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How to keep costs low when running a medical billing company

Margins are tight in the medical billing industry, but you can keep costs low with these actionable strategies.

How to keep costs low when running a medical billing company

At a Glance

  • The way to profitability for medical billing companies is keeping costs low.
  • Effectively managing operational costs is essential; according to a recent Tebra study, only 26% of medical billing companies expect margins to be above 20%.
  • You can leverage modern technology, such as cloud-based services and robotic process automation, to significantly streamline operations.
  • Outsource IT and administrative services strategically to free up resources and reduce overhead.
  • Cross-train employees and encourage ongoing education to minimize errors and increase staff productivity.

Margins are tight — every dollar counts in the medical billing industry. According to Tebra’s State of the US Medical Billing Industry Report, 26% of medical billing companies expected margins to be above 20% in 2023 — which was a significant drop from the 34% in 2022. Managing costs effectively is essential to staying competitive in the crowded industry.

That doesn’t mean running a medical billing company isn’t worth it — doing so can be very profitable. But with slim margins, reducing expenses while maintaining operational efficiency is critical. 

Let’s dive into actionable strategies to help you streamline your operations, cut unnecessary costs, and ultimately strengthen your company’s financial health.

Medical Billing Benchmark Report

How to manage operational costs

According to the 2024 Tebra Benchmark Report, operations have been the largest expense for the last 2 years, and 6 in 10 companies (61%) have increased their spending. As operational costs rise, so does the need to manage them effectively. Keeping operational expenses in check is crucial to maintaining a healthy bottom line — especially in the competitive medical billing industry.

Assess your current expenses

Start with understanding where your money is going. Costs like the following quickly add up and eat away at your margins:

  • Office space rent
  • Employee salaries and benefits
  • Billing software subscriptions
  • Marketing and advertising costs
  • Professional association fees
  • Ongoing education and training costs

Monitor and analyze operational costs

Stay on top of your expenses to ensure long-term profitability. Paying attention to where your money goes can help you make informed decisions that control costs and improve efficiency.

Paying attention to where your money goes can help you make informed decisions that control costs and improve efficiency.

First, categorize your expenses to help you focus on the areas where cost reductions will have the biggest impact, like office space rent and software subscriptions.

Then, continue to track your expenses over time to identify patterns or areas with increasing costs. For example, if you’re spending more on marketing without a corresponding bump in revenue, it may be time to reevaluate your strategy.

Tips to reduce your medical billing expenses

Keeping your medical billing expenses low isn’t just about cutting costs — it’s about making strategic decisions that drive long-term success. Reducing expenses while maintaining or even improving efficiency can give you a significant advantage.

Keeping your medical billing expenses low isn’t just about cutting costs — it’s about making strategic decisions that drive long-term success.

Here are some practical tips to help you achieve that ratio.

Outsource to experts 

Outsourcing to medical billing experts can help increase efficiency and ensure claims are processed with greater accuracy and speed, reducing costly errors and boosting reimbursement rates. If you outsource, it's important to ensure items don't fall through the cracks. Having documented processes and dedicated supervision of your vendor is vital for financial success.

Use cloud-based services

Shifting to cloud-based services can reduce your medical billing expenses while at the same time increasing flexibility and scalability. Cloud solutions eliminate the need for expensive on-site servers and reduce IT maintenance costs. They also offer enhanced security and automatic updates, ensuring your systems are always up-to-date without extra effort from your team.

Plus, cloud-based platforms allow your team to access important data from anywhere, making remote work seamless and improving overall efficiency. By leveraging the cloud, you can cut costs and unify your operations.

Streamline processes with technology 

You’re likely already using technology to manage your medical billing operations, but are you tapping into the latest tools to drive costs down even more? 

Only 20% of surveyed medical billing companies use robotic process automation (RPA) — down from 29% the year before — and only 36% use patient collections automations to manage workflows, according to the 2024 Tebra Benchmark Report.

Finding the right tools like the ones below can streamline processes, reduce errors, and significantly reduce costs.

  • Automated billing software: Reduce manual errors and accelerate claims submissions.
  • AI-powered coding tools: Ensure compliance and minimize costly coding errors.
  • RPA: Automate repetitive tasks like data entry, reducing operational costs and enhancing efficiency.
  • Cloud-based document management: Store and access important documents, mitigating the risk of lost paperwork and ensuring compliance.
  • Digital client onboarding and payment options: Simplify client onboarding and payment processing, improving satisfaction and revenue collection.

