell them it's illegal for them to get into a % based contract in my state (NY) and once they learn that, they are fine. The other ones I simply ask them if they pay a % to their electric company , phone company, etc.    I get paid for the work I do. Simple. If I were to get a client that tells me.. Well Joe the biller down the street will do it all for 2%.. Great, call me in 6 months but expect my rate to be higher.
Linda Walker
Practice Managers Resource & Networking Community
One Stop Resources, Education and Networking for Medical Billers
www.billerswebsite.com

tallmanusa

  • Full Member
  • ***
  • Posts: 123
Re: Can you make a profit by charging 4%?
« Reply #2 on: November 02, 2012, 07:06:39 AM »
Linda, thanks for the reply.
You have been in business a long time, you have a client base, this is luxury a lot of us don't have.
A new company has to offer something different. If we offer the same as everybody else, we are certain to fail. If we offer the same things at the same price we have nothing to offer, except our good looks, and you know how far that gets you.

One does not have to sell on a percentage basis; one can sell for $2.99 per claim or $3.99 per claim while the going rate is $5 to $8 per claim. The percentage is the most common, and what the doctor would be already paying.

I beg to differ with you that doctors are not price sensitive; I have spent my lifetime dealing with physicians, they are the cheapest people, and now more than ever. As you know medicare is cutting their pay by 27% starting January 1, under Obamacare. Other insurances usually follow medicare, the doctors would be scrambling to save a nickel anywhere they can.

My question remains the same, can you make money by discounting the services whether by percentage or per claim basis? If I cannot I would not enter the field, I have nothing to offer; and so goes for every newcomer.


supertaz93

  • Newbie
  • *
  • Posts: 33
Re: Can you make a profit by charging 4%?
« Reply #3 on: November 02, 2012, 09:34:27 AM »
In business, you can price yourself out of business in either direction.  My sister-in-law was selling golden retrievers for $100 because she thought that was a fair amount.  She was getting no takers.  Come to find out, because her price was so low, people assumed something was wrong with the puppies.  She tripled her price and sold the puppies immediately. 

PMRNC

  • Hero Member
  • *****
  • Posts: 4217
    • One Stop Resources & Networking for Medical Billers
Re: Can you make a profit by charging 4%?
« Reply #4 on: November 02, 2012, 10:03:41 AM »

Quote
In business, you can price yourself out of business in either direction.  My sister-in-law was selling golden retrievers for $100 because she thought that was a fair amount.  She was getting no takers.  Come to find out, because her price was so low, people assumed something was wrong with the puppies.  She tripled her price and sold the puppies immediately.

Excellent analogy.. When I founded PMRNC with my then partner we actually offered free memberships almost for a year.. we did ok but not great. We then began to charge a very minimal fee ( I believe we started at $19.99 for the year) and we actually got LESS business. It wasn't until later on when we raised our price and upped our services that we began seeing a real profit.   After then taking some courses on marketing and advertising I learned that was what was called "PERCEIVED VALUE".   

Quote
You have been in business a long time, you have a client base, this is luxury a lot of us don't have.
A new company has to offer something different. If we offer the same as everybody else, we are certain to fail. If we offer the same things at the same price we have nothing to offer, except our good looks, and you know how far that gets you.

No matter what you charge, if you are indeed offering what everyone else is offering that's right, you are going to have a harder time. If you have less experience, less knowledge and less to offer, that is how it goes. If I opened up a Pizza shop and have never made pizza before, whether I charge .25 cents a slice or $2.25 a slice, the pizza shop on the other side of town is going to get more business than me.  That's just a fact. People (especially doctors and other professionals) do place perceived value on something.   If I went to my lawyer and asked him to just charge me 4% he'd laugh at me and he should laugh at me.    I was new in business too. I started out with ZERO clients and never resorted to cheapening myself.  I did have one major advantage that goes to prove my theory, I was on the other side of the fence. When I was up against the 4% group physicians did indeed choose me over them when I was 3% higher just starting out.   I dont want my clients telling other physicians.. "Go use HRS, they are cheap, they only charge 2.99 a claim" I'm sorry, if that was how I had to get clients I'd find another business.  We already have an uphill battle with the offshore companies advertising .50 cents a claim!! Add this and it sours an industry.

Quote
I beg to differ with you that doctors are not price sensitive; I have spent my lifetime dealing with physicians, they are the cheapest people, and now more than ever.

Your opinion in what experiences you have had may differ, but I'm sorry I have NOT dealt with cheap physicians.  I've certainly had some tell me that other companies are offering a lower cost.. but again, their response is going to depend on  my response.   We teach people how to treat and respect us. That's a fact. Sociology 101 LOL.    I have been doing this a long time and I've seen and talked with billing companies who think like this and don't make it a year.

