FEATURE storY Finally, it is important to keep in mind that OIG has included “Billing Service Companies” in its annual work plan three times in recent years. This further highlights the fact that OIG has consistently chosen to dedicate audit and investigative resources to review business relationships between billing companies and the health care providers they serve. the journal of the healthcare billing and management association 17 Primary Reimbursement Arrangements Currently in Use PERCENTAGE-BASEd ARRANGEMENTS an overwhelming number of third-party billing companies still utilize a percentage-based billing approach. this type of arrangement can be based on gross billings, but almost all agreements of this type are established on net collections. from the standpoint of most billing companies and the providers they serve, a percentage-based arrangement just makes good sense. not only is it easy for both parties to calculate, physicians and other providers like knowing that a third-party billing company benefits from medical claims being promptly and properly billed. a percentage arrangement also encourages billing companies to ensure that account receivable balances are effectively worked. billing company representatives like knowing that they are compensated for their hard work. unfortunately, as oig has repeatedly noted, percentage-based arrangements can also be quite problematic.5 for instance,, mistakes made when billing (such as the inadvertent filing of a duplicate claim) might benefit both a billing company and a provider but would adversely affect the health care program billed. similarly, claims that are improperly upcoded, unbundled, or filed with an incorrect modifier could conceivably be used to increase revenues to a biller but would hurt a health plan. PER-CLAIM BASEd COMPENSATION ARRANGEMENTS in terms of the level of risk presented, compensation arrangements based on the number of claims processed (in lieu of a percentage of collections) are less likely to raise concerns with the government. this type of arrangement is easy for both parties to calculate but is still arguably subject to abuse if one or both parties engage in unbundling. third-party billing arrangements that compensate a billing company based on the number of claims processed rather the amount of money billed or collected is one way of addressing some of the risk identified with percentage-based agreements. unfortunately, a per-claim arrangement still does not eliminate possible incentives for a billing company to improperly double-bill or unbundle a claim. FLAT FEE BASEd COMPENSATION ARRANGEMENT overall, a “flat fee” compensation arrangement is even less likely to be subject to abuse as compared to the other two payment arrangements set out above. Properly constructed, it can eliminate the inherent improper incentives inadvertently created under a percentage or per-claim based approach to determining the amount due to a third-party biller for billing services provided. billing on a flat-fee basis is relatively easy and offers both billing companies and physicians a number of benefits. these include, but are not limited to: • Physician benefits: a flat-fee approach effectively eliminates any risk to the physician of a potential medical Practice act violation for “fee-splitting” (as described in more detail below). furthermore, it allows a physician to actually budget in the costs of processing his or her claims each month, thereby possibly avoiding a vacillating monthly fee. • third-Party billing company benefits: should a health care provider find itself under investigation, a third-party billing company employing a flat-fee arrangement will likely greatly reduce its potential risk for liability if claims are ultimately found to be improperly upcoded, billed as duplicates, unbundled, or otherwise improperly handled by a health care provider.
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