The following excerpt is from Start Your Own Medical Claims Billing Service. Buy it now from Amazon | Barnes & Noble | iTunes

One of the many nifty things about a medical billing service is that its startup costs are comparatively low. You have the advantage of establishing a homebased business, which cuts office lease expenses down to nothing. You have almost no inventory, which means no outlay of funds for pretty doodads to grace display spaces (in fact, you have no display spaces!). Your major financial outlay will be for office equipment and your software and/or business opportunity since you most likely already have a computer.

But let’s take it from the top. The following is a breakdown of everything -- from heavy investment pieces to flyweight items -- you’ll need to get up and running:

  • Computer system with an internet connection and printer
  • Fax machine
  • Software and/or business opportunity
  • Clearinghouse
  • Reference materials
  • CMS 1500 forms
  • Phone
  • Voice mail or answering machine
  • Stationery and office supplies
  • Postage

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You can add all kinds of goodies of varying degrees of necessity onto this list. But let’s consider that you’re starting absolutely from scratch. You can always set up your computer on your kitchen table or on a card table in a corner of the bedroom. You can stash files in cardboard boxes. It’s not glamorous, but it’ll suffice until you get your business steaming ahead.

Here are a few of the expenses specific to a medical claims billing service.

Computing costs

A computer is absolutely essential for any type of business. Not only do you need it to process claims, it can also help you manage bookkeeping and inventory control tasks, maintain client records and produce marketing materials. At a minimum, you’ll need a premium desktop computer, the most current version of Windows, and 2 GB to 16 GB RAM (with 8 GB being the sweet spot). Depending on your needs, you can expect to pay from $1,000 to $2,500 for a good brand-name computer, including a monitor, mouse and printer.

High-speed internet service basically goes along with the computer because it’s essential to have access to the internet. Invest in the fastest high-speed internet service your budget will allow if you anticipate transmitting a high volume of information on a regular basis. The cost for internet service widely varies with monthly costs starting at $20.

Software prices can vary radically, depending on which medical claims billing package you buy and from whom. This is an area to which you should devote a great deal of research. You’re going to be virtually married to your program, spending hours of quality time with it and you want to be sure you and your software are a match made in microprocessing heaven. You’ll want to allocate somewhere between $500 and $5,000, depending on many variables, including whether you purchase just the medical insurance billing software or the business opportunity to go with it.

Clearinghouse costs

Clearinghouses, like software, require research on your part. If the software is like a marriage partner or significant other, then the clearinghouse is the brother- or sister-in-law that comes to visit for what seems to be the rest of your life. You’d better be sure you’re happy living under the same roof with it.

Many times you can find the software and clearinghouse integrated in the same package which ensures their compatibility. Otherwise, you’ll want to make sure the clearinghouse is going to live in harmony with your billing software or you’ll live in what is known as “clearinghouse hell.” This happens when there is a claim error and the clearinghouse blames the software company, who blames the clearinghouse, and back and forth until someone takes responsibility. Try to avoid that at all costs.

Like software, clearinghouse costs vary radically. You should allocate from zero to $300 for “membership” fees and from zero to $100 per doctor for sign-up.

By way of reference

Although your reference library can comfortably contain a wealth of texts, we’ll consider here only the very few that are the real must-haves: the International Classification of Diseases (ICD)-10, Current Procedural Terminology (CPT) and Healthcare Common Procedure Coding System (HCPCS) Level II Expert coding books. If you’re billing for dentists, you’ll also want the Current Dental Terminology codes, which is the dental version of CPT codes. You can sketch in about $100 for a single download of CPT or around $250 if you have a small staff of under 10 people and wish to network the software. The CPT and CDT physical books cost around $105 and $75, respectively. While the ICD-10 Second Edition classification codes can be accessed for free (see the Appendix), figure on spending around $150 for the HCPCS Level II Expert.

One medical insurance biller (MIB) we know in Napa, California, prefers hardcopy books in lieu of downloads, which are sometimes a little pricier. She has also added a National Drug Code directory, which has every injectable that a doctor might use. “This can be especially useful if you are working for a family practice or dermatologist,” she says. We also recommend having a medical terminology dictionary on hand.

Phone necessities

You should install at least one separate dedicated landline for your business to handling business phone calls. Costs, of course, depend on how many features you add to your telephone service and which local and long-distance carriers you go with, but for the purpose of startup budgeting, let’s say you should allocate about $25 per line. You’ll also need to add the phone company’s installation fee, which should be around $50.

Another alternative is to use a cloud communications system like RingCentral that can handle all or some of your communication needs such as a “soft phone,” answering machine, fax and texts on multiple devices.

During the times you’re out of the office, you’ll need somebody or something to answer your phone. “Having an answering machine or voice mail is important,” says the Napa MIB. “Doctors don’t like to make a lot of calls, so they need to know what their options are if they can’t reach you right away such as leaving a detailed message and knowing you’ll respond.”

You have several ways to go here: the trusty answering machine, the phone company’s voice mail feature or a cloud-based communication system mentioned earlier. For estimating startup costs, let’s figure a basic answering machine at about $40, voice mail at about $6 a month or the cloud-based answering service starting around $25 a month.