Billing services currently exist to manage medical practices. These services relieve medical professionals of tedious detail work, but rarely offer a means to maximize the practice’s bottom line. Physicians 1st Billing and Claims will not only free office staff for more crucial tasks but also maximize return from insurance carriers.
National statistics show only about 70 percent of insurance claims initially submitted on paper are ever paid by insurance carriers. With electronic submission, Physicians 1st Billing and Claims can increase the percentage of claims paid to around 98 percent.
Additional statistics indicate that it currently costs a medical practice between $8.00-$10.00 per claim to process insurance for their patients. Physicians 1st Billing and Claims can reduce these costs by 50 percent or more.
Statistics show turnaround on paper insurance claims to be 30, 60, even 90 days or longer, creating serious outstanding receivables for the practice. By submitting claims electronically, Physicians 1st Billing and Claims can generally have money in the physician’s hand within 14-18 days, reducing outstanding receivables and improving cash flow.
Statistics also show a 30 percent suspension/rejection rate for paper insurance claims. This doesn’t mean that the claims are never paid. What it does mean is medical staff must hassle with insurance carriers over payment. With extensive editing performed on electronic claims prior to their transmission to carriers, this percentage is reduced to 2-3 percent. Claims are submitted with a 98 percent accuracy rate.
For many years physicians graduated from medical school under the premise that they were going to run a “practice.” “Businesses” were for other professionals. Many simple administrative procedures were neglected, such as:
– Keeping current with insurance specifications and regulations so that claims were paid on a timely basis
– Concentrating on collecting receivables and co-payments
– Ensuring that fees were kept at the maximum allowable insurance carriers were paying
– Keeping procedure codes current to prevent claim suspension or rejection.
For many offices, outstanding receivables grew tremendously and annual bad-debt write-offs became routine. But adequate profit margins allowed medical practices to ignore sound business procedures. Medical practice complacency toward industry change is in the past. Physicians’ heads raised, and they began taking note of public opinions toward health care reform issues four years ago. With the onslaught of managed care organizations into the industry, physicians are finding profit margins shrinking. They are now alert to the fact that in order to remain in business into the 21st century, they will have to adopt more efficient business practices. Physicians 1st Billing and Claims is prepared to assist local health care providers move through the last of the 20th century and into the 21st century with sound practices that will guarantee business success and quality health care for our families and our country.
Physicians 1st Billing and Claims is contributing over $9,000 to this business and is requesting to borrow another $5,000. Please give this detailed business plan your attention. The use of these funds is explained in the Start-up Summary section.
**1.1 Objectives**
1. To acquire one account by the end of month two.
2. To process 1,500 claims a month by month 15.
3. To become recognized as a local industry expert in the field of medical reimbursement.
4. To add several additional services to our initial offering of electronic claims submission, including:
– Code optimization.
– Managed care contract analysis.
– Full practice management.
– Customized reporting.
– Fee analysis.
– Medicare financial impact analysis.
Physicians 1st Billing and Claims is a medical reimbursement consulting firm that helps medical practices become efficient and save money by outsourcing insurance processing and medical billing to an expert reimbursement service. Our goal is to offer a complete one-stop-shopping experience for all medical practice administrative functions by the end of 1998, in order to repay our business-start-up loan and finance continued growth and development.
Since 1985, the Federal Government has been urging the health care industry to submit insurance claims electronically, as it can save millions of dollars annually. Presently, 95 percent of pharmaceutical claims and 70 percent of hospital claims are submitted electronically, while physicians and dentists lag at only 25-30 percent.
In 1990, Congress mandated that physicians file claims for all their Medicare patients. Many doctors were unprepared for the paperwork, and eight years later, the burden continues to grow. While no mandate was passed in 1996, the calls for electronic submission of all Medicare claims persisted. This year, over 1 trillion dollars worth of medical charges will be issued in the U.S., equating to 9 billion medical claims. Medical practices must meet the mandates and deal with the growing paper problem. Outsourcing to experts who can save practices money, provide faster returns from insurance carriers, and handle claims with accuracy is the sensible solution.
