Starting a medical billing company can be very profitable. With proper planning, execution and hard work, you can enjoy great success. Below you will learn the keys to launching a successful medical billing company.
Importantly, a critical step in starting a medical billing company is to complete your business plan. To help you out, you should download Growthink’s Ultimate Business Plan Template here.
14 Steps To Start a Medical Billing Company:
- Choose the Name for Your Medical Billing Company
- Develop Your Medical Billing Company Business Plan
- Choose the Legal Structure for Your Medical Billing Company
- Secure Startup Funding for Your Medical Billing Company (If Needed)
- Secure a Location for Your Business
- Register Your Medical Billing Company with the IRS
- Open a Business Bank Account
- Get a Business Credit Card
- Get the Required Business Licenses and Permits
- Get Business Insurance for Your Medical Billing Company
- Buy or Lease the Right Medical Billing Company Equipment
- Develop Your Medical Billing Company Marketing Materials
- Purchase and Setup the Software Needed to Run Your Medical Billing Company
- Open for Business
1. Choose the Name for Your Medical Billing Company
The first step to starting a medical billing company is to choose your business’ name.
This is a very important choice since your company name is your brand and will last for the lifetime of your business. Ideally you choose a name that is meaningful and memorable. Here are some tips for choosing a name for your medical billing company:
- Make sure the name is available. Check your desired name against trademark databases and your state’s list of registered business names to see if it’s available. Also check to see if a suitable domain name is available.
- Keep it simple. The best names are usually ones that are easy to remember, pronounce and spell.
- Think about marketing. Come up with a name that reflects the desired brand and/or focus of your medical billing company.
2. Develop Your Medical Billing Company Business Plan
One of the most important steps in starting a medical billing company is to develop your business plan. The process of creating your plan ensures that you fully understand your market and your business strategy. The plan also provides you with a roadmap to follow and if needed, to present to funding sources to raise capital for your business.
Your business plan should include the following sections:
- Executive Summary – this section should summarize your entire business plan so readers can quickly understand the key details of your medical billing company.
- Company Overview – this section tells the reader about the history of your medical billing company and what type of medical billing company you operate. For example, are you an in-house medical billing company, outsourced, third-party medical, hybrid, medical billing software, web-based, medical billing franchise, or a self-employed medical billing consultant?
- Industry Analysis – here you will document key information about the healthcare industry. Conduct market research and document how big the industry is and what trends are affecting it.
- Customer Analysis – in this section, you will document who your ideal or target customers are and their demographics. For example, how old are they? Where do they live? What do they find important when purchasing services like the ones you will offer?
- Competitive Analysis – here you will document the key direct and indirect competitors you will face and how you will build competitive advantage.
- Marketing Plan – your marketing plan should address the 4Ps: Product, Price, Promotions and Place.
- Product: Determine and document what products/services you will offer
- Prices: Document the prices of your products/services
- Place: Where will your own business be located and how will that location help you increase sales?
- Promotions: What promotional methods will you use to attract customers to your medical billing company? For example, you might decide to use pay-per-click advertising, public relations, search engine optimization and/or social media marketing.
- Operations Plan – here you will determine the key processes you will need to run your day-to-day operations. You will also determine your staffing needs. Finally, in this section of your plan, you will create a projected growth timeline showing the milestones you hope to achieve in the coming years.
- Management Team – this section details the background of your company’s management team.
- Financial Plan – finally, the financial plan answers questions including the following:
- What startup costs will you incur?
- How will your medical billing company make money?
- What are your projected sales and expenses for the next five years?
- Do you need to raise funding to launch your business?
3. Choose the Legal Structure for Your Medical Billing Company
Next you need to choose a legal structure for your own medical billing company and register it and your business name with the Secretary of State in each state where you operate your business.
Below are the five most common legal structures:
1) Sole proprietorship
A sole proprietorship is a business entity in which the owner of the medical billing company and the business are the same legal person. The owner of a sole proprietorship is responsible for all debts and obligations of the business. There are no formalities required to establish a sole proprietorship, and it is easy to set up and operate. The main advantage of a sole proprietorship is that it is simple and inexpensive to establish. The main disadvantage is that the owner is liable for all debts and obligations of the business.
A partnership is a legal structure that is popular among small businesses. It is an agreement between two or more people who want to start a medical billing company together. The partners share in the profits and losses of the business.