Quote
As you know medicare is cutting their pay by 27% starting January 1, under Obamacare. Other insurances usually follow medicare, the doctors would be scrambling to save a nickel anywhere they can.


I have no idea what your experience is in the business, however the consulting portion of my business BECAUSE of Obamacare has doubled. I have taken out 79 physicians from Medicare and/or Medicaid   De credentialing became just as much of a demand for me than credentialing :)  Carriers will not be able to "mimic" Medicare where that is concerned, that's a myth, premiums WILL rise but there will NOT be this competition among carriers that people think. I'm not happy at all About Obamacare, as a patient and as the daughter of parents on Medicare I'm so not happy with it and I'm scared for my folks because of it and my own family because I know my own Cadillac policy through my husband's days are numbered. But IF it goes through, my business will go on I will just once again diversify. Like I said.. I'm getting calls left and right about opting out of Medicare. I'm not worried about Obamacare in the least from a business stand point.

Quote
One does not have to sell on a percentage basis; one can sell for $2.99 per claim or $3.99 per claim while the going rate is $5 to $8 per claim. The percentage is the most common, and what the doctor would be already paying
.

What is "common" is not always what is right or what is successful.  It's also common that people get paid to work. Physicians are human too and they are out to make a living. Like I said.. once I ask them if any of their other service providers charge them based on a percentage of their revenue.. conversation over. They pretty much all say "I guess I didn't think of it that way".  Would a physician hire an office manager in house and pay her based on a percentage of his revenue? I think not.   And also there is the legality of such fee-splitting arrangements now in many states.  I'm in NY where it's illegal.. I could get more business than I know what to do with by letting physicians know if they are paying their billing company a %, they are risking their practices and medical license.  I think the average physician would be highly insulted to be called "cheap"    It's very simple ... I work XX hours, I get paid for those hours. They get that.  That old line "We don't get paid till you get paid" is so tired and they know it too.   

Keep ONE more thing in mind and I might not be your favorite person after this.. but I'm honest.   NETWORKING is absolutely KEY in this business.. your networking skills will not be worth anything if you outbid and undercut the "competition"   The KEY is your services, thinking outside the box and being diversified. IF you don't have the experience or knowledge you have a broader disadvantage, maybe that's negative of me to say, but again, it's honest. I didn't say IMPOSSIBLE. But look at how you would be entering into this business, best to keep your fellow billing companies as "friends" or you won't last a year.

Quote
My question remains the same, can you make money by discounting the services whether by percentage or per claim basis? If I cannot I would not enter the field, I have nothing to offer; and so goes for every newcomer.
 

I'll answer this practically, opinion aside.    YES you can make a profit that way. After you have worked 4 X as hard, have 2X as many clients and worked 3 X as many hours as the other.   

The two main ingredients in this business is NETWORKING and DIVERSITY, today's new billing company must have those two things or they will not make it.
Linda Walker
Practice Managers Resource & Networking Community
One Stop Resources, Education and Networking for Medical Billers
www.billerswebsite.com

QueenAlicia

  • Sr. Member
  • ****
  • Posts: 347
Re: Can you make a profit by charging 4%?
« Reply #5 on: November 02, 2012, 02:10:25 PM »
My answer is NO!  It depends on the specialty.

The going rate is not 6%, that would be based upon your region. 

Also if you are using Kareo than you must be eating those costs as they charge per provider.  If you charge 4% it screams cheap, lack of experience (which may not be the case) and that you are desperate.  Not only that, depending on the provider reimbursements you may not make anything but $1 a claim (such as MH).

Not to sound harsh but you work to hard to make pennies.  Get paid what you are worth, show the provider why you charge would you do and stop letting them nickel and dime you. You want your business to not only make money but for you to make money.  I am talking from experience.


tallmanusa

  • Full Member
  • ***
  • Posts: 123
Re: Can you make a profit by charging 4%?
« Reply #6 on: November 02, 2012, 03:48:50 PM »
Thanks for the responses.
I am the organizer, I plan to subcontract almost all of the work. At the end of the day if I can get 20% net margin, I am happy. I am still doing my research and that is why I ask questions; if that is not feasible I will do something else.

Here is medical billing service that charges 4%; they say so on their website:
http://www.ebiometronics.com/

I talked to them, the owner is a doctor ( Nephrologist); they claim to have several hundred clients. They appear to be profitable. Actually I asked him. Nephrology is a high paying specialty, for him to spend most of his time in this business, he must be doing well.
They use the office ally system. Is that better than Kareo? but that is another question.