Flexibility is another key to our success. We understand that each medical practice is unique and will evaluate the needs of each practice individually. Our billing services will be customized accordingly.
Additionally, we offer a variety of services to streamline medical administrative functions, providing a one-stop-shopping experience for medical practices.
We are currently organized as a partnership, formed in October 1998. Physicians 1st Billing and Claims and our logo are trademarked through the U.S. Department of Commerce Patent and Trademark Office, covering Medical Practice Management and Reimbursement Consulting.
The partnership is comprised of John and Mary Biller, who have extensive experience in teaching, management, marketing, and filling out and filing medical insurance claims. John will manage the Marketing and Sales departments, while Mary will oversee the Training and Clerical Administration departments. They will jointly handle the Accounting and Data Entry departments.
To start, John and Mary will work full-time in the business, with John focusing on marketing/sales, purchasing, and data entry, and Mary focusing on data entry, clerical administration, and training. Their children, Erika and Matthew, will assist with data entry and housekeeping as needed. The entire Biller family is dedicated to ensuring the success of Physicians 1st Billing and Claims.
To assist with the startup, John and Mary have purchased a business opportunity package from Claim Systems Inc., which includes state-of-the-art medical billing and accounting software, unlimited training for the first six months, 24-hour technical support for two years, emergency support service, and a comprehensive marketing package. The package price is $5,000.00, with an additional $45.00 for shipping and handling. Optional dental billing software can be purchased separately for $900.00 plus shipping. A $400.00 deposit secures the rights to become a franchise once Claim Systems receives licensing from the State of Indiana. If approval is granted, Physicians 1st Billing and Claims will pay an additional $1,595.00 for ownership of franchise rights and the benefits of national advertising and name recognition.
John already owns the necessary computer equipment for the business, including a Pentium II Gateway computer with an ink-jet printer and a scanner. Additional office equipment, such as a Pentium computer, ink-jet printer, fax machine, phone and communications equipment, chair, copy machine, accounting software, and miscellaneous office supplies, will be purchased.
John and Mary are investing $9,640 of their own capital and seeking a four-year loan of $16,000 to successfully start Physicians 1st Billing and Claims.
Start-up Requirements:
– Legal: $200
– Office Supplies Stationery: $200
– Furniture: $500
– Business Opportunity: $6,040
– Insurance: $200
– Rent: $50
– Software: $69
– Expensed Equipment: $345
– Other: $2,000
– Total Start-up Expenses: $9,604
Start-up Assets:
– Cash Required: $16,000
– Other Current Assets: $0
– Long-term Assets: $0
– Total Assets: $16,000
Total Requirements: $25,604
Start-up Funding:
– Start-up Expenses to Fund: $9,604
– Start-up Assets to Fund: $16,000
– Total Funding Required: $25,604
Assets:
– Non-cash Assets from Start-up: $0
– Cash Requirements from Start-up: $16,000
– Additional Cash Raised: $0
– Cash Balance on Starting Date: $16,000
– Total Assets: $16,000
Liabilities and Capital:
– Liabilities
– Current Borrowing: $16,000
– Long-term Liabilities: $0
– Accounts Payable (Outstanding Bills): $0
– Other Current Liabilities (interest-free): $0
– Total Liabilities: $16,000
– Capital
– Planned Investment
– Owners: $9,604
– Investor: $0
– Additional Investment Requirement: $0
– Total Planned Investment: $9,604
– Loss at Start-up (Start-up Expenses): ($9,604)
– Total Capital: $0
– Total Capital and Liabilities: $16,000
– Total Funding: $25,604
Company Locations and Facilities:
John and Mary will utilize 518 sq. ft. of their home for their start-up. John’s office area will be used for marketing and accounting operations, while Mary’s office area will be used for data entry and clerical operations.
Services:
We offer a full-service medical reimbursement business with individual pricing. Our goal is to be a one-stop shop for medical practices when it comes to administrative functions. We customize our charges based on the work we do and the needs of each office. We offer electronic billing of medical insurance claims and will soon expand to offer other administrative functions. Our software simplifies and accelerates the process of claims payment, ensuring faster payment for physicians. We also offer practice management software, managed care contract services, and complete dictation transcription.
