Medical Billing Contracts: Everything You Need to Know
Medical billing contracts lay out the expectations for which services are provided by a medical billing business as well as the pricing for those services and the terms under which payment is rendered.3 min read
2. Types of Pricing
Updated November 16, 2020:
Medical billing contracts lay out the expectations for which services are provided by a medical billing business as well as the pricing for those services and the terms under which payment is rendered. They ensure that the billing service is compensated properly for its work. They also define the work that the service is responsible for.
Without a billing contract, clients may believe they can simply terminate the service without paying for the services that have already been done regarding collecting bills on behalf of doctors. Therefore, it is imperative that you have a thorough contract for medical billing.
Medical Billing Contract Basics
A contract may also be called a service agreement. It should define:
- What services the billing company will provide
- What services the billing company is not responsible for providing
- How much the services will cost, and how they will be figured; this may be by percentage, by the claim, or by the hour
- When the billing company will begin providing service
- How the information regarding patient services will be passed along to the company
- Where the billing company should send payments received from insurance and patients
- Patient privacy and confidentiality issues
Another item you should include in the medical billing contract is that you will not be responsible for any billing problems that may have taken place before your contract for service began. This is particularly vital if the billing has had serious issues in the past. You will also need to specify how much you will be paid for the services you provide, and how payment will be rendered.
If your clients are reluctant to sign the billing contract, you may consider giving them a trial period.
You will need to define what particular responsibilities will be provided, such as:
- Dealing with insurance claims or payments by patients
- Collecting on overdue accounts, potentially from before your service contract began
- Sending non-paying patients to a collections agency
Spelling every detail out ahead of time in a contract ensures that both you and your client expect the same things. It also makes you look more professional and prevents problems from arising in the future. For example, a well written contract helps you avoid having dissatisfied clients or litigation.
We recommend that you consult with an attorney to prepare your contract, or at least review it before it is signed. To make the process go more quickly and reduce your expenses, try to figure out what your billing agreement should cover before your appointment.
Every company has different needs and varying expectations, and this applies to both billing companies and clients. Your contract may need to be tailored to these exact specifications. It's better to invest extra time and money into attorney fees for contract preparation than to risk potential lawsuits or unpaid invoices down the line.
In addition to the medical billing contract, your client, which will likely be a health care provider, may require that you agree to and sign a contract regarding the HIPAA privacy rules. These rules are strict, and everyone who deals with patients' medical records, even for billing purposes, needs to comply.
Types of Pricing
Your fees for billing services may be either by a percentage or a flat fee.
Pricing by percentage means that you are paid a percentage of the amounts that you collect on behalf of the client throughout a certain period of time, most commonly monthly.
If you are paid a flat fee, the client will be paying you a set amount for every time period during which you provide services, no matter how much you collect on their behalf.
Before you determine which method works best for you, you need to understand the marketplace in which you are working. Your charges will depend on your competitors' rates, and which of your competitors are working for what medical practices. You also should research to find out which medical practices do not currently use a medical billing service for collecting payments.
If you have a new client who was previously working with a different billing company, you should negotiate your contract carefully. Chances are you won't know what they paid their previous provider, so you won't be able to base it on the other provider's rates for the same services.
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