There are several other companies with the same business model; whether I can emulate them, that remains to be seen.

How do they get their business? Google Adwords. You can get a client for about $200.

PMRNC

  • Hero Member
  • *****
  • Posts: 4217
    • One Stop Resources & Networking for Medical Billers
Re: Can you make a profit by charging 4%?
« Reply #7 on: November 02, 2012, 09:55:20 PM »
Quote
I am the organizer, I plan to subcontract almost all of the work. At the end of the day if I can get 20% net margin, I am happy. I am still doing my research and that is why I ask questions; if that is not feasible I will do something else.

What are your plans in regards to compliance. Subcontracting out the work the way you have planned is additional costs JUST in compliance assurance itself. You are going to want to have the MAX amount in E/O insurance.. right there your 4% is a no -go . I'm not trying to be harsh, just real.   I've seen and talked to many billing company owners in start-up with the same stars in their eyes.. "I'll finance it, sub out the work and cash the checks"  Compliance gets sacrificed, service is sacrificed because you have subcontractors you cannot expect to have the same level of personal service as an in house office.  To get a good picture when you are projecting costs you want to have a good compliance plan in place and obtain insurance quotes. Compliance in this business is absolutely IMPERATIVE.  Maybe your plans are to expand on to sub contractors when you have a large client base? I don't see this being done out of the gate or even for a while at same time your only charging 4%.

Quote
Quote
Here is medical billing service that charges 4%; they say so on their website:
http://www.ebiometronics.com/

I talked to them, the owner is a doctor ( Nephrologist); they claim to have several hundred clients. They appear to be profitable. Actually I asked him. Nephrology is a high paying specialty, for him to spend most of his time in this business, he must be doing well.
They use the office ally system. Is that better than Kareo? but that is another question.

Maybe I'm misreading but they claim to have their own software.. maybe they just mean they only use their systems for all clients.  I use any system the provider wants or I have Kareo if they need a PM solution. Today's billing company has to be diversified.   I've heard Office Alley is ok, but no it's not better than Kareo, I believe Office Alley is one of the free ones (could be mistaken) I've seen it and used it once but still feel 150% confident enough to say not it's not better than Kareo.

Quote
How do they get their business? Google Adwords. You can get a client for about $200.

Online marketing is hit or miss. It's essential and I've had a LOT of success with PMRNC with Google Ad words, but when you are selling service driven business, sure I will buy they might get tons of hits.. but those hits require multiple hits and then multiple contacts to turn into clients. I do website design and marketing too so I have some experience with that as well. Most of the sites I have built that get hits still require a lot of hand holding after the click through. The website is merely a means of making a first impression in this business.   I'm not saying they are not getting clients with only $200 adword campaign but I am saying I doubt it.   

Again, just my opinion.
Linda Walker
Practice Managers Resource & Networking Community
One Stop Resources, Education and Networking for Medical Billers
www.billerswebsite.com

tallmanusa

  • Full Member
  • ***
  • Posts: 123
Re: Can you make a profit by charging 4%?
« Reply #8 on: November 03, 2012, 09:35:47 AM »
I am a retired physician; for 30 years I had my own practice. I was on the other side of the fence, and outsourced my billing to a billing company.

I had a long conversation with the doctor owner of ebiometronics and I have another one scheduled. They have white labeled someone else's software, they can sell that to a billing company as well, and that is what he suggested.

It appeared that he is making money and lots of it, even charging 4% and he is making more money than as a kidney specialist doctor. I believe he outsources some of the work off shore.

Here is a link to another website.  http://www.mtbc.com/
They charge 5%; I am not sure if they white label someone else's software or it is there own, however it looks very comparable to Kareo/ Practice fusion combo; they are also owned by a doctor. You will see their prices under practice management icon. By the way I thought they had a nice website.

My impression is that some people are making a lot of money in this business, upwards of a million dollars a year net profit, by selling services at discounted rates.
How they are doing it, that is what I am researching.
« Last Edit: November 03, 2012, 11:39:23 AM by tallmanusa »

Michele

  • Global Moderator
  • Hero Member
  • *****
  • Posts: 4707
    • Solutions Medical Billing
Re: Can you make a profit by charging 4%?
« Reply #9 on: November 04, 2012, 05:20:36 PM »
I have seen companies that charge 4% or 5% but from what I've seen you get what you pay for.  When we started we were low, because we didn't know any better.  We started in 1994 at 5% (we didn't know about the fee splitting thing).  We are very meticulous and do a very good job.  We couldn't make it at 5%.  We raised up to 6% and didn't lose a client.  I know other services that charge that low and there are two reasons.  The first, they do a shoddy job.  They can afford to take 5% because they aren't doing all the work needed.  They send the claims in and take what comes back.  No follow up, no appeals on denials, etc.  The other thing I see with 5% billing companies is that they are robbing the dr blind!  They only charge 5% because they are taking what they think they deserve.  You may think I'm crazy but this is based on facts that we have come across. 

