Evaluating & Buying a Franchise

Doctor's Orders: When a Medical Billing Franchise Opportunity Deserves a Second Opinion

"If the entrepreneur doesn't personally have the skills they must have people working for them that understand the insurance industry, particularly the managed care portion, plus knows coding, contracting (with payers), and other financial aspects of the healthcare reimbursement world."

Unlike some work-from-home schemes such as envelope stuffing, there are many legitimate medical billing franchises.

Besides doctors, many professionals in the healthcare industry make great money - from pharmaceutical sales people and scientists to medical printing companies and publishers. When you hear about medical billing opportunities it's easy to see easy dollar signs. As with any other business venture, the Golden Rule of "look before you leap" applies to medical billing opportunities. Unlike some work-from-home schemes such as envelope stuffing, there are many legitimate medical billing franchises.

A Second Opinion?

An instant giveaway that a medical billing franchise deserves serious investigation is if the company has posted an advertisement in a newspaper classifieds section or shopper's guide. Another warning sign is finding a medical billing franchise opportunity in the Help Wanted section, where you think you are applying for a job, not buying a business. The ad might appeal to individuals looking for part-time work with no experience. A toll-free number is typically provided in the ad. When you call the number, a sales person will tell you all about how processing medical claims and invoices is a lucrative business opportunity - that there are medical clinics and doctors eager to work with you, even without any experience.

These scams usually charge a fee of around $300-500 and promise to deliver everything you might need to process electronic medical claims, including software, and a list of potential clients. The best part is you can do this from the comfort of your own home. In the case of scams, the client lists may consist of out-dated information from databases of doctors who have not requested medical billing or claims processing services. So, you're left with cold calling and creating your own client base - plus, you may not even have the equipment necessary for a legitimate business. If you genuinely have no experience, establishing a successful enterprise with virtually no resources may be an uphill battle.

Avoiding the Snake Oil Salesman

Much like the old days when traveling salesman convinced trusting consumers that his potions and elixirs could cure their ailments, only to vanish when the truth came to light, medical billing scammers often get away with their unscrupulous practices. That's why it's important to due your homework and always get a second opinion. Here are some ways to protect yourself:

• Ask the franchisor to give you the names of other franchisees. Make sure you get a large selection. If the franchisor can only produce one or two names beware; the contacts may be hired to provide favorable references.
• Consult with organizations established specifically for medical claims processors or medical billing businesses and with doctors in your community. Ask them if there is a legitimate need for this type of service and much work does processing medical claims email? Is special training required? Have they ever heard of the company offering the franchise?
• Check with the state Attorney General's office, Chamber of Commerce and the Better Business Bureau in your area and the area where the franchisor is based; however keep in mind that not having any complaints does not necessarily mean there haven't been problems with this company, as they may have moved or changed names.
• If the medical billing opportunity sells another company's software, check with the software company to find out if they are aware of problems with the medical billing franchisor.
• Consult a franchise lawyer, advisor and accountant before you sign any contract or submit fee up front.

Good Prognosis

Buying a legitimate medical billing franchise often requires building a client base. "The first client is the toughest but you need to start somewhere," said Jerry Killough, president of ClinixMIS, Inc., an application service provider that delivers accounts receivable and practice management software for physicians and medical billing professionals. "Many of these billing companies got started by someone that worked for a physician or managed a practice and saw an opportunity to take over management of the practice's AR by starting a small, cottage-industry type business. Others are started by individuals that know healthcare providers who are willing to work with them in the startup. Most companies are individually owned, and often are run by multiple family members."

Even after you've determined that a medical billing franchise is above board, there are additional considerations vital to your success in this particular industry. "If you are in an area saturated by billing companies, and you can simply look in the yellow pages under 'Billing Companies' to see the competition, you had better have an inroad to some good business to help you get started," Killough said. "High competition in a market is great for the providers using these services because this drives down the fee structures. Multiple companies bidding on the same business cut rates. While this is usually not a good business practice, revenue-driven billing companies who have not studied the potential profitability of certain business opportunities, cut their rates and either 1) win the business but do a poor job because they cannot sustain the overhead necessary for quality performance or 2) force others to cut their rates in order to win the business (leading to a decline cycle that harms everyone). The point is not to get into bidding wars that lead to certain failure."

And what about the "no experience" part? Unfortunately, given the competitive nature of the work, some experience as a businessperson or healthcare knowledge will only help your cause.

"If the entrepreneur doesn't personally have the skills they must have people working for them that understand the insurance industry, particularly the managed care portion, plus knows coding, contracting (with payers), and other financial aspects of the healthcare reimbursement world," said Killough. "In addition, knowledge of applicable laws such as HIPAA and the Stark Law are mandatory. A high level of insight into the industry and what makes it tick is essential to someone getting into this business. "

If you're still in the running, you will need specific equipment to get started. If you are buying a medical billing franchise - versus a "business opportunity", the franchisor should assist you in locating and acquiring this equipment. "Your main equipment will be in the area of a billing system," Killough advised. "Automation of processes is essential to hold down overhead costs. Otherwise, normal office equipment such as fax machines, printers, etc.

"Some billing companies even operate in a virtual office setting with no physical office at all. This, of course, requires that the company have an electronic document management (scanning) solution in place to allow your virtual office staff to access all documents. It is very difficult to have a totally paperless operation in medical billing so this is unique, but it can be done."

An Apple a Day

Depending on your market, skills set and contacts within the healthcare industry, you could make a good living from buying a medical billing franchise. Just as you would investigate a doctor, possibly seeking second and third opinions on a prognosis and proposed treatment plan, doing the same with a medical billing and claims processing franchise will only lead to a happy and healthy future.