The advantages of a partnership are that it is easy to set up, and the partners share in the profits and losses of the business. The disadvantages of a partnership are that the partners are jointly liable for the debts of the business, and disagreements between partners can be difficult to resolve.
3) Limited Liability Company (LLC)
A limited liability company, or LLC, is a type of business entity that provides limited liability to its owners. This means that the owners of an LLC are not personally responsible for the debts and liabilities of the business. The advantages of an LLC for a medical billing company include flexibility in management, pass-through taxation (avoids double taxation as explained below), and limited personal liability. The disadvantages of an LLC include lack of availability in some states and self-employment taxes.
4) C Corporation
A C Corporation is a business entity that is separate from its owners. It has its own tax ID and can have shareholders. The main advantage of a C Corporation for a medical billing company is that it offers limited liability to its owners. This means that the owners are not personally responsible for the debts and liabilities of the business. The disadvantage is that C Corporations are subject to double taxation. This means that the corporation pays taxes on its profits, and the shareholders also pay taxes on their dividends.
5) S Corporation
An S Corporation is a type of corporation that provides its owners with limited liability protection and allows them to pass their business income through to their personal income tax returns, thus avoiding double taxation. There are several limitations on S Corporations including the number of shareholders they can have among others.
Once you register your medical billing company, your state will send you your official “Articles of Incorporation.” You will need this among other documentation when establishing your banking account (see below). We recommend that you consult an attorney in determining which legal structure is best suited for your company.
4. Secure Startup Funding for Your Medical Billing Company (If Needed)
In developing your own medical billing business plan, you might have determined that you need to raise funding to launch your business.
If so, the main sources of funding for a medical billing company to consider are personal savings, family and friends, credit card financing, bank loans, crowdfunding and angel investors. Angel investors are individuals who provide capital to early-stage businesses. Angel investors typically will invest in a medical billing company that they believe has high potential for growth.
5. Secure a Location for Your Business
When you’re starting a medical billing company, the first thing you need to do is find a location. There are a few things to keep in mind when choosing a location:
– Cost: You’ll want to find a location that is affordable, both in terms of rent and utilities.
– Accessibility: The location should be easy to get to, both for your employees and your clients.
– Space: You’ll need enough space to set up your office and equipment.
Once you’ve narrowed down your options, it’s important to take a look at the surrounding businesses and see if there is potential for collaboration. You may also want to consider whether the area is growing, as this could mean more business for you in the future.
6. Register Your Medical Billing Company with the IRS
Next, you need to register your business with the Internal Revenue Service (IRS) which will result in the IRS issuing you an Employer Identification Number (EIN).
Most banks will require you to have an EIN in order to open up an account. In addition, in order to hire employees, you will need an EIN since that is how the IRS tracks your payroll tax payments.
Note that if you are a sole proprietor without employees, you generally do not need to get an EIN. Rather, you would use your social security number (instead of your EIN) as your taxpayer identification number.
7. Open a Business Bank Account
It is important to establish a bank account in your medical billing company’s name. This process is fairly simple and involves the following steps:
- Identify and contact the bank you want to use
- Gather and present the required documents (generally include your company’s Articles of Incorporation, driver’s license or passport, and proof of address)
- Complete the bank’s application form and provide all relevant information
- Meet with a banker to discuss your business needs and establish a relationship with them
8. Get a Business Credit Card
You should get a business credit card for your medical billing company to help you separate personal and business expenses.
You can either apply for a business credit card through your bank or apply for one through a credit card company.
When you’re applying for a business credit card, you’ll need to provide some information about your business. This includes the name of your business, the address of your business, and the type of business you’re running. You’ll also need to provide some information about yourself, including your name, Social Security number, and date of birth.
Once you’ve been approved for a business credit card, you’ll be able to use it to make purchases for your business. You can also use it to build your credit history which could be very important in securing loans and getting credit lines for your business in the future.
9. Get the Required Business Licenses and Permits
A medical billing company needs to have a business license and a permit to operate as a medical billing company. The business license can be obtained from the local city or county government. The permit to operate as a medical billing company can be obtained from the state government.
10. Get Business Insurance for Your Medical Billing Company
The type of insurance you need to operate a medical billing company will depend on the type of business.
Some business insurance policies you should consider for your medical billing company include:
- General liability insurance: This covers accidents and injuries that occur on your property. It also covers damages caused by your employees or products.