Just a side note, there may be good services that do their work diligently for 5%, I just haven't seen them.  :)
Sign Up for our FREE Medical Billing Newsletter
Get a 10% discount on Medical Billing Products by using Coupon Code: 10OFF
http://www.solutions-medical-billing.com

tallmanusa

  • Full Member
  • ***
  • Posts: 123
Re: Can you make a profit by charging 4%?
« Reply #10 on: November 06, 2012, 07:24:42 AM »
Thanks for the responses.
I have concluded that the answer is No. Furthermore underpricing the services is not a good idea.

I plan to charge 5%, which is still lower than the market, with a $800 minimum and $500 set up fee. I plan to do business with ONLY those practices that are willing to utilize EMR, and we would do only web based e filing. Of the various programs I have evaluated Kareo/practice fusion seems to excel, there may be others. I like their top package which is $299 per provider per month; I plan to offer that with my services, the cost is on me.
I have hired two experienced billers part time, working from home, at 1% of the revenue collected by that biller. Is that a fair compensation?

I have commissioned a web designer to design a 40+ pages website; why so many pages? I want to describe in detail what a PM + EMR can do. Practice fusion has no issues in us describing as their website does.

We need brochures.

We just need clients, though I am not ready yet.

Any comments would be appreciated.

« Last Edit: November 06, 2012, 07:26:45 AM by tallmanusa »

Michele

  • Global Moderator
  • Hero Member
  • *****
  • Posts: 4707
    • Solutions Medical Billing
Re: Can you make a profit by charging 4%?
« Reply #11 on: November 07, 2012, 07:03:55 AM »
40+ pages seems like a lot to me.  Did you tell them you needed 40+ pages or did they tell you?

Regarding the billers, I personally (JMO) am not for employees working from home.  I know there are some out there somewhere that are good, but to me it's an invitation to not do a good job.  Paying them based on the revenue collected will help with that because if they aren't collecting they won't get paid, but you need systems to be able to check their work.  Personally as a biller I would never agree to work for 1% of the revenue. 
Sign Up for our FREE Medical Billing Newsletter
Get a 10% discount on Medical Billing Products by using Coupon Code: 10OFF
http://www.solutions-medical-billing.com

QueenAlicia

  • Sr. Member
  • ****
  • Posts: 347
Re: Can you make a profit by charging 4%?
« Reply #12 on: November 07, 2012, 04:57:09 PM »
I would never except 1% from an employer.  That screams cheap and it doesn't sound leagal. I would want to be an hourly employee or a subcontractor.

I think that a 40 page website is too much.  You can get what you need to say in less and you will probably loose the provider or decision maker after the first few pages.

I do like the "fee schedule" that you have set up for charging percent.  I have something similar when I have a provider that is more comfortable paying a percent and the minimum adjusts with the specialty.

Good luck!  :)

tallmanusa

  • Full Member
  • ***
  • Posts: 123
Re: Can you make a profit by charging 4%?
« Reply #13 on: November 07, 2012, 06:37:20 PM »
Yes 40 pages looks like a lot, but to compete you need to be able to offer full services and have to explain it.
Here is a website  www.athenahealth.com ; it is more than 50 pages. We offer just about everything they offer.
They are a big time company, but clients expect the same from a smaller company, even more services.
How would you pay a subcontractor? I don't want to pay hourly.

PMRNC

  • Hero Member
  • *****
  • Posts: 4217
    • One Stop Resources & Networking for Medical Billers
Re: Can you make a profit by charging 4%?
« Reply #14 on: November 09, 2012, 11:25:45 AM »
IF I hired employee's I wouldn't pay them a %, I would probably steer clear of fee-splitting arrangements all-together. I would probably compensate based on an average salary using their experience/references as a guide. JMHO.   Have you worked out such thins as a compliance plan (this should be critical especially if having your employee's off-site) and also E/O insurance (again, greater liability with off site employee's)   I can certainly appreciate all the "outer" workings, software, EMR, etc... but don't forget the critical elements that could make or break you from the back end.
Linda Walker
Practice Managers Resource & Networking Community
One Stop Resources, Education and Networking for Medical Billers
www.billerswebsite.com