Service Description:
Our goal is to provide outstanding service to physicians. We offer complete patient record setup, electronic and manual medical claims filing, patient billing, claims posting and patient record updating, collection services, complete practice analysis, assistance in negotiating health care contracts, automated transcription service, and volume discounting. Initially, we will focus on claims filing and gradually expand our services.
Competitive Comparison:
We perform evaluations on each practice to determine their specific needs and customize our charges accordingly. Our competitors do not offer full analysis service or two-way computer communications and record posting and file updates.
Sales Literature:
Included in the appendix are copies of our sales brochure and tips brochure. These brochures were developed with the expertise of a national marketing company specializing in medical reimbursement issues.
Technology:
Our computer software is state-of-the-art and specifically developed for medical reimbursement consultants. The ET&T clearinghouse we use is highly respected in the industry and guarantees the accuracy of claims before they are sent to carriers.
Future Services:
As we gain experience, we plan to offer full medical office consulting services, including patient billing, collection services, assistance in negotiating health care contracts, and automated transcription service.
Market Analysis Summary:
Our target market includes any medical practice or health care delivery unit that utilizes the HCFA-1500 format for claims submission. We can also process claims for dentists with specialized ADA software. New practices are particularly appealing to us, as we can assist them in billing and claims training and increase their cash flow.
Market Segmentation:
Our target market includes physicians in various specialties such as family practice, internal medicine, surgeons, psychologists, chiropractors, physical therapists, podiatrists, specialists, ambulance services, and medical laboratories. We initially plan to sign a single doctor practice, with an ideal target being a family practice physician.
Market Analysis
Year 1 Year 2 Year 3 Year 4 Year 5 CAGR
Potential Customers Growth
Physicians 2% 867 884 902 920 938 1.99%
Dentists 2% 179 183 187 191 195 2.16%
Other 2% 18 18 18 18 18 0.00%
Total 1.98% 1,064 1,085 1,107 1,129 1,151 1.98%
4.2 Service Business Analysis
The Federal Government’s influence is quite positive. In May, 1992, the Health Care Financing Administration, the governing body for Medicare, established what they call “payment floors” for Medicare claims. Carriers contracted to pay Medicare claims were told to hold paper claims’ payments until “at least the 27th day after receipt.” Electronic claims were to be held until the 14th day, but had to be paid by the 19th day. If “clean claims” were not paid by the 19th day after receipt, the Federal Government would have to pay interest on the claim amount. No payment penalties were placed on paper claims. Program Memorandum AB-92-5 described above was beneficial for the electronic medical claims industry.
Several states have passed mandates of their own since 1992, but until now there has been no real action by the Federal Government on this issue. It is expected that Congress will mandate electronic submission of Medicare claims in the near future and the cut-off date for paper claims will follow soon after. After the cut-off date, paper Medicare claims will not be accepted.
If history is any indication and current trends continue, commercial insurance carriers will follow suit within a short period of time. Statistics show that it currently costs a commercial carrier between $2.60 to $20.00 to process a claim. The same claim can be processed electronically for approximately $1.10. The conversion costs of moving from paper to electronic processing can be extensive, but in the long run these savings will be substantial.
4.2.1 Main Competitors
Our main competition is Bi-State Medical Consulting. They provide full-service medical claims management.
Strengths:
– Experience
– Education
– Large client base
Weaknesses:
– One-way claims communication and software
– Limited advertising ability
However, the strengths and weaknesses are of little consequence as the local market is untouched, and no other company in this area can offer the software features or dedicated service that Physicians 1st Billing and Claims can provide.
The bottom line of our ability to compete lies in our provision of free practice management software, two-way computer communications for next-day patient records updating, and substantially improved cash flow for physicians.