- Auto insurance: If a vehicle is used in your business, this type of insurance will cover if a vehicle is damaged or stolen.
- Workers’ compensation insurance: If you have employees, this type of policy works with your general liability policy to protect against workplace injuries and accidents. It also covers medical expenses and lost wages.
- Commercial property insurance: This covers damage to your property caused by fire, theft, or vandalism.
- Business interruption insurance: This covers lost income and expenses if your business is forced to close due to a covered event.
- Professional liability insurance: This protects your business against claims of professional negligence.
Find an insurance agent, tell them about your business and its needs, and they will recommend policies that fit those needs.
11. Buy or Lease the Right Medical Billing Company Equipment
To start a medical billing company, you will need some basic equipment such as a computer, phone, scanner, and internet access. You might also want to invest in some office furniture.
12. Develop Your Medical Billing Company Marketing Materials
- Logo: Spend some time developing a good logo for your medical billing company. Your logo will be printed on company stationery, business cards, marketing materials and so forth. The right logo can increase customer trust and awareness of your brand.
- Website: Likewise, a professional medical billing company website provides potential customers with information about the services you offer, your company’s history, and contact information. Importantly, remember that the look and feel of your website will affect how customers perceive you..
- Social Media Accounts: establish social media accounts in your company’s name. Accounts on Facebook, Twitter, LinkedIn and/or other social media networks will help customers and others find and interact with your medical billing company.
13. Purchase and Setup the Software Needed to Run Your Medical Billing Company
Most medical billing businesses need accounting software and customer relationship management (CRM) software.
While there are many different software options available, some of the most popular programs for accounting include QuickBooks and Xero. Some of the most popular CRM programs include Salesforce, and Zoho.
Research the software that best suits your needs, purchase it, and set it up.
14. Open for Business
To run a medical billing company, you need software that can manage patient information, insurance claims, and billing. There are many different software options available, so it’s important to do some research to find one that meets your specific needs.
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How to Start a Medical Billing Company FAQs
Not necessarily. It depends on the type of medical billing company you want to start. There are a few key things to keep in mind, such as understanding the billing process and having good computer skills. However, with the right planning and execution, starting a medical billing company can be a lucrative endeavor.
One way to start a medical billing company with no experience is to look for a business partner who has the experience you need. You can also look for online resources or attend medical billing workshops. Additionally, you can consider working for a medical billing company to get experience in the industry. Finally, make sure to develop a strong business plan and marketing strategy to attract clients.
There is no one-size-fits-all answer to this question, as the profitability of medical billers can vary greatly depending on the services they offer, the size of their client base, and a host of other factors. That said, certain types of medical billing companies are likely to be more profitable than others. For example, companies that offer innovative and efficient billing services that help their clients save money are likely to be more profitable than those that simply process claims. Additionally, companies that cater to a large number of clients are also likely to be more profitable than those with a smaller client base.
To start a medical billing company, it will cost you around $10,000-$20,000. This includes the cost of setting up your business, purchasing equipment, and hiring employees.
The ongoing expenses for a medical billing company can include things like software licenses, subscription fees for online billing services, and credit card processing fees. Other ongoing expenses can include employee salaries, benefits, and training costs.
To keep your medical billing company running smoothly, it's important to budget for these necessary expenses. By planning ahead, you can ensure that your business remains profitable.
A successful medical billing business makes money by charging for administrative services, which may include submitting claims for payment to insurance companies and assisting doctors in meeting the requirements of Medicare and Medicaid. The company may also earn a commission on the services it provides, such as those for laboratory testing. Other revenue sources may come from the sale of medical supplies, billing software, or other related products and services.
There are a few reasons owning a medical billing company can be profitable. First, the demand for medical billing services is high, as most healthcare providers need assistance in managing their billing and revenue cycle functions. Additionally, medical billing companies can charge a premium for their services if they provide a high level of expertise and efficiency. Finally, the medical billing industry is relatively fragmented, providing opportunities for consolidation and growth. Taken together, these factors make owning a medical billing company a profitable proposition.
There are a few reasons medical billing companies fail. One reason is that the company is not charging enough for its services. Another reason may be that the company is not managed properly, which can lead to mistakes in billing and payments. A third reason may be that the company is not knowledgeable about the medical billing process and how to navigate through the complex insurance system. Finally, the company may not have a good relationship with doctors and other medical professionals, which can impact its ability to obtain new referrals.