Understanding the Key Components of a Medical Billing Contract

Understanding the Key Components of a Medical Billing Contract
Partnering with healthcare billing companies is a great way to streamline your practice’s finances. But to ensure a smooth-sailing working relationship, it’s important that both parties are aware of the components of healthcare billing contracts.
Having a good contract in place will help both practices and billing companies avoid a lot of problems. It will eliminate guesswork, clarify expectations, and define each party’s responsibilities.
In this blog post, we will discuss the key medical billing contract terms that every practice should know before signing the fine print.

Medical billing contract essentials you should know

Having a clear contract is an essential part of healthcare billing solutions. If you’re planning to hire a medical billing company like Med Financial Solutions, then the following details should be on your contract:

1.  Responsible parties

First and foremost, the contract should include the legal names of the entities involved. This is technically your practice or business name and the medical billing company’s name.
However, if you or the billing service provider are incorporated, you can use the corporation name instead. 
Aside from that, you should include the address, contact number, and other pertinent information about each party’s identification.

2.  Effective dates

The contract should also indicate the dates to which the terms and obligations stipulated become effective. Short to say, this includes the ‘start date’ and ‘expiration date’ of the contract.
But what if the contract is open-ended? In this case, there should be a clause stating circumstances and conditions to which the contract can be terminated by one or both parties.
For this, it’s crucial to specify the number of days’ notice to which the termination will become effective.

3.  Purpose and scope of contract

Defining the purpose and scope of the contract will set a solid foundation when entering into or negotiating medical billing contracts.
For this clause, you should state the goals and objectives of the partnership. It should also outline the medical billing services your practice will be paying, such as medical coding, claim submission, patient invoicing, and so on.
Aside from that, this section should also state whether all specialties within the practice is covered only one or a select few.
Overall, this part should be discussed thoroughly between your practice and the billing service provider. This way, the scope will be clear for both parties.

4.  Compensation and payment terms

Payment terms are the most crucial part of any professional medical billing services contract. This should outline in detail how the medical billing company will be paid, including the calculation of fees and fee structure.
The fee structure can be a flat fee per claim, a percentage of collections, or a combination of both. Medical revenue cycle management companies use varying payment structures, so it’s important to know your practice’s options first.
Aside from that, this clause should include when invoices will be issued and when they will be due for payment. This way, there wouldn’t be any confusion about the medical coding and billing services once the contract is rolled out.

5.  Confidentiality and data security

In the healthcare industry, confidentiality and data security are always paramount.
With this, the contract should also outline how patient information will be handled and protected. At the same time, it should include provisions for compliance with HIPAA or the Health Insurance Portability and Accountability Act of 1996.
Aside from that, there should be a clause where the medical billing company states the measures they will take to protect patient data. Take note that this is extremely crucial, as non-compliance can lead to hefty fines, penalties, or even legal problems.

6.  Indemnification and liability

The indemnity and liability clauses protect both your practice and the medical billing company in case of legal action. This also takes effect if any of the parties experience financial losses.
For example, the healthcare provider will indemnify the medical billing provider against any claims due to inaccurate or incomplete information where the former is at fault.
On the other hand, the clause can also include indemnification should financial losses or damages occur due to the billing company’s services.
By stating these specific conditions, you’ll have a clear picture of where responsibility lies in case the going gets tough.

7.  Dispute resolution

You should understand that disputes may arise even in the strongest partnerships. So, to safeguard your practice and the billing company’s interest, it’s important to have a dispute resolution clause in the contract of your outsourced medical billing services.
For example, you can specify arbitration or mediation processes should a dispute arise. You can also indicate other methods of resolution as agreed upon by your medical billing provider.
Overall, this clause intends to clarify how disputes will be handled and who will shoulder the cost of the dispute resolution.

