Medical billing business plan for starting your own business
Do you want to start a medical billing business? Well, considering the rising costs of healthcare in the US and the complexities involves in medical payments when there is 3rd party i.e. insurance company involved, the business can be immensely profitable.
A medical billing business facilitates the patients and medical practitioners as well as health insurance companies in dealing with complex medical transactions. For this, the medical billing specialist does a range of tasks such as filing the claim, keeping up patient’s record and medical history.
To start this business, the first step is to make business plan for medical billing company. In case you don’t know the essentials, you can take help from here. Here we are providing business plan for a medical billing startup, Medi Assist. If you will be raising a loan, you’ll also have to see business plan for loan from bank.
2.1 The Business
Medi Assist will be based in San Diego. The business will provide expert medical billing specialists to physicians, dentists, surgeons, and others in the profession. After 5 years of the launch, the business will be expanded to one more location.
2.2 Management of medical billing
To make sure that you manage your medical billing startup well, it is essential to decide everything in a medical billing company business plan. Since, the business requires expertise and specialization in the domain, it is essential that you manage the functions effectively. For each case, you’ll need to arrange for commute, legal assistance, and access to data for accurate record keeping.
To assist you we will provide the list of employees, management positions and their spheres of authority in this medical billing business plan pdf. Though you can take help from this sample business plan for medical billing, it will be best practice to hire business planning expert for making your business plan if you are new to the field.
2.3 Customers of medical billing
Before opening a medical billing company you must recognize groups of your target customers. The customers of Medi Assist are expected to be:
- Medical Practitiioners
2.4 Business Target
It is essential to set business targets even when you work on simple ideas like business plan for a medical laboratory or nursing business plan. It is to remain focused and directed throughout the operations of your business.
Our targets to establish our name in the market will be given in the later sections. However, our financial targets are given as below:
3.1 Company Owner
Medi Assist will be owned by Mariana Downey. She is an expert medical billing agent and has been working in the domain for more than 6 years.
3.2 Why the medical billing is being started
Mariana decided to start medical billing business because of her interest and expertise in the field. Since the business requires specified knowledge and cannot be run by any layperson, Mariana found that there are more prospects of getting successful in this domain.
3.3 How the medical billing will be started
If you are looking for what do I need to start a medical billing business, we’re providing step-wise procedure to be followed here.
Step1: Research & Plan
The first step is to carry out an intensive research on how to start your own billing company. After that you will have to pen down details in a business plan in systematic manner. To assist you with this, we’re providing sample medical billing business plan in this blog.
Step2: Fund & Recruit
The next step is to incentivize your venture and manage financial resources. You’ll then need to invest your money to purchase the required equipment, rent a space, and employ the personnel.
Step3: Manage & Systemize
After getting hands on monetary and fiscal resources, you’ll have to devise management structure to systemize all operations.
Step4: Exist on the Web
Next, you will have to make sure that you have a strong web presence. Today, clients are likely to search for medical billing services on the web and seek the services of only those whose websites come at the top. Thus, it is a must to ensure online presence.
Lastly, you will have to advertise your startup to reach your target audience. In this medical billing business plan example we will be listing the techniques adopted by Medi Assist to advertise their venture.
|Research and Development||$10,000|
|TOTAL START-UP EXPENSES||$248,800|
|Other Current Assets||$225,000|
|Start-up Expenses to Fund||$248,800|
|Start-up Assets to Fund||$877,800|
|TOTAL FUNDING REQUIRED||$1,126,600|
|Non-cash Assets from Start-up||$1,138,300|
|Cash Requirements from Start-up||$125,300|
|Additional Cash Raised||$50,000|
|Cash Balance on Starting Date||$31,300|
|Liabilities and Capital|
|Accounts Payable (Outstanding Bills)||$62,500|
|Other Current Liabilities (interest-free)||$0|
|Additional Investment Requirement||$0|
|TOTAL PLANNED INVESTMENT||$1,126,600|
|Loss at Start-up (Start-up Expenses)||$140,600|
|TOTAL CAPITAL AND LIABILITIES||$1,344,900|
Services of medical billing
Before you start medical billing company, it is essential to search for how to start a medical billing business and read at least one medical billing service business plan. After this, you will be able to know which services are being provided by your competitors. And thus decide the services that you want to provide as you start medical billing business. In this sample business plan for medical billing, we’re providing the services provided by Medi Assist.
- Setup Patient Record
Our medical billing experts will setup patients medical history and the record of all transactions related to healthcare.
- Claim Filing
We will help filing medical claims both in manual and electronic forms.
- Negotiating Healthcare Contracts
We’ll negotiate the medical and healthcare contracts by dealing with all the three parties at a time. The three parties can be patients, medical assistance providers, and insurance companies.
- Upkeeping & Updating Record
We will maintain the patient’s record and update it from time to time both manually and electronically.
