How can I tell what a medical billing business really earns?

Ask how much of a billing service’s work the owner does personally and whether the statements show it. Statements show what came in, but not how many hours it took or how fragile the client list is. The records below let you check the statements against the day-to-day reality. They are questions to ask, and your accountant will tell you how to read the answers.

How the firm is paid

A billing firm may be paid a share of what clinics collect, a set amount per claim, or a flat monthly fee. Each model behaves differently. A share of collections rises and falls with a clinic’s own busy and quiet months, while a flat fee stays level even when the work grows. Ask to see the fee terms in each client agreement and whether they have changed.

Revenue by client and by physician

Ask for revenue broken down by clinic and by physician for the last few years. This shows whether one practice supplies most of the income and whether a single physician’s retirement would leave a gap. It also shows clients gained and lost. Ask the owner why each departing client left, and whether any have given notice.

The work behind the revenue

Rejected claims take time to fix, and that time is a real cost. Ask how much staff time goes into rework and whether it is billed or absorbed. Compare the owner’s hours with staff hours: if the owner does much of the billing, a buyer has to hire someone to replace that labour. Software, clearing costs and the timing of payments from clinics belong in the same review.

• Client agreements and any fee changes
• Revenue by clinic and by physician
• Clients won and lost, with reasons
• Rework time on rejected claims
• Software and clearing costs, and receivables timing

The medical clinic due diligence guide covers the clinic side of the same questions.