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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 U.S. and the complexities involved in medical payments when there is 3rd party (insurance company) involved, the business can be immensely profitable.
A medical billing business facilitates 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 and keeping up the patient’s record and medical history.
To start this business, the first step is to make a business plan for medical billing company. In case you don’t know the essentials, you can take help from here. Here we are providing a 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 a loan from a bank.
Executive Summary
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, you must 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 a 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 Practitioners
- Surgeons
- Dentists
- Others
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:
Company Summary
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 a step-wise procedure here.
Step1: Research & Plan
The first step is to carry out intensive research on how to start your own billing company. After that, you will have to pen down details in a business plan in a 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 monetary and fiscal resources, you’ll have to devise a 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 an online presence.
Step5: Market
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.
| Start-up Expenses | |
| Legal | $125,300 |
| Consultants | $0 |
| Insurance | $25,100 |
| Rent | $32,500 |
| Research and Development | $10,000 |
| Expensed Equipment | $52,500 |
| Signs | $3,400 |
| TOTAL START-UP EXPENSES | $248,800 |
| Start-up Assets | $225,400 |
| Cash Required | $181,000 |
| Start-up Inventory | $35,100 |
| Other Current Assets | $225,000 |
| Long-term Assets | $211,300 |
| TOTAL ASSETS | $877,800 |
| Total Requirements | $1,126,600 |
| START-UP FUNDING | |
| Start-up Expenses to Fund | $248,800 |
| Start-up Assets to Fund | $877,800 |
| TOTAL FUNDING REQUIRED | $1,126,600 |
| Assets | |
| 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 |
| TOTAL ASSETS | $1,344,900 |
| Liabilities and Capital | |
| Liabilities | $15,200 |
| Current Borrowing | $0 |
| Long-term Liabilities | $0 |
| Accounts Payable (Outstanding Bills) | $62,500 |
| Other Current Liabilities (interest-free) | $0 |
| TOTAL LIABILITIES | $77,700 |
| Capital | |
| Planned Investment | $1,126,600 |
| Investor 1 | $0 |
| Investor 2 | $0 |
| Other | $0 |
| Additional Investment Requirement | $0 |
| TOTAL PLANNED INVESTMENT | $1,126,600 |
| Loss at Start-up (Start-up Expenses) | $140,600 |
| TOTAL CAPITAL | $1,267,200 |
| TOTAL CAPITAL AND LIABILITIES | $1,344,900 |
| Total Funding | $1,126,600 |
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 set up patients’ medical histories and records of all transactions related to healthcare.
- Claim Filing
We will help file medical claims both in manual and electronic forms.
- Negotiating Healthcare Contracts
We’ll negotiate the medical and healthcare contracts by dealing with all 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 a 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 U.S. even though only 1761 such businesses are operating there. If you want to enter this enterprise, you can also make a lot within a short time.
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 doctors and healthcare providers. They will need our services of filing claims, checking the credentials, and keeping a record of patients.
5.2.2 Surgeons
This segment will include the medics who perform minor or major surgeries.
5.2.3 Dentists
Dentists who provide teeth cleaning, healing, and maintenance services will also be our customers.
5.2.4 Others
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 included in it.
| Market Analysis | |||||||
| Potential Customers | Growth | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | CAGR |
| Medical Practitioners | 36% | 52,500 | 63,000 | 75,600 | 90,720 | 108,864 | 10.00% |
| Surgeons | 30% | 42,500 | 51,000 | 61,200 | 73,440 | 88,128 | 10.00% |
| Dentists | 18% | 22,530 | 27,036 | 32,443 | 38,932 | 46,718 | 10.00% |
| Others | 16% | 21,500 | 25,800 | 30,960 | 37,152 | 44,582 | 11.00% |
| Total | 100% | 139,030 | 166,836 | 200,203 | 240,244 | 288,293 | 10% |
5.3 Business Target
- Expand our service sector to at least one more locality by the end of the first 5 years
- Maintain a 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 in 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 experts in their domains.
- We are offering several discounts, 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 a 50% discount to our first 50 customers.
- We’ll offer a 20% discount on all our services in June and July.
- We’ll advertise our startup on social media, in local newspapers, and in magazines.