Marketing Analysis of medical billing
If you’re looking for how to open a medical billing company, you are on the right page. In this medical billing business plan sample we have provided full guide on how to start medical billing business. After you have gone through the initial steps, you need to undergo a thorough market analysis. Unlike cannabis business plan or reiki business plan, market analysis for medical billing can give you a tough time. It is because the business is still unknown to many and does not involve just one-time interaction. The target customers would remain in contact for long time and hence they would prefer to see how you are more reliable and efficient than your competitors. Therefore, you need to investigate the already operating medical billing businesses, market trends, inclinations of customers, and pricing policies that can help you get through. If you are starting medical billing business from home you’ll still need to do market analysis.
5.1 Market Trends
The growth prospects of medical billing startup are encouraging. According to IBISWorld, the market size of medical billing services stands at $5 billion in the US. It is despite the fact that there are only 1761 such businesses operating in the US. Thus, it can be seen how much market size is shared by these busineses. If you plan your
5.2 Marketing Segmentation
Before starting medical billing business it is also essential to do market segmentation. For this, you’ll have to divide the entire population into distinct groups. In this free medical billing business plan template on how to start your own medical billing company, we’re providing the market segmentation done by Medi Assist.
5.2.1 Medical Practitioners
This category includes the doctors and healthcare providers. They will need our services of filing claims, checking the credentials and keeping record of patients.
This segment will include the medics who perform minor or major surgeries.
Dentists who provide teeth cleaning, healing and maintenance services will also be our customers.
This segment may include medics who aren’t covered in the above categories such as physiotherapists. Moreover, hospital groups and healthcare provider organizations are also its part.
|Potential Customers||Growth||Year 1||Year 2||Year 3||Year 4||Year 5||CAGR|
5.3 Business Target
- Expand our service sector to at least one more locality by the end of first 5 years
- Maintaining CSAT score above 90% throughout the service years
- Capture 15% of the market share within three years of operation
5.4 Product Pricing
Our prices are a little higher than others in the same profession. But due to our expertise, Mariana’s experience of the field, and our sales strategy we still expect to get more customers than them.
Marketing Strategy of medical billing
Before starting a medical billing company you will have to devise ways by which you want to reach out to your target customers. In this medical billing company business plan on how to start a medical billing and coding business, we are providing the sales strategy of Medi Assist.
6.1 Competitive Analysis
- Our employees are highly specialized and expert in their domains.
- We are offering several dicosunts in the beginning to get known.
- Customers are our topmost priority, we are willing to go to all lengths to facilitate them.
6.2 Sales Strategy
- We’ll offer 50% discount to our first 50 customers.
- We’ll offer 20% discount on all our services in the months of June and July.
- We’ll advertise our startup on social media, local newspapers, and magazines.
6.3 Sales Monthly
6.4 Sales Yearly
6.5 Sales Forecast
|Unit Sales||Year 1||Year 2||Year 3|
|Setup Patient Record||1,350||1,431||1,517|
|TOTAL UNIT SALES||5,145||5,454||5,781|
|Unit Prices||Year 1||Year 2||Year 3|
|Setup Patient Record||$400.00||$464.00||$538.24|
|Setup Patient Record||$540,000.00||$663,984.00||$816,434.73|
|Direct Unit Costs||Year 1||Year 2||Year 3|
|Setup Patient Record||$100.00||$110.00||$115.50|
|Direct Cost of Sales|
|Setup Patient Record||$135,000.00||$157,410.00||$175,197.33|
|Subtotal Direct Cost of Sales||$570,675.00||$665,407.05||$740,598.05|
Personnel plan of medical billing
The staff of medical billing business cannot comprise of anyone but highly experienced and qualified professionals. In this medical billing business plan example we’re providing the list of employees of Medi Assist alongwith their job descriptions and expected salaries. If you’re going to make business plan medical billing you should also do the same.
7.1 Company Staff
Mariana will hire personnel for the following positions:
- 1 Co-Manager to oversee all operations
- 1 Financial Manager
- 5 Medical Billing Specialists
- 2 Accountants
- 1 Legal Expert
- 2 Drivers
- 1 Web Designer
7.2 Average Salary of Employees
|Year 1||Year 2||Year 3|
Financial Plan of medical billing
If you are going to start medical coding and billing business you must be wary of how profitable is medical billing business. Well, the business is immensely profitable and the profit margin is expected to increase more in the upcoming years.
To assess, how much you would be able to make as per your resources, investment and sales, you will be needing to create a financial plan for your business. For that you can take help from the financial plan provided here as well those listed in business plan for urgent care center and business plan for veterinary clinic.
