Author Topic: Business Pricing ?  (Read 2471 times)

AllAboutU

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Business Pricing ?
« on: October 24, 2015, 05:07:05 PM »
I have a business model for my pricing that incorporates my overhead and generally the time it will take me to complete everything. I have been using the formula's Michelle and Linda teaches. I have always had providers that are established.

Here's my dilemma: I have 2 brand new practices that are considering coming on board, brand new to where they have NO revenue for me to base my pricing off of. I was thinking of a sliding scale to include my overhead, but I am at a loss of what to charge. I have done the math and I refuse to bill anyone a percentage per claim, I would loose too much money. I also do not want to scare them away with my hourly fee once I have broken out the cost of my overhead and where I'd like my salary to be. In taking on these two companies, I will have to think about hiring at least one person as I already have 3 other providers. I'm struggling can anyone add any insight. I would not expect to have to work very many hours since they are a startup and they only need billing / posting.

I was thinking percentage of monthly revenue to be reassessed again at the $10k mark:
Company's revenue is $0-$5000 my charge would be 20% of that
Company's revenue is $5001-$10,000 my charge would be 35% of that

Thanks for any help. I really appreciate all of you!


Michele

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Re: Business Pricing ?
« Reply #1 on: October 26, 2015, 09:20:17 AM »
It is always difficult to calculate a fee when the practice is a new one.  What we try to do is to estimate how much business they expect to do, compare that to another similar client and calculate our fee that way.  With new providers we also set up a re-evaluation at 3 months.  That allows us to determine if we are on track.  Also it is good for the provider as well to ensure they are not overpaying. 

I am surprised by your figures below.  Most providers are used to paying a % on what is collected (even though it's not a good method) and 20% - 35% of revenue seems high. 
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AllAboutU

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Re: Business Pricing ?
« Reply #2 on: October 27, 2015, 07:27:43 AM »
Thank you Michelle for your reply. I was thinking of total monthly revenue as a way to capture my expenses for this provider. I was thinking to charge this method for just a couple of months and then review with them where we stood in terms of pricing. My thought is that if I charge based on total revenue received it will cover expenses and the hours it takes as I would be doing more than just collections for them. I like your method, I will try that. I have a meeting with them tomorrow, we shall see. Thank you again for your help!!!!

Michele

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Re: Business Pricing ?
« Reply #3 on: October 28, 2015, 10:26:13 AM »
Good Luck!
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PMRNC

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Re: Business Pricing ?
« Reply #4 on: October 29, 2015, 08:24:29 AM »
I look at my time same as Michele and my flat fee never discloses my hourly rate.. the sliding scale is for new patients so that would even out as the client gets busier. I agree with Michele those figures seem very high.
Linda Walker
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www.billerswebsite.com

williamportor

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Re: Business Pricing ?
« Reply #5 on: November 01, 2015, 11:29:38 AM »
"I have been using the formula's Michelle and Linda teaches."

Hello- I feel rather silly for asking this, but could someone please tell me just what this "formula" is?? I've gone carefully through my medical billing course from Michelle and Linda, as well as the posts on this site, and have yet to locate this "formula"  I too charge a flat monthly rate for my billing clients, and would be very interested to know the "formula" one should use when doing so. I've had some advice of what I should not be doing, but that's all. (Sorry if I've missed anything here.)

PMRNC

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Re: Business Pricing ?
« Reply #6 on: November 01, 2015, 03:27:34 PM »
I've posted the formula here in the forum a few times, you can try to search for it.
In PMRNC's members only area we also have a few formula's for pricing your service as well. www.billerswebsite.com
Linda Walker
Practice Managers Resource & Networking Community
One Stop Resources, Education and Networking for Medical Billers
www.billerswebsite.com

Michele

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Re: Business Pricing ?
« Reply #7 on: November 02, 2015, 11:25:15 AM »
This is from a previous post by Linda:

"There have recently been a few threads on this.  How I do it is based on hourly rate, what I want to make per hour. My formula goes like this:

For this example I will use an hourly rate of $25 p/hour.

I determine the amount of time I will need per week per client (estimated). This is easy if you have been billing for the provider and it's always a good idea to calculate how much time you spend on each client no matter how you are charging. For this example we will say this provider will take or takes 12 hours per week.

I then add up my expenses PER client (this should NOT include any fees for the cost of doing business such as computer, attorney, books, education, etc) only costs such as clearinghouse, postage, phone, claim forms, software per client fees, envelopes, ink, paper, etc.. should be included in these costs.  For the sake of this example we will use an estimated cost of $500

I then take my hourly rate of $25 and multiply it by 12 hours per week=$300 per week X 4 weeks= $1200 per month
I then add my estimated costs for each month $1200 + $500 = $1700 monthly flat fee total.

To create the sliding scale I then break down (again estimating) how many patients/claims I can comfortably do per hour. For this example I will use 8 patients. That will equal $25 (hourly) per every 9 patients added.  That will allow you to continually get paid for your time and allow for growth of the practice. Remember to increase you "costs" and I do this once every 6 months as per my contract.

Nice and simple, and biggest factor is I get paid for all my work. :)"


We also use another formula as well:

Take the estimated or average receivables for that client per month.  Multiply that amount by the average percentage for your area (6%, 7%) and compare it to the number you got from the previous formula.  It's a great way to double check and make sure you are in line.

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PMRNC

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Re: Business Pricing ?
« Reply #8 on: November 02, 2015, 11:38:57 AM »
Quote
Take the estimated or average receivables for that client per month.  Multiply that amount by the average percentage for your area (6%, 7%) and compare it to the number you got from the previous formula.  It's a great way to double check and make sure you are in line.

While that does seem advantageous, in NY you MUST MUST MUST be careful with making sure your pricing does not even "appear" to be based on a %. NY is one of the only states to be so detailed in their fee-splitting law for physicians.
Linda Walker
Practice Managers Resource & Networking Community
One Stop Resources, Education and Networking for Medical Billers
www.billerswebsite.com

williamportor

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Re: Business Pricing ?
« Reply #9 on: November 04, 2015, 03:38:44 AM »
Thank You very much. I'm sorry I missed the earlier posts on this. This was a big help.  :D

Michele

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Re: Business Pricing ?
« Reply #10 on: November 04, 2015, 03:47:49 PM »
Not a problem!   ;)
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