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2019 Medical Billing Software Buyer's Guide

As practices grow and the number of patients increases, it becomes critical to streamline processes and achieve a good first-pass resolution rate: any medical practice that sees more than 10 to 20 patients a day and does not have an electronic medical billing solution in place is likely to be losing a fair amount of its revenue to unpaid claims.

Regulatory provisions are becoming more and more complex, insurance companies update rules and criteria for medical coverage frequently, and claims are being denied regularly. Medical bills now go through a complete cycle: from e-claim creation, to electronic submission, and successive denials and re-submissions, until the bill is finally paid.

A simple medical billing software is sometimes not sufficient: practices need to manage this entire cycle to increase payments and revenue. Depending on their needs and requirements, they have a few options: medical billing software solutions handle claim management and billing; Revenue Cycle Management (RCM) systems focus on the entire lifecycle of a practice’s revenue and are far more comprehensive.

Medical Billing Software vs. Revenue Cycle Management

Small practices often opt for a stand-alone medical billing or RCM solution. These are often online or web-based, and very easy to acquire and use. No complex servers or databases need to be set up and managed. Payment generally is based on a percentage of collections: if no money is collected on a bill, the service provider does not get paid.

Large practices tend to acquire software solution packages that include medical billing, practice management and EHR/EMR. Two deployment options are available: on-premise solutions are purchased outright, generating a higher up-front cost and smaller recurring costs (maintenance and upgrades). Web-based solutions are more flexible; payment is sometimes calculated on a per-provider, per-month basis, or as a percentage of received payments.

Creating and managing the entire payment course of a medical bill is a multi-step process. These steps form the essential features that all medical billing solutions must have to be able to get a high first-pass claim acceptance rate. While almost all solutions will demonstrate these steps, the key lies in how well they are implemented.

Key Features of a Medical Billing Software

Patient Registration and Insurance Eligibility Check

While many eligibility checking tools are built into practice management solutions, every practice must have a means of checking insurance eligibility before the patient encounter begins. If the patient’s insurance plan does not cover the requested services, the patient needs to be told upfront that they will need to cover the bill. The solution must also check during registration whether there are any outstanding bills the patient needs to clear.

Claim Generation

As the patient is seen by the physician, a superbill is created - either on paper or electronically. This is transferred to the medical biller, which creates a claim and checks for a number of potential errors. Good medical billing solutions will sometimes use millions of rules to check that the claim meets the requirements of various insurers. Some solutions update their list of possible errors every time an insurer denies a bill, and so create a huge knowledge base of errors to check for. Naturally, these solutions will get better as their library of errors grows. Billing agencies also need to follow HIPAA guidelines; ensuring this is critical.

Claim Transmission

HIPAA guidelines require that all practices transmit their claims electronically. Manual claims are permitted under some special circumstances. Check that both methods are possible.

Use of Clearinghouses

In some cases, billers can send claims directly to a paying agency such as Medicaid or Medicare. In others, the claim is sent to a clearinghouse, which in turn sends it to the insurance after ensuring that it is in the correct format, as demanded by different agencies. In many cases, using a clearinghouse can help improve the first-pass claim ratio.

Claim Follow-up

Your billing solution must be able to follow up on individual claims to track their progress with the insurer. In case of undue delay, a query should be raised or the claim must be resubmitted. Claims can be accepted, rejected or denied. In case of rejection—often caused by an error in the bill—the solution must support claim correction and resubmission. Efficient solutions will go through that process within a day. In case of denial (the insurer refuses to process the claim due to the medical procedure not being covered in the policy or due to a pre-existing condition), appeals are filed. The solution must support all these actions.

Even when claims are approved, insurance will only pay the amount that is specified in the policy. The remaining amount can be recovered from a secondary insurance (if the patient has one) or from the patient. The software must be capable of handling this process.

Patient Statements Creation

Depending on how much the insurance company has paid, a statement is created and forwarded to the patient so that the balance can be recovered. The software must automatically reconcile payments received. Depending on patient preferences, it should send statements to patients by email or post.

Statement Follow-up and Collections

It is important that bills sent to patients are properly tracked and that the billing solution generates reminders and sends follow-up bills. When a bill is overdue beyond a certain point, a collection agency may have to become involved. Your practice should be able to customize these actions and decide how many reminders are to be sent, what the messaging should be, and when a collection agency takes over.

Reporting Features

While most medical billing solutions offer similar features, there can be wide disparities in their reporting capabilities. Reporting features are capital to good revenue management processes: practice administrators must know how their practice is doing. Any reports that the solution provides should be completely customizable without requiring any advanced programming knowledge.

Below is a list of the most critical reports:

  • Accounts Receivable: this report indicates the number of days accounts have been unpaid. Ideally, all claims and bills must be cleared within 45 days, but you should be able to set this figure. The software must red-flag any claims pending beyond this point.
  • Key Performance Indicators: KPI reports track the following over a specified period (weekly / monthly etc.):
    • total patient encounters
    • total charges
    • total collections
    • total adjustments
  • Carrier and Insurance Analysis: these reports give insights into the top insurance companies paying your practice, accounts receivable per company, rates different insurance companies pay you for the same procedure, etc.

Users should be able to email reports, export to MS Excel or PDF files, and drill down to individual items or data points. Report generation and sharing should also be restricted to specified users only.

Using an External Billing Service

Medical practices have the option to generate and handle their bills in-house, or to opt for a third-party billing service. Many small practices that have limited staff opt to outsource their billing to a third-party medical billing service provider. There are several advantages to this approach:

  • Greater focus on core activities: practices that outsource medical billing can devote more time to patient care, rather than following up on the financial side of their practice. Using a billing service also reduces the need for administrative staff.
  • Reduced billing errors: professional billing agencies have highly experienced staff focused on medical billing alone, to ensure your e-claims have a very high first-pass claim acceptance rate. Experienced staff know exactly how to prepare claims to minimize denials and rejections. They can even provide tips on maximizing revenue.
  • Pay only for results: typical billing agencies charge a percentage of the claims that are paid. This can be much cheaper compared to handling billing within the practice with a dedicated workforce.
  • Patient satisfaction often improves with accurate statements from the billing agency and from the reduced burden on clinical staff.
  • Better compliance and improved revenue.

The only possible disadvantages to outsourcing your medical billing is the feeling of loss of control, or a fear of letting your revenue details be known outside of the practice. However, if you select a reputable service provider, the security and privacy of your data will be protected, and the service will help you bring your billing back in-house should you ever wish to.


All medical practices need excellent administration if they are to stay viable. A practice that does not use any electronic claim and billing solutions is quite possibly losing a lot of its revenue. One option is to outsource billing to a third-party service provider. Alternatively, practices can use online or web-based medical billing solutions to handle claims in-house. Almost all medical billing solutions have similar features, but the difference lies in the way they are implemented. Therefore, careful selection is important. A good solution, well implemented, will make a major difference to your revenue in just a few months.