Prescription For Success
This story appears in the June 1998 issue of Startups. Subscribe »
If you've seen a doctor recently, you know health-care providers are among the most time-pressured professionals. Many are so busy seeing patients, they don't have time to manage the finances of their medical practices.
"In a doctor's office, everything is either urgent or important or both. Billing is merely important, not urgent," says Merlin Coslick, executive director of Electronic Medical Billing Network of America Inc., a trade association in Watchung, New Jersey. "The staff tend to not attend to the billing as efficiently as the doctor would like, and doctors come to realize that by outsourcing billing to a dedicated billing service, it will be done in a timely fashion."
Given these realities and the financial pressures of managed health care, it's no wonder medical billing services are a fast-growing industry for entrepreneurs.
Medical billing businesses offer a wide variety of services. Billers enter claims data into a computer, electronically transmit claims through a clearinghouse to insurers, prepare paper claims, generate management reports, mail patients' statements, post payments, send notices to patients who haven't paid and suggest ways to improve billing procedures. Some billers also sell medical billing software or offer consulting services to health-care providers who want to improve their billing systems.
All types of health-care providers are potential clients for medical billing services, including surgeons, mental-health practitioners, optometrists, dentists, physical therapists, home health-care services, medical equipment stores and ambulance companies. And, because the field is relatively new, the market hasn't been saturated in many areas.
"Although you may occasionally cross paths with another biller," says Coslick, "competition is not a major consideration [in this market]."
Marcie Geffner is a Los Angeles freelance writer who reports on small business and real estate.
A Booming Business
Bonnie Nentl, owner of Rapid Return Medical Billing in Brainerd, Minnesota, says entrepreneurs need three skills to succeed: computer know-how, marketing savvy and medical billing expertise. Nentl, 33, worked in a hospital billing department for 10 years before she started her company in November 1994. A lack of computer and marketing experience didn't stop her from turning a homebased start-up into a six-figure company with more than 70 clients, its own offices and five employees. Her business became so successful that her husband, Tim, 36, came on board full time in January 1996.
The Nentls' employees enter claims data into computers, post payments and answer patients' and doctors' questions. Tim, an accountant, handles the company's financial records and payroll, while Bonnie concentrates on marketing. "We could have kept the business small and homebased," she says, "but my husband wanted to quit his job, so we made a conscious decision to expand."
Bonnie started by purchasing a business opportunity from National Claims Service in El Dorado Hills, California, for $8,000. She received medical-practice management and claims-downloading software, marketing materials, video computer training, ongoing technical support, medical code books and attended a marketing seminar. She also spent $1,200 for a computer, $200 for a printer and $150 for used office furniture, bringing total start-up costs to about $10,000.
Second Time Around
Robert O'Kelly, 59, decided to start his own business when he was laid off from a computer systems programming job at a large insurance company. After extensive research, he chose medical billing because he had some familiarity with insurance claims and the start-up costs were manageable. He launched his homebased company, Accelerated Medical Billing, in Las Vegas in July 1994. With just eight clients, he brought in revenues of approximately $45,000 in 1996.
O'Kelly's start-up costs also totaled less than $10,000. He spent $3,500 for a computer with a tape backup system, $1,400 for office furniture and fixtures, $980 for a laser printer, $850 for a copier and $200 for medical books. He paid $500 for a software program and an additional $300 for a two-day training program offered by the software vendor.
Investing time as well as money before launching the business was important to O'Kelly's success. "I took a coding class [to learn codes used in the insurance industry]. I took a [medical] terminology class at an adult school. I went to California State University, Dominguez Hills, for a medical-insurance computer billing class. I took another billing class at a community college, and I took an entrepreneurship course at the University of Southern California," he says.
Billing software is essential for start-ups in this field. "There are dozens of software programs available. The rule of thumb is, the more you spend, the more unhappy you'll be," says Coslick. "The people who spend less are the ones who've done careful research and found you really need to spend only $500 to $1,000 on software."
Part-Time Profits
The flexibility of working at home part time was one factor that attracted Diedre Mikkelson, owner of AccuTrac Medical Billing in Poway, California, to medical billing. Mikkelson, 35, left a prosperous mortgage-banking career to stay home and start both a family and her company in April 1996. "I didn't want a high-stress job, and I wanted to be able to stay at home with my child. I wanted the best of both worlds," she says.
Today, Mikkelson has four clients and revenues of $2,200 to $2,500 per month, working just 15 hours per week. Her typical monthly business expenses are about $300.
Medical billing services generally charge a per-claim fee of $2 to $3 or 5 percent to 8 percent of the receivables collected. How much each client is charged depends on the services provided and the type of practice. "If you're billing for a neurosurgeon who does maybe 10 surgeries a month at $40,000 a surgery," Mikkelson says, "you're not going to charge as [high a percentage] as you charge a psychiatrist who sees 20 patients a day, four days a week."
Catching Clients
Newcomers to the billing business often think choosing the right software guarantees success. Not so, Coslick says: Equal emphasis should be placed on strong marketing efforts. "Buying software doesn't make you a billing service," he says. "The marketing side is far more important. If you can't market, you don't have a business."
Referrals from existing clients count considerably in signing up new clients, because health-care providers tend to trust one another in making business decisions. Getting your first client when you don't have any referrals can be daunting.
