Starting a Medical Billing Business > Starting Your Own Medical Billing Business

Medical billing/coding business income potential

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sbgradinnb:
When generating a business plan how do you calculate the potential revenue/income stream that will be expected?

For exmaple: (all figures hypothetical for sake of argument)

Lets say you are charing 7% on all your accounts.  You subtract approximately 2% for expenses such as software, marketing, and other fixed costs which will net you 5% (just an approximation) monthly.

Lets say you have gotten to a certain point where you have contracted 4 providers who each bill 25k/mo.  That is 100k/mo in billing that you will be responsible for, and you have a 5% profit margin.  

So that means that for billing for 100k worth of claims your entire business will only be generating 5k/mo in profit?  Am I incorrect here?  I am trying to foresee the income potential vs. the sacrifices in time, money, and effort that will be required.

Any comments are appreciated.  I know this is a bit of an unusual scenario/post.  Thanks for looking.

medauthor:

--- Quote ---Lets say you have gotten to a certain point where you have contracted 4 providers who each bill 25k/mo.  That is 100k/mo in billing that you will be responsible for, and you have a 5% profit margin. 

So that means that for billing for 100k worth of claims your entire business will only be generating 5k/mo in profit?  Am I incorrect here?  I am trying to foresee the income potential vs. the sacrifices in time, money, and effort that will be required.


--- End quote ---

Not necessarily.....BILLING 25K does NOT mean each provider will BRING IN 25K, so your figure of 5K per month is NOT accurate, unless you are charging a % based on what you BILL OUT, and NOT what is collected.

sbgradinnb:
Yes, I see the difference.  My mistake.  So assuming the above is the amount collected, your business will be earning approx. 5k/mo.  Is this correct?

Is this below the industry avg?  Near?  

How many providers would you need to actively have contracts with to have substantial income?

Thx

Michele:
That depends on what you are looking for, what is substantial income.  Are you doing all the work yourself?  Will you have employees?  Did the 2% for expenses allow anything for labor?   

sbgradinnb:
I will be partnering up with someone who will be handling most of the workload, while I will be out there marketing our services, making contacts and contracting providers. 

For the sake of argument, lets assume the 2% includes labor, so 5% would be the profit margin.

Substantial income lets assume 10k+/mo.

Based on these assumptions, its seems that in order to hit that target income, we would have to have 200k/mo in collections.  How long do you think that would take to build up to that level?  6 months?  1year?  2 years?  (I know this all depends but im just looking for general ballpark information)

Thanks for the input.

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