Comparative analysis of billing and admin provider fees: is your admin charging too much?

There are a number of different ways to have your billing and admin managed. You can be part of a group, employ your own dedicated Practice Manager or Secretary or you can engage a billing and admin service. Depending on the alternative you chose, there are a number of different fee structures offered.

A private practice group is likely to charge you a fixed annual fee, regardless of the amount of work you do. If you employ a Practice Manager or Secretary you would be responsible for their salary, super and the other overheads associated with employing staff. Alternatively, if you sign up to a billing and admin service provider, you are likely to be offered a flat fee per account, an hourly rate or a percentage of account value.

Based on my research, we are aware that the flat fee per account sits at approximately $40 per account. Proponents of a flat fee feel it is inappropriate for fees to vary with accounts of different value when the work to create an account does not differ significantly between an account with one value and another account with a another value.

To get a sense of whether a flat fee is appropriate, we can use the accounts processed by us as an example.

  1. We have processed more than 17,000 accounts at a value of more than $10,000,000 since 2009
  2. Our average value of an account is approximately $590
  3. By applying the rate we charge against this average value we get an average fee per account of $29.50

Now, that’s the total across all of our accounts. If we look at the numbers for our doctors whose accounts are of a lower value:

  1. We have processed nearly 2,500 accounts for these doctors with a cumulative value of approximately $780,000 since 2009
  2. The resulting average value of an account is $312
  3. Simply applying our rate against this average value gives an average fee per account of $15.60

What this shows us is that the flat fee we’re aware of is higher than what our fees work out on average across the whole group, and more than two and a half times higher than the amount paid by doctors whose accounts are of a lower value. Does that mean a flat fee approach results in the doctors with lower value accounts effectively subsiding the doctors with higher value accounts?

Another alternative is an hourly rate. The market rate for booking keeping services is in the order of $50 per hour. I have a general concern with hourly rates because they reward inefficiency – the longer we take to do our job, the more we get to charge. By comparison, a percentage fee encourages us to maximise the revenue you earn (by, for example, ensuring all modifiers etc are charged for) and leaves the questions of how efficient we are to us – if we take longer to do our job then it remains our problem and it is not passed onto you.

We’ve not logged the amount of hours we’ve spent per doctor, but based on the hours my staff and I work, in the financial years 2011-2012 and 2012-2013, the average for all doctors for all accounts worked is $44 per hour.

Our view is that the analysis above confirms the validity of the percentage model. What are your thoughts on the right methodology to charge for admin and billing services?

Leave your comments in the box below.

I’m looking forward to hearing your thoughts, Ben.

Ben Dudley is the principal of Doctors Accounts Services, and is focused on removing the burden of admin from Perth’s anaesthetists. If you’re interested in how Ben can help your established private practice, then click here. If you’re new to private practice and need help, click here to see how we can easily transition you into your own practice.

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