Mikkelson jumped this hurdle by marketing her services door-to-door in medical buildings. "Getting your first client is the most difficult step," she says. "You're asking someone to turn over the collection of the income that supports their office and their family to you, and they don't know you. You don't have to be brash or a stereotypical salesperson; you just have to feel confident in your ability and let that confidence show."
Bonnie Nentl landed her first account in just two weeks by consistently visiting five doctors' offices every day. After a marketing hiatus during which she set up her new office and trained her employees, she has resumed this strategy. "Once you make yourself do it, it's not as hard as you may think," she says.
O'Kelly, who has tried a variety of marketing strategies, has found the most successful ones are following through on referrals and taking quick action in contacting brand-new medical providers. "I joined the Chamber of Commerce, which prints a new members list [regularly]," he explains. "It showed one [durable medical equipment] company that had opened its doors only about a month before I saw the listing. I went over there and got the account."
Medical billing is an attractive opportunity for entrepreneurs who are willing to take the time to acquire some technical know-how and market persistently. "Be serious about your business, be tenacious in your quest for clients and have confidence in your abilities," says Mikkelson. If you've got those qualities, this business just may fit the bill.
Resources
- Directory of Medical Management Software (Resource Books, $39.95, 408-295-4102) takes some of the guesswork out of selecting software for medical billing services. The 158-page directory describes national and local clearinghouses, software companies for billing centers and health-care providers, other useful software programs and industry associations.
- Medical Claims Processing--A Business Report (Resource Books, $29.95, 408-295-4102) is a 58-page report that explains medical claims processing and describes the benefits of electronic claims submission for health-care providers. Ten specific examples of medical billing business opportunities are outlined.
- Resource Books also publishes a bimonthly newsletter, AQC Resource Newsletter, for the medical billing industry. A one-year subscription (six issues) costs $59. For more information about Resource Books products, call (800) 995-8702 or (408) 295-4102; e-mail aqcresource1@juno.com; or write to Resource Books, 175 N. Buena Vista Ave., Ste. B, San Jose, CA 95126.
- Entrepreneur Media Inc.'s Business Start-Up Guide #1345, Medical Claims Processing ($59), is a 264-page guide full of advice on office facilities and equipment, personnel, legal requirements, record-keeping and taxes, advertising and promotion, start-up costs and more. Call (800) 421-2300 to order.
- Medical billers who have been in business at least two years and have at least two clients can join the International Billing Association (IBA) for $450 to $950 annually. Nonmembers can attend the IBA's educational seminars and conferences. For information, call (301) 961-8680; write the IBA at 7315 Wisconsin Ave., #424E, Bethesda, MD 20814; or visit http://www.biller.com
- The Electronic Medical Billing Network (EMBN) offers start-up information for new billing services, monthly meetings in the New Jersey area, three hours per month of business telephone consultation, vendor referrals, publications and a monthly newsletter. Membership costs $110. For information, call (908) 757-1211; write to EMBN at P.O. Box 7162, Watchung, NJ 07060; visit http://www.webcircle.com/embn or e-mail embn@webcircle.com.
- The National Electronic Biller's Alliance (NEBA) offers members a newsletter and discounts on a few medical billing software programs. NEBA also sells a self-study course on medical billing procedures and terminology. Annual membership costs $129. For information, call (650) 577-1190; write to NEBA, 2226-A Westborough Blvd., #504, South San Francisco, CA 94080; or visit http://www.nebazone.com
Business Opportunities
ClaimTek Systems
222 S.E. 16th Ave.
Portland, OR 97214-1488
Phone: (800) 224-7450
Fax: (800) 503-9461
Start-up capital: $1.5K-$7.99K
Infinity Software
27636 Ynez Rd. L-7. #143
Temecula, CA 92591
Phone: (909) 699-9581
Fax: (909) 699-9391
Start-up capital: $495+
Island Automated Medical Services Inc.
5999 Central Ave., #300
St. Petersburg, FL 33710
Phone: (800) 322-1139,
(813) 347-2200
Fax: (813) 347-2519
Start-up capital: $4.9K+
National Claims Service
5000 Windplay Dr., #1
El Dorado Hills, CA 95762
Phone: (800) 207-3711
Fax: (916) 933-3547
Start-up capital: $4.99K-$8.49K
New Ventures!
1351 Tyringham Rd.
Eustis, FL 32726
Phone: (888) 875-4798,
(352) 357-5116
Fax: (352) 357-3067
Start-up capital: $69-$4K
Pacific Medical
9921 Carmel Mountain Rd., #321
San Diego, CA 92129
Phone: (800) 815-6334
Fax: (619) 538-3743
Start-up capital: $1.99K
USA For HealthClaims Inc.
39 E. Kings Hwy.
Audubon, NJ 08106
Phone: (800) 809-0670
Fax: (609) 310-1247
Start-up capital: $4.99K
Contact Sources
Accelerated Medical Billing, 7441 W. Lake Mead Blvd., #160, Las Vegas, NV 89128, (702) 255-0056
AccuTrac Medical Billing, accutrac@interfuture.com
National Claims Service, (800) 697-1569, http://www.nationalclaims.com
Rapid Return Medical Billing, 1100 Hwy. 210 W., #7, Brainerd, MN 56401, rapidreturn@brainerdonline.com
