Mar 28, 2011 – It’s no secret that the healthcare is inundated with paperwork. Many medical professionals claim they spend more time filling out forms than actually treating patients. A large portion of the endless pile of paperwork is related to coding, submitting and processing medical claims related to physician or medical billing.

With no end in sight to the volume of paperwork associated with managing a medical practice, more and more practices are outsourcing their billing function to third party companies. In this article we take a closer look at medical billing in general, issues related to medical billing and the types of service providers offering medical billing as a third party service.

Services and purposes

Generally speaking, medical billing is the process of facilitating payment from patients and insurance carriers on behalf of healthcare providers. More specifically, medical billing refers to the process of submitting medical claims to medical insurance carriers and patients in order for healthcare providers, to receive payment for services rendered. In addition to submitting claims for payment, medical billing includes the service of following-up on denied or non-adjudicated medical claims in order to rectify payment errors or total lack of payment.


One of the most common problems that healthcare facilities face related to physician billing is payment collection. Payment collection has historically been an issue for healthcare providers resulting from a complex system of rules, regulations and participants. Payment collection issues range from inaccurate coding or untimely submission on behalf of the physician’s office to patient population demographics and insurance carrier policies, procedures and practices. The overall result is a complex and inefficient system that frequently results in rejections, denials and underpayments of up to 50%.

Many medical offices are ill-equipped to manage the arduous task of billing and as is such turn to medical billing service providers for assistance.

Service Providers

There are over 7000 medical billing service providers in America, and as is such the sophistication and organizational structure of these businesses varies greatly. In general however, medical billing service providers can be categorized into 2 distinct groups; Home businesses and Practice Management companies.

Home business medical billing companies are typically small organizations with 1-2 employees. Many proprietors of these types of organizations received training and have past experience working in medical practices. These companies service between 1 and 3 clients and essentially act as an extension of the medical practice for which they provide billing services. The primary advantage of working with a home based biller is the high level of customer service they often provide. This however is highly correlated to the individual proprietor and not indicative of the group as a whole. The primary disadvantages to home based billers are the difficulties in servicing multiple clients simultaneously, limited knowledge base, and access to technology.

Practice management companies are generally larger institutions with between 10 and over a hundred employees. Practice management companies typically employ institutionalized processes to manage all aspects of medical billing. In addition to medical billing, practice management companies often provide additional value added services such as scheduling, coding, credentialing assistance and third party application interfacing. Practice management companies benefit from economies of scale that allow for high levels of technology and knowledge that can be distributed more easily across their client base. In addition, practice management generally have the ability to rapidly add and service new and multiple clients given the size and scope of their organizations.