Optimize staff efficiency

Improving your team's operations is one of the most effective ways to reduce costs and boost productivity. 

  • Enhance operational flexibility: Cross-training your team to handle multiple roles allows you to quickly adapt to varying workloads, ensuring smooth operations even during peak periods or unexpected staff shortages.
  • Maximize workforce efficiency: Applying lean management principles helps you identify and eliminate inefficiencies in your workflow, enabling your team to focus on the tasks that drive revenue and performance.
  • Encourage continuous improvement: Fostering a culture of innovation and continuous improvement empowers your staff to develop creative solutions to common challenges, making them more effective in their roles.

Implement cost-effective billing software

Consider adopting modern billing software that seamlessly integrates with electronic health records (EHR) and electronic medical records (EMR) systems. An integrated system enhances coding accuracy, eliminates duplicate data entry, and streamlines bill management. This leads to a more efficient and cost-effective billing process. 

Beyond reducing administrative tasks, modern billing software can provide valuable insights through real-time reporting. This can help you identify trends, optimize workflows, and ensure timely reimbursements. The right software solution simplifies your billing operations and supports better decision-making and long-term savings.

Check out Tebra's software for billing companies that can give you the tools to systematize workflows and create efficiencies that bring speed to payment, scalable growth, and maximized revenue — for you and your clients.

Shop for the best prices

Follow these steps to find the best billing software for the value.

  1. Compare providers: Evaluate different billing software providers to see what features and services they offer at various price points.
  2. Look for hidden costs: Pay attention to any hidden fees or additional costs that might not be apparent upfront. 
  3. Choose a scalable solution: Opt for software that can grow with your business. This way, you’re paying for what you need now, with the flexibility to expand as your company evolves.

When to outsource and when to keep tasks in-house

More medical billing companies could benefit from strategic outsourcing. According to the 2024 Tebra Benchmark Report, 27% of surveyed medical billing companies use business process outsourcing.

While it can save time and reduce overhead, certain tasks may be better managed internally to ensure quality and streamline operations. Understanding which tasks to outsource and which to keep in-house is essential for maximizing your company’s performance while keeping costs low.

Outsource IT services and administrative tasks

Outsourcing specific tasks like IT services, payroll, and administrative support can free up your team to focus on core business functions. It can also reduce costs by leveraging specialized expertise without needing full-time staff. 

Hiring full-time IT staff, purchasing and maintaining hardware, and ensuring cybersecurity compliance can quickly add up. Outsourcing these functions lets you focus on your core business while experts manage the technical details.

Benefits of outsourcing IT services

Outsourcing IT services offers several advantages that can help your medical company operate more efficiently.

  • Avoid overhead costs: Access expert support and the latest technology without the burden of hiring full-time staff or investing in hardware and software — and the corresponding exorbitant price tag.
  • Safeguard patient security and ensure compliance: Specialized companies are well-versed in security and regulations, like HIPAA and the HITECH Act. They implement strong security protocols, conduct regular audits, and ensure your team is trained on the latest best practices, helping avoid hefty fines and legal challenges that come with non-compliance.
  • Enhance system reliability and performance: Outsourced IT providers monitor your systems around the clock, ensuring maximum uptime and quick resolution of any technical issues. This proactive management minimizes downtime and keeps your operations running smoothly.

Reducing costs with outsourced administrative support

Outsourcing tasks like internal accounting, payroll, and human resources can significantly lighten your administrative costs.

  • Save time and money: Let external firms handle payroll, benefits management, and compliance so your staff can spend less time on paperwork and more time delivering exceptional service to your medical practice clients.
  • Access advanced technology: Outsourcing firms often employ the latest technology and software for administrative tasks. This gives you access to tools that might otherwise be costly or difficult to implement in-house.

Tasks best kept in-house for efficiency

Tasks like client communications and critical billing processes may be more effective when handled internally. Keeping these in-house ensures better control, faster response times, and consistent service delivery.

Achieving the right balance between in-house and outsourced operations requires a strategic approach.