6.3 Sales Monthly
6.4 Sales Yearly
6.5 Sales Forecast
| Sales Forecast | |||
| Unit Sales | Year 1 | Year 2 | Year 3 |
| Setup Patient Record | 1,350 | 1,431 | 1,517 |
| Claim Filing | 1,425 | 1,511 | 1,601 |
| Healthcare Contracts | 1,215 | 1,288 | 1,365 |
| Record Upkeep | 1,155 | 1,224 | 1,298 |
| 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 |
| Claim Filing | $350.00 | $406.00 | $470.96 |
| Healthcare Contracts | $425.00 | $493.00 | $571.88 |
| Record Upkeep | $525.00 | $609.00 | $706.44 |
| Sales | |||
| Setup Patient Record | $540,000.00 | $663,984.00 | $816,434.73 |
| Claim Filing | $498,750.00 | $613,263.00 | $754,068.18 |
| Healthcare Contracts | $516,375.00 | $634,934.70 | $780,715.71 |
| Record Upkeep | $606,375.00 | $745,598.70 | $916,788.16 |
| TOTAL SALES | $2,161,500.00 | $2,657,780.40 | $3,268,006.78 |
| Direct Unit Costs | Year 1 | Year 2 | Year 3 |
| Setup Patient Record | $100.00 | $110.00 | $115.50 |
| Claim Filing | $110.00 | $121.00 | $127.05 |
| Healthcare Contracts | $125.00 | $137.50 | $144.38 |
| Record Upkeep | $110.00 | $121.00 | $127.05 |
| Direct Cost of Sales | |||
| Setup Patient Record | $135,000.00 | $157,410.00 | $175,197.33 |
| Claim Filing | $156,750.00 | $182,770.50 | $203,423.57 |
| Healthcare Contracts | $151,875.00 | $177,086.25 | $197,097.00 |
| Record Upkeep | $127,050.00 | $148,140.30 | $164,880.15 |
| 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 anyone but highly experienced and qualified professionals. In this medical billing business plan example we’re providing the list of employees of Medi Assist along with 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
| Personnel Plan | |||
| Year 1 | Year 2 | Year 3 | |
| Co-Manager | $32,550 | $35,805 | $39,386 |
| Financial Manager | $32,550 | $35,805 | $39,386 |
| Billing Specialists | $184,500 | $202,950 | $223,245 |
| Accountants | $42,500 | $46,750 | $51,425 |
| Legal Expert | $23,000 | $25,300 | $27,830 |
| Drivers | $42,500 | $46,750 | $51,425 |
| Web Designer | $23,000 | $25,300 | $27,830 |
| Total Salaries | $380,600 | $418,660 | $460,526 |
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 as those listed in business plan for urgent care center and business plan for veterinary clinic.
8.1 Important Assumptions
| General Assumptions | |||
| Year 1 | Year 2 | Year 3 | |
| Plan Month | 1 | 2 | 3 |
| Current Interest Rate | 8.12% | 8.20% | 8.26% |
| Long-term Interest Rate | 8.40% | 8.44% | 8.47% |
| Tax Rate | 24.03% | 24.21% | 24.60% |
| Other | 0 | 0 | 0 |
8.2 Break-even Analysis
| Break-Even Analysis | |
| Monthly Units Break-even | 5340 |
| Monthly Revenue Break-even | $132,500 |
| Assumptions: | |
| 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 | |
| Sales | $2,161,500 | $2,657,780 | $3,268,007 |
| Direct Cost of Sales | $570,675 | $665,407 | $740,598 |
| Other | $0 | $0 | $0 |
| TOTAL COST OF SALES | $570,675 | $665,407 | $740,598 |
| Gross Margin | $1,590,825 | $1,992,373 | $2,527,409 |
| Gross Margin % | 73.60% | 74.96% | 77.34% |
| Expenses | |||
| Payroll | $380,600 | $418,660 | $460,526 |
| Sales and Marketing and Other Expenses | $145,000 | $148,000 | $156,000 |
| Depreciation | $2,300 | $2,350 | $2,500 |
| Leased Equipment | $0 | $0 | $0 |
| Utilities | $2,900 | $3,000 | $3,100 |
| Insurance | $2,100 | $2,100 | $2,100 |
| Rent | $2,900 | $3,000 | $3,200 |
| Payroll Taxes | $24,000 | $25,000 | $27,000 |
| Other | $0 | $0 | $0 |
| Total Operating Expenses | $559,800 | $602,110 | $654,426 |
| Profit Before Interest and Taxes | $1,031,025 | $1,390,263 | $1,872,983 |
| EBITDA | $1,031,025 | $1,390,263 | $1,872,983 |
| Interest Expense | $0 | $0 | $0 |
| Taxes Incurred | $206,205 | $278,053 | $374,597 |
| Net Profit | $824,820 | $1,112,211 | $1,498,386 |
| Net Profit/Sales | 38.16% | 41.85% | 45.85% |
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 Sales | $51,000 | $55,080 | $59,486 |
| 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 | |||
| Cash Spending | $42,000 | $42,000 | $45,000 |
| Bill Payments | $27,000 | $28,000 | $31,000 |
| 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 |
| Dividends | $0 | $0 | $0 |