8.1 Important Assumptions
|Year 1||Year 2||Year 3|
|Current Interest Rate||8.12%||8.20%||8.26%|
|Long-term Interest Rate||8.40%||8.44%||8.47%|
8.2 Break-even Analysis
|Monthly Units Break-even||5340|
|Monthly Revenue Break-even||$132,500|
|Average Per-Unit Revenue||$231.00|
|Average Per-Unit Variable Cost||$0.62|
|Estimated Monthly Fixed Cost||$163,800|
8.3 Projected Profit and Loss
|Pro Forma Profit And Loss|
|Year 1||Year 2||Year 3|
|Direct Cost of Sales||$570,675||$665,407||$740,598|
|TOTAL COST OF SALES||$570,675||$665,407||$740,598|
|Gross Margin %||73.60%||74.96%||77.34%|
|Sales and Marketing and Other Expenses||$145,000||$148,000||$156,000|
|Total Operating Expenses||$559,800||$602,110||$654,426|
|Profit Before Interest and Taxes||$1,031,025||$1,390,263||$1,872,983|
8.3.1 Profit Monthly
8.3.2 Profit Yearly
8.3.3 Gross Margin Monthly
8.3.4 Gross Margin Yearly
8.4 Projected Cash Flow
|Pro Forma Cash Flow|
|Cash Received||Year 1||Year 2||Year 3|
|Cash from Operations|
|Cash from Receivables||$22,000||$23,760||$25,661|
|SUBTOTAL CASH FROM OPERATIONS||$73,000||$79,570||$85,936|
|Additional Cash Received|
|Sales Tax, VAT, HST/GST Received||$0||$0||$0|
|New Current Borrowing||$0||$0||$0|
|New Other Liabilities (interest-free)||$0||$0||$0|
|New Long-term Liabilities||$0||$0||$0|
|Sales of Other Current Assets||$0||$0||$0|
|Sales of Long-term Assets||$0||$0||$0|
|New Investment Received||$0||$0||$0|
|SUBTOTAL CASH RECEIVED||$74,000||$79,000||$85,000|
|Expenditures||Year 1||Year 2||Year 3|
|Expenditures from Operations|
|SUBTOTAL SPENT ON OPERATIONS||$69,000||$70,000||$76,000|
|Additional Cash Spent|
|Sales Tax, VAT, HST/GST Paid Out||$0||$0||$0|
|Principal Repayment of Current Borrowing||$0||$0||$0|
|Other Liabilities Principal Repayment||$0||$0||$0|
|Long-term Liabilities Principal Repayment||$0||$0||$0|
|Purchase Other Current Assets||$0||$0||$0|
|Purchase Long-term Assets||$0||$0||$0|
|SUBTOTAL CASH SPENT||$69,000||$74,520||$80,482|
|Net Cash Flow||$21,000||$23,000||$25,000|
8.5 Projected Balance Sheet
|Pro Forma Balance Sheet|
|Assets||Year 1||Year 2||Year 3|
|Other Current Assets||$1,000||$1,000||$1,000|
|TOTAL CURRENT ASSETS||$282,000||$315,840||$355,004|
|TOTAL LONG-TERM ASSETS||$24,400||$27,328||$30,744|
|Liabilities and Capital||Year 4||Year 5||Year 6|
|Other Current Liabilities||$0||$0||$0|
|SUBTOTAL CURRENT LIABILITIES||$19,000||$21,280||$23,919|
|TOTAL LIABILITIES AND CAPITAL||$300,000||$329,280||$370,440|
8.6 Business Ratios
|Year 1||Year 2||Year 3||INDUSTRY PROFILE|
|Percent of Total Assets|
|Other Current Assets||2.11%||2.34%||2.59%||2.40%|
|Total Current Assets||149.80%||151.00%||152.00%||158.00%|
|Percent of Sales|
|Selling, General & Administrative Expenses||93.56%||96.09%||98.78%||97.80%|
|Profit Before Interest and Taxes||41.50%||42.62%||43.81%||33.90%|
|Total Debt to Total Assets||0.18%||0.18%||0.17%||0.40%|
|Pre-tax Return on Net Worth||74.08%||74.89%||75.00%||75.00%|
|Pre-tax Return on Assets||96.30%||101.12%||106.17%||111.30%|
|Additional Ratios||Year 1||Year 2||Year 3|
|Net Profit Margin||33.56%||34.60%||35.67%||N.A.|
|Return on Equity||55.80%||57.53%||59.31%||N.A.|
|Accounts Receivable Turnover||7.7||7.8||7.8||N.A.|
|Accounts Payable Turnover||15.6||16||16.3||N.A.|
|Total Asset Turnover||2.5||2.5||2.6||N.A.|
|Debt to Net Worth||-0.04||-0.03||-0.04||N.A.|
|Current Liab. to Liab.||1||1||1||N.A.|
|Net Working Capital||$244,000||$257,664||$272,093||N.A.|
|Assets to Sales||0.85||0.87||0.89||N.A.|
|Current Debt/Total Assets||1%||0%||0%||N.A.|
1. Is medical billing business profitable?
Yes, the business is profitable. You can see it from the profit generated by Medi Assist in the first 3 years of their launch as given in this sample medical billing business plan.
2. How do I start a medical billing business?
As a first step, you need to make medical biling business plan and then the later steps include executing the business plan medical billing in letter and spirit.
3. How do medical billing companies make money?
Medical biling companies make money by offering several services such as filiing claims for patients, upkeeping and updating medical record etc.
4. How do I get medical billing clients?
To get medical billing clients, you’ll need to advertise your services on social, electronic and print media. You can explore more techniques by visiting sales strategy section of this medical billing business plan example.
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