Medical Billing Business Plan

Physicians 1st Billing and Claims’ target market consists of any medical practice or health care delivery unit that utilizes the HCFA-1500 format (a national standard utilized by Medicare) for submission of claims. This includes family practice, internal medicine, surgeons, psychologists, chiropractors, physical therapists, podiatrists, specialists, ambulance services, medical laboratories, etc. Physicians 1st Billing and Claims can also process claims for dentists with the use of special ADA software.

New practices are particularly appealing as Physicians 1st Billing and Claims can assist the new physician and his or her staff in billing and claims training. By equipping the physicians with a a well trained staff in claims handling and putting an efficient billing program into place, Physicians 1st Billing and Claims can reduce the stress of start up and ensure greater likelihood of a practice’s success due in part to increased cash flow.

4.1 Market Segmentation

The following is a chart showing the number of physicians in (omitted) for each speciality mentioned.

Number and Specialty

5 Allergy-Immunology
47 Anesthesiologist
3 Cardiovascular
12 Cardiovascular Surgery
84 Chiropractors
1 Clinical Genetics
2 Child Psychiatry
1 Clinical Immunology
5 Colon Rectal Surgery
10 Critical Care Medicine
179 Dental
11 Dermatology
1 Diabetes
35 Diagnostic Radiology
1 Education
21 Emergency Medicine
16 Ear, Nose and Throat
114 Family Practice
30 Family Practice Residents
1 Family Practice Sports Med.
12 Gastroenterology
10 Geriatrics
22 General Surgery
1 General Surgery Burns
7 Gynecology
7 Hematology
4 Infectious Diseases
40 Internal Medicine
10 Neurology
12 Nephrology
4 Neonatal-Prenatal Medicine
3 Nuclear Radiology
9 Neurological Surgery
26 Obstetrics
1 Obstetrics & Gynecology Resident
1 Occupational Medicine
3 Oncology
22 Ophthalmology
35 Orthopedic Surgery
7 Orthopedic Surgery Resident
14 Optometry
24 Pediatrics
14 Psychiatry
49 Psychologists
1 Pediatrics Pulmonary
6 Physical Med. & Rehab.
15 Physical therapy
1 Pediatric Nephrology
9 Plastic Surgery
21 Pathology
11 Pulmonary
3 Rheumatology
6 Therapeutic Radiology
13 Thoracic Surgery
14 Urology
12 Vascular Surgery

Physicians 1st Billing and Claims’ initial plan is to sign a single doctor practice. An ideal target would be a family practice physician.

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” (claims that are error free) 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. As stated earlier, 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. It is in their best interest as well. 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.

Their strengths are:

• Experience.
• Education.
• Large client base.

Their weaknesses are:

• One-way claims communication and software.
• Limited advertising ability.

The strengths and weaknesses, however, seem of little consequence as the local market by all accounts is untouched, and no other company in this area can offer the software features or the dedicated service that Physicians 1st Billing and Claims is able to offer.

The bottom line of our ability to compete lies in our ability to provide any and every physician with free practice management software, two-way computer communications which allow for next day patient records updating, and substantially improved cash flow for the physician.

4.2.2 Business Participants

If Congress does mandate electronic submission of insurance claims during 1998, 600 physicians will be scrambling 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. If practices are unable to meet the mandates, they will lose a good portion of their patient base.

During the past few years, medical practice’s interest in Total Quality Control (TQC) has intensified. Part of this is attributed to the Federal Government and the American public’s interest in health care 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. In the past, doctors personally decided what they would charge for services rendered. For many physicians this fee-for-service payment method is a thing of the past. With managed care, physicians sign contracts and affiliate with different health maintenance organizations (HMOs) or preferred provider organizations (PPOs). Most decide to affiliate for one of two reasons:

1. Their peers are doing it and they do not want to be left out, or
2. They feel it will increase their patient base.

Unfortunately for many physicians, their patient bases do increase while their incomes decline. With the “capitation” payment schedules that accompany managed care affiliation, most physicians are making less than they were under the fee-for-service system. Association with managed care organizations also creates tremendous new paperwork requirements. Many offices complain of five times more paperwork than before affiliation. All of this is making medical practices look for innovative ways to create better office efficiency.