Starting a Medical Billing Business

Medical bill

A medical billing company is relatively easy to open as a start-up business. It is one of the few healthcare businesses that can be operated without huge investments in costly medical equipment and years of education. With smart planning and a very affordable investment budget, you could become a valuable player in the healthcare industry as a medical billing company.

Selecting a Business Structure

The first decision that any person opening a medical billing company must make is how to structure the business entity that will operate the business. Very few healthcare businesses should ever operate as a sole proprietorship. The choice of business structure is important for many reasons including protection from potential liability.

Many medical billing companies are organized as a limited liability company. This form of business structure allows the owner to shield their individual assets from liability for the debts of the company, and provides flexibility in ownership, taxation and distribution of profits. A limited liability company is inexpensive and easy to form. You may also want to consider organizing your business as a corporation.

Get details on business formation by visiting the website of the Secretary of State in your state. It is a good idea to consult with legal and tax professionals when deciding upon a business structure

Securing Licenses

Once a business structure has been determined, and the company has been organized with the state of formation, the business must secure local county and state business licenses, as applicable.

  • All medical billing companies are required to obtain local county and municipality business licenses or tax receipts. The fees for these licenses vary from jurisdiction to jurisdiction, but can be found on applicable city and county websites. Even home-based businesses are generally required to obtain a local business license.
  • There are currently no federal or state licensure requirements for medical billing companies. A few states, such as New Jersey, do require registration and certification of third party medical billers.

Laws and regulations change quickly in the healthcare industry, so it is wise to check specific requirements in your state of organization before opening a medical billing business.

Earning Industry Certifications

Most owners of medical billing companies are certified, or hire staff members who are certified, by various educational institutions and private companies as trained medical billers and coders. The two most common certifications are certified professional coder (CPC) and certified professional biller (CPB).

The two top certification agencies for medical billing and coding are:

Creating Your Business Plan

No business should be started without comprehensive business plan to facilitate success. A business plan provides the roadmap for the company to move forward and is the written testament to the planning and goals of the entrepreneur. A business plan is especially important in the medical billing business, due to the complexities and highly technical nature of the services being offered by the company.

A few key factors to consider when writing your business plan include:

  • Will your business be home-based or located in a traditional office? Running the company from an office adds to the professional look and feel of the business, which may be an advantage from a marketing and client service perspective, but operating a traditional office adds considerably to the expense of operating the business.
  • Will you specialize in a particular aspect of medical billing? If you have expertise in a specific field of medicine, you may find that specializing provides you with a competitive advantage in that area to start with. However, specialization does limit your potential client base.

Building Your Budget

Building budget

A medical billing business is one of the least expensive types of healthcare businesses to start. There are no pieces of equipment costing hundreds of thousands of dollars or expensive patient-related fixtures or furnishings.

Example Expenses

Expenses can vary significantly based on a variety of factors, such as size, location, scope and more. Typical start-up capital expenditures tp consider when building your budget include:

  • Computers, printers and ancillary hardware (pricing available from vendors such as
  • Medical billing and accounting software (pricing available from software vendors; examples provided below)
  • Training and certifications (pricing available from providers)
  • Coding manuals and billing regulations (pricing available from
  • Furniture and fixtures (pricing available from vendors such as National Business Furniture)
  • Phone equipment and service (pricing available from vendors)
  • Licenses and fees (pricing available from applicable governmental agencies)
  • Office supplies (pricing available from vendors, such as
  • Payroll (see for average medical billing and coding wages by location and experience)

Home-Based Versus Traditional Office Costs

A home-based medical billing company can probably be started for between $5,000-$10,000 depending upon the use of new or used equipment, the number of staff members, and the amount of paid training that is needed by staff members.

Start-up costs are significantly higher for bricks and mortar traditional offices as opposed to running a home-based business. Monthly rent and common operating expenses, plus potential build-out and construction costs can bring opening expenses to $20,000 or more for a brick and mortar office.

Nurse using computer

Selecting Medical Billing Software

Medical billing software is an essential tool for operating a medical billing business. Most medical billing companies use an online version of medical billing software and pay a one-time license fee, plus a monthly subscription fee. Examples of software programs:


HealthFusion's MediTouch medical billing software is cloud-based and offers a free demo to help in the decision-making process. This software comes with online training and support. There are no installation fees or fees for updates to the software. Annual pricing is advertised as below industry average pricing, and based upon the number of users and volume of business. (Range: $1,000-$2,000)


Also a cloud-based online billing system, athenahealth has a client base of 75,000 providers. The company's website claims that its software reduces accounts receivable time frames by an average of 32 days and reduces paperwork on denials and claim adjustments. The company cites statistics indicating that 94% of the claims submitted with its software are paid on the first-time submittal. Pricing is based upon the level of billing and the number of users. (Range: $1,500-$3,000)

Choosing a Medical Billing Clearinghouse

No matter which software you choose, you won't want to submit claims directly to insurance companies, Medicare, or Medicaid. You will need to pass your claims through a third-party medical billing clearinghouse.

Medical billing clearinghouses catch errors and keep you from having to resubmit bills to payors which can delay payments for months. Like software, the cost of a clearinghouse membership can vary from less than $100 to several hundred dollars, and may involve additional fees for each doctor or account you add. Your medical claims software may allow you to submit your claims to any clearinghouse, or it may restrict the submittal of claims to a specific clearinghouse.

Visit for a list of options.

Marketing Your Business

Marketing a medical billing business requires a combination of the use of modern online marketing techniques and old-fashioned direct marketing to physicians and other medical providers.

  • Digital marketing: A professional looking website and related social media accounts are essential for businesses in order to be found by providers looking for billing assistance. Using experienced web-based marketing companies to enhance your company's online presence is well worth the money and can result in ongoing client leads.
  • Direct marketing: Most medical billing businesses also devote time to direct marketing by visiting provider offices and sending out traditional marketing mailings and advertising. Face-to-face meetings with potential clients are always the best way to impress the prospective client with the company's expertise and capabilities.
  • Networking: Attending local physician and provider seminars and functions in order to network with local providers and pass out your business card and flyers can be an effective, low cost marketing strategy.
  • Introductory offer: It may be worth discounting your fees for a 60-day period in order to bring new clients on board.
  • Identify new potential clients: It is also a great idea to check local business licenses to see when new medical practices apply for business licenses. You can find this information at the county and city licensing offices in your location.

Green Light to a Great Future

The need for medical records and health technicians, such as medical billing and coding jobs, is expected grow 15% from 2014 to 2024, according to the Bureau of Labor Statistics, making it a viable home business option. Starting this type of business can be an excellent way to share in the excitement and financial rewards of the healthcare industry. With relatively low start-up costs and the option to operate from home or from an office, a medical billing business may offer a great future for you and your family.

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