8.  Non-disclosure and non-compete

To further safeguard your healthcare practice, you can also request a non-disclosure and non-compete clause in the contract.
With the non-disclosure clause, you’ll prohibit the medical billing firms involved from sharing confidential information they collected during the partnership.
On the other hand, a non-compete clause restricts medical billing outsourcing companies from providing similar services to direct competitors within your service area. However, this part should be agreed upon by the billing company, and there should also be a termination clause indicating when they can accept work from your competitors.

9.  Amendments and modifications

The healthcare industry is ever-changing, and so will your billing needs. This is why an amendment clause should also be included in the contract together with the requirements for doing so.
Overall, all amendments or modifications should be agreed between both parties. Make sure that this clause indicates a clear process of how the changes will be made to ensure that the contract will remain legally binding. 

10. Governing jurisdiction

Lastly, the contract should also include which state and laws will govern its interpretation and enforcement.
For example, if you’re hiring a billing company out of state and your practice is in Florida, it should be clear whether the contract is subject to Florida laws or the state where the company is registered.
This is a crucial detail, which will come in handy in case disputes arise or if legal actions are needed.

Key terms in medical billing agreements

The medical claims processing services are full of jargon and medical terms, which can be overwhelming for a new healthcare practice. In that case, here are some you should be familiar with:
  • DCN. This stands for Document Control Number, which is assigned to every medical claim you’ll submit to payors. It’s used by clearing houses, insurance companies, and other entities when processing your reimbursements.
  • SLA. This stands for Service Level Agreement, a contractual agreement between a service provider and a client that outlines all the terms and conditions of the services involved in the partnership.
  • ERA. This stands for Electronic Remittance Advice, which is an electronic version of the Explanation of Benefits (EOB) statement. It explains the payment and adjustments done by the insurance company for a specific claim.
  • A/R. A/R or Accounts Receivable is simply the money owed to your practice. These are the outstanding payments or invoices that are yet to be collected from insurance companies, government payors, or patients.
  • J-Code. J-codes are codes assigned to injectable drugs that are not typically administered by the patient. Instead, these drugs are given in a clinical setting like hospitals or a physician’s office.
  • HME/DME. HME stands for Home Medical Equipment, while DME stands for Durable Medical Equipment. The distinction between these two is crucial when preparing medical claims.
Looking for other terminologies? Click here to learn more medical billing acronyms and terms that we use in our services.

What to avoid when drafting medical billing contracts

Aside from knowing what to include in a medical billing contract, it’s also important to know what to avoid. Here are a few things your practice should be careful about:
  • Don’t be vague. Avoid using ambiguous language or leaving important terms undefined. You should clearly define the scope of services, payment terms, responsibilities, and any other relevant details to minimize confusion or disputes.
  • Don’t rush the review process. Remember that medical billing contracts will directly affect your practice’s finances. This is why you should take enough time to review and negotiate the contract terms. You can also seek legal advice to ensure your practice’s interests are well-protected.
  • Don’t omit a force majeure clause. You should also include a force majeure clause that outlines how unforeseen events, such as natural disasters or government actions, may affect the performance of the contract. Make sure that the rights and obligations of both parties are clarified in such circumstances.
  • Don’t shy away from legal counsel. Feel free to consult with a lawyer about the legality and fairness of the medical billing contract before you sign the agreement. This way, you’ll be well-guided on how to negotiate better terms for your practice.
  • Avoid excessive using jargon. While it’s understandable that the medical field is full of jargon, it’s still important to use language that both parties will understand. And for everyone’s benefit, make sure that there’s a definition of terms attached in the contract as well.

Partner with a reliable medical billing company today!

You should never put your practice’s revenue cycle to chance. By partnering with top medical billing companies like Med Financial Solutions, you can reduce claim denials, streamline your claims submission, and improve your collections.
On top of that, you can free up your staff’s schedule so they can focus more on improving your services. Instead of juggling patient care with billing tasks, our specialists can do it for you.
If you want to learn more about how we can help, contact us at Med Financial Solutions today!
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