Achieving the right balance between in-house and outsourced operations requires a strategic approach. Regularly assess your business needs and capabilities to determine which tasks are best outsourced. That’s the best part about outsourcing — you can scale up when you need the extra help or take projects in-house when you have the capacity.

Selecting the right provider for outsourced services

Finding the right outsourcing partner can make all the difference in streamlining your operations — a crucial step in driving down costs. Keep these factors in mind to ensure you get the best value:

  • Proven experience: Ensure the provider has a strong track record in the healthcare industry.
  • Regulatory expertise: Verify their compliance with key regulations to minimize the risks of expensive fines.
  • Reliable support: Opt for 24/7 availability to prevent downtime that could disrupt your business and increase costs.
  • Flexible scalability: Choose a partner that can flex with your business, so you’re not paying for services you don’t know.
  • Robust security: Confirm they have strong measures in place to protect your data, avoiding potential breaches and their associated costs.

Managing and optimizing the billing function

Getting the most out of your medical billing operations means going beyond managing costs — it’s about creating a well-oiled machine that enhances your business. Beyond monitoring and reducing costs, ensure that every aspect of the billing process operates at peak efficiency.

Ongoing cost monitoring strategies

Keep costs in check to regularly monitor and analyze your billing operations. Start by tracking key performance indicators (KPIs) such as claim acceptance rates, reimbursement times, and overall processing costs. Use this data to identify inefficiencies and areas where you can reduce expenses. 

Additionally, consider conducting regular audits to ensure that your processes comply with industry standards and are free of costly errors. By staying proactive in your cost monitoring efforts, you can continuously optimize your billing operations and protect your bottom line.

Improving cash flow and reducing claim denials

Effective cash flow management starts with minimizing claims denials, often due to confusing paperwork or simple data entry errors. And since 65% of rejected claims will never be resubmitted, denials are time-consuming and costly.

Effective cash flow management starts with minimizing claims denials.
  • Ensure medical practices have patients update their payer forms regularly to streamline billing while decreasing paperwork missteps.
  • Reduce costly errors by ensuring every code you submit aligns with payer guidelines. Only include codes directly related to the patient’s visit to avoid unnecessary rejections.
  • Prevent automatic claim denials by avoiding notes that look like they were copied and pasted from earlier visits. Instead, ensure providers’ documentation includes specific, up-to-date details from the most recent visit, and double-check that the codes accurately reflect the conditions addressed.

Updating and training staff on best practices

Keep your team up-to-date on the latest industry standards, payer guidelines, and coding practices to minimize errors and boost efficiency. Here are a few ways to keep your staff continuously improving.

  • Regular training sessions: Schedule quarterly workshops or online courses to update your team on the latest coding practices and regulations.
  • Mentorship program: Pair experienced staff with newer employees for hands-on learning and support.
  • Accessible resources: Provide up-to-date coding manuals and access to industry webinars, ensuring these tools are easily accessible.
  • Continuous feedback: Encourage staff to suggest improvements and regularly review this feedback to stay aligned with best practices.

Position your medical billing company for success

Cutting costs isn’t just about saving money — it’s about making your medical billing company more efficient, agile, and competitive. Keep track of your costs and work to continually optimize your processes to drive down your bottom line and see topline growth.

Your steps today will set the stage for sustained growth and long-term success. For more information on your peers in the medical billing industry, download The State of the US Medical Billing Industry report.

Medical Billing Benchmark Report

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Benchmarks for your medical billing company: Get an inside look at revenue models, operations, and industry trends gathered from 100+ independent medical billing companies in our medical billing benchmark report.

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Rebecca Slawter, freelance healthcare writer

Rebecca Slawter is a seasoned freelance content and copywriter focusing on healthcare and B2B SaaS. Rebecca has first-hand knowledge of the importance of connections between patients and their providers — connections that are easier to build in independent practices. Her passion for writing about healthcare is rooted in wanting to spotlight healthcare professionals and their tireless efforts, and to do what she can to improve the industry as a whole.

Reviewed by

Aimee Heckman

Aimee Heckman is a healthcare business consultant with more than 25 years of experience in medical practice management, revenue cycle management, PM/EHR implementation, and business development. As a Certified Professional Biller (CBP) and Certified Physician Practice Manager (CPPM), Aimee has demonstrated success in assisting physicians with maintaining their independence and surviving the ever-changing healthcare business environment.

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