| SUBTOTAL CASH SPENT | $69,000 | $74,520 | $80,482 |
| Net Cash Flow | $21,000 | $23,000 | $25,000 |
| Cash Balance | $27,000 | $30,000 | $33,000 |
8.5 Projected Balance Sheet
| Pro Forma Balance Sheet | |||
| Assets | Year 1 | Year 2 | Year 3 |
| Current Assets | |||
| Cash | $275,000 | $308,000 | $338,800 |
| Accounts Receivable | $24,000 | $26,880 | $30,213 |
| Inventory | $4,300 | $4,816 | $4,900 |
| Other Current Assets | $1,000 | $1,000 | $1,000 |
| TOTAL CURRENT ASSETS | $282,000 | $315,840 | $355,004 |
| Long-term Assets | |||
| Long-term Assets | $10,000 | $10,000 | $10,000 |
| Accumulated Depreciation | $19,400 | $21,728 | $24,444 |
| TOTAL LONG-TERM ASSETS | $24,400 | $27,328 | $30,744 |
| TOTAL ASSETS | $294,000 | $329,280 | $370,440 |
| Liabilities and Capital | Year 4 | Year 5 | Year 6 |
| Current Liabilities | |||
| Accounts Payable | $18,700 | $20,944 | $23,541 |
| Current Borrowing | $0 | $0 | $0 |
| Other Current Liabilities | $0 | $0 | $0 |
| SUBTOTAL CURRENT LIABILITIES | $19,000 | $21,280 | $23,919 |
| Long-term Liabilities | $0 | $0 | $0 |
| TOTAL LIABILITIES | $15,000 | $16,800 | $18,883 |
| Paid-in Capital | $30,000 | $30,000 | $31,000 |
| Retained Earnings | $53,000 | $57,770 | $63,547 |
| Earnings | $193,400 | $210,806 | $231,887 |
| TOTAL CAPITAL | $285,000 | $310,650 | $341,715 |
| TOTAL LIABILITIES AND CAPITAL | $300,000 | $329,280 | $370,440 |
| Net Worth | $293,400 | $319,806 | $351,787 |
8.6 Business Ratios
| Ratio Analysis | ||||
| Year 1 | Year 2 | Year 3 | INDUSTRY PROFILE | |
| Sales Growth | 7.25% | 8.03% | 8.90% | 3.00% |
| Percent of Total Assets | ||||
| Accounts Receivable | 9.21% | 10.20% | 11.31% | 9.80% |
| Inventory | 5.39% | 5.97% | 6.62% | 9.90% |
| Other Current Assets | 2.11% | 2.34% | 2.59% | 2.40% |
| Total Current Assets | 149.80% | 151.00% | 152.00% | 158.00% |
| Long-term Assets | 11.55% | 11.60% | 11.64% | 12.00% |
| TOTAL ASSETS | 100.00% | 100.00% | 100.00% | 100.00% |
| Current Liabilities | 4.90% | 4.94% | 4.98% | 4.34% |
| Long-term Liabilities | 0.00% | 0.00% | 0.00% | 0.00% |
| Total Liabilities | 7.59% | 7.65% | 7.72% | 7.38% |
| NET WORTH | 100.45% | 101.25% | 102.19% | 110.00% |
| Percent of Sales | ||||
| Sales | 100.00% | 100.00% | 100.00% | 100.00% |
| Gross Margin | 94.60% | 97.15% | 99.87% | 99.00% |
| Selling, General & Administrative Expenses | 93.56% | 96.09% | 98.78% | 97.80% |
| Advertising Expenses | 1.52% | 1.56% | 1.60% | 1.40% |
| Profit Before Interest and Taxes | 41.50% | 42.62% | 43.81% | 33.90% |
| Main Ratios | ||||
| Current | 34 | 35 | 36 | 32 |
| Quick | 33 | 33.8 | 34.645 | 33 |
| 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. |
| Activity Ratios | ||||
| Accounts Receivable Turnover | 7.7 | 7.8 | 7.8 | N.A. |
| Collection Days | 100 | 100 | 100 | N.A. |
| Inventory Turnover | 32.4 | 34.02 | 35 | N.A. |
| Accounts Payable Turnover | 15.6 | 16 | 16.3 | N.A. |
| Payment Days | 27 | 27 | 27 | N.A. |
| Total Asset Turnover | 2.5 | 2.5 | 2.6 | N.A. |
| Debt Ratios | ||||
| Debt to Net Worth | -0.04 | -0.03 | -0.04 | N.A. |
| Current Liab. to Liab. | 1 | 1 | 1 | N.A. |
| Liquidity Ratios | ||||
| Net Working Capital | $244,000 | $257,664 | $272,093 | N.A. |
| Interest Coverage | 0 | 0 | 0 | N.A. |
| Additional Ratios | ||||
| Assets to Sales | 0.85 | 0.87 | 0.89 | N.A. |
| Current Debt/Total Assets | 1% | 0% | 0% | N.A. |
| Acid Test | 29 | 29.12 | 29.16 | N.A. |
| Sales/Net Worth | 2.1 | 2.2 | 2.2 | N.A. |
| Dividend Payout | 0 | 0 | 0 | N.A. |
FAQ
- Is the 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.
- How do I start a medical billing business?
As a first step, you need to make medical billing business plan and then the later steps include executing the business plan medical billing in letter and spirit.
- How do medical billing companies make money?
Medical billing companies make money by offering several services such as filing claims for patients, upkeeping and updating medical records, etc.
- 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 the sales strategy section of this medical billing business plan example.
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