4.2.2 Business Participants
If Congress mandates electronic submission of insurance claims during 1998, 600 physicians will need to meet the mandates. Since October 1990, physicians treating Medicare and Medicaid patients have been required by law to file the necessary claims for these individuals. Failure to meet the mandates will result in a loss of a good portion of the patient base.
The interest in Total Quality Control (TQC) has intensified in medical practices during the past few years, partly due to the Federal Government and the American public’s interest in healthcare reform. Physicians fear that if they do not voluntarily comply, more Federal regulations will be imposed.
The managed care movement across America is also influencing medical practices. With managed care, physicians affiliate with different health maintenance organizations (HMOs) or preferred provider organizations (PPOs) for two main reasons: their peers are doing it, or they believe it will increase their patient base. Unfortunately, many physicians’ incomes decline while their patient bases increase under managed care due to the "capitation" payment schedules. Affiliation with managed care organizations also creates new paperwork requirements, making medical practices search for better office efficiency.
Strategy and Implementation Summary
Studies show that the No. 1 issue with consumers today is "personal service." They want to know that someone cares about their concerns and wants to resolve their problems. Physicians 1st Billing and Claims understands this because we have been in their position.
Physicians 1st Billing and Claims also understands that consumers want reasonable prices for services. That is why we evaluate the needs of each medical office and customize our service charges based on those needs.
Our goal is to establish win-win, long-term relationships with clients. We strive to be the type of company that anyone would be happy to do business with.
5.1 Competitive Edge
Physicians 1st Billing and Claims provides the following benefits:
1. Free State-Of-The-Art Practice Software
2. Two-way Computer Communications
3. Next Day Patient Record Updating
4. Complete Practice Analysis
5. Full-Service Medical Claims Management
6. Superior Service
7. Experience
No one else in the local market can offer this service package.
Results improve when multiple items are used in concert to attain a contract for health care services. The basic plan is divided into five segments:
1. Contacting the medical practice for the first time:
– By phone
– Cold call
2. Identifying the gatekeeper and making contact with them
3. Mailing or dropping off information:
– Three-panel brochure
– Self-mailer
– Promotional letter
4. Scheduling an appointment for a presentation
5. The presentation
Contacts to implement this marketing strategy will be from a prior developed database of physicians who currently do not file medical claims electronically. This information is obtained from public records.
5.2.1 Promotion Strategy
It is more advantageous for medical practices to outsource insurance processing to expert medical reimbursement services instead of trying to make the transition to in-house processing themselves. Insurance processing has become complicated, and expertise is needed to ensure judicious decisions.
Most medical offices have basic computer capabilities for appointments, billing, and printing paper insurance claims. However, they do not have the capabilities to transmit claims electronically or evaluate managed care contracts. Transitioning to electronic processing is expensive and requires additional skills.
The logical solution is to contract with an expert electronic medical billing and reimbursement service. This allows medical office staff to focus on patient care and leave the detailed work to professionals.
5.2.2 Marketing Programs
Physicians 1st Billing and Claims will incorporate numerous strategies simultaneously:
– Listing in the local Yellow Pages for stability and professionalism
– Networking with Chamber of Commerce, local civic organizations, county medical associations
– Volunteering services for medical fundraisers and health fairs, maintaining an information booth at local medical trade shows
– Attending Medicare, Medicaid, Blue Shield, and Worker’s Compensation activities
– Networking with other professionals in the medical field
– Affiliation with local and national peer organizations
– Advertising in local/hospital newsletters
– Membership in the Better Business Bureau
– Accepting invitations to appear on local radio talk shows
– Submitting press releases to local newspapers
– Writing articles for health publications in the area
5.2.3 Pricing Strategy
Physicians 1st Billing and Claims has a two-part pricing strategy:
Part 1: Negotiating services based on a percentage for complete claims management, typically between 6-10% based on practice size.
Part 2: Charging for services rendered for claims filing based on a sliding scale. The price per claim ranges from $3.50 to $5.00, depending on the number of patients. A one-time setup charge, between $150.00 and $500.00 based on patient load, will be assessed at contract signing.
5.3 Sales Strategy
Realistic goals have been set for sales efforts.
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