In the modern healthcare industry, efficient medical billing systems play an important role in ensuring that providers are timely reimbursed for the services they offer. However, the billing process isn’t always as straightforward as it might seem. The type of medical billing systems a healthcare provider uses can significantly impact their administrative workload, revenue cycle, and patient satisfaction.
Choosing the best healthcare billing software for your practice is important in a modernized way, as it helps you to spend maximum time on quality patient care and generate more revenue much faster. In this blog, we will explore a few common types of billing software and how they work in healthcare settings. Understanding the difference between each medical billing platform helps healthcare providers select the most suitable option for their practices, whether they are independent practices, a small clinic, or a large hospital network.
How many types of Medical Billing Systems are there?
There are four main types of medical billing systems that facilitate both healthcare professionals and patients. These medical billing software will streamline your billing process with accurate medical billing coding, automated data entry, a clean-claim submission, and denial management while staying compliant with all healthcare payer regulations, HIPAA, and CMS guidelines. Four main types are as follow:
- Closed Medical Billing Systems
- Open Medical Billing Systems
- Isolated Medical Billing Systems
- Cloud-Based Billing Systems
Which Medical Billing System fits your practice?
1. Closed Medical Billing Systems
A closed medical billing system refers to a billing model best suited for stand-alone medical practice, where a healthcare provider manages all aspects of the billing process in-house and not shared among different facilities, doctors, or others. The healthcare provider’s internal billing department handles everything from patient registration to claims submission and payment collection in a closed system. This system is typically used by smaller and private healthcare practices or organizations, whose records remain confidential with the in-house billing team and not shared across the board.
For example, the Electronic Medical Record (EMR) is a widely used tool in closed medical billing procedures that stores treatment charts and comprehensive patient data for a specific provider. As an EMR can be linked with other EMRs within the same practice, it is not designed for use outside the healthcare practice’s network. It is primarily intended for billing teams and the designated physicians to have full control over the billing process without any third-party or clearinghouse involvement for a more accurate claim process and to eliminate errors with fast payment collection.
How Does EMR Work?
- Providers can directly submit claims to insurance companies and manage patient payments without any third-party involvement.
- Patient information, claims processing, and reimbursements are kept within the healthcare organization’s control.
- Billing team works closely with clinical staff to ensure that services provided are accurately coded.
2. Open Medical Billing Systems
An open medical billing system involves external entities such as insurance companies, third-party administrators, stakeholders, out-source billing teams, or clearinghouses in the billing process. This model is commonly used in larger healthcare organizations where claims need to be processed efficiently, often in real-time as interlinked with several specialities and departments. Electronic Health Records (EHR) is the most commonly used medical billing system that helps to transmit patient healthcare data across different system sectors. EHR provides a more comprehensive information chart compared to EMR and is not confined to a single practice. It allows both patients and multiple healthcare professionals to access, monitor, and update the data on a regular basis.
With open EHR systems, healthcare providers submit claims to external entities like insurance companies or clearinghouses for reimbursement. The EHR system enables faster claim processing, reduced administrative work, and improved patient outcomes due to better coordination with insurance companies. Additionally, improves cash flow as payment is processed more efficiently with fewer billing errors.
How Does EMR Work?
- Healthcare providers electronically submit claims to insurance companies or clearinghouses.
- External entities help verify the claims, assess eligibility, and process payments on behalf of the provider.
- Patient data is shared between the provider and external partners to ensure accurate and efficient billing
3. Isolated Medical Billing Systems
An isolated billing system is a standalone billing process that operates separately from other healthcare management software and is particularly designed for patient care. It is commonly used in smaller practices or independent healthcare providers who do not need traditional medical billing systems. For example, Personal Health Records (PHRs) are an isolated medical billing system designed for patients to maintain records and communicate openly. They can input, update, and access their health information anytime, which is completely different from EMRs and EHRs.
How Does PHR Work?
- Billing is handled separately from other clinical or financial software, often manually.
- The system may only communicate with external entities like insurance companies on an as-needed basis.
- Healthcare providers typically manage claims submission and payments independently, without relying on advanced integration.
4. Cloud-Based Billing Systems:
Cloud-based billing systems have become a popular choice for healthcare practices due to their flexibility, scalability, and cost-effectiveness. These systems are hosted on remote servers, and easily accessible for providers to manage billing details from any location, at any time. Unlike traditional billing systems, cloud-based solutions are in no need of a local server, making them a more convenient option for practices of all sizes.
One example of a cloud-based billing system is a Practice Management System (PMS). PMS software integrates various aspects of healthcare administration, including patient scheduling, billing, insurance claims, with detailed reporting and analytics features into one unified system. Basically, PMS platforms help providers to streamline their billing processes while maximizing their revenue cycle.
How Does PMS Work?
- Eliminates the need for on-site servers and allows for better coordination between multiple locations or remote teams.
- Automated claim submission with accurate medical coding for the service being rendered, to eliminate billing errors and save time.
- With integrated features, providers can track the status of claims and payments instantly, helping improve cash flow and operational efficiency.
- Comply with healthcare regulations such as HIPAA, ensuring that billing and patient data are handled safely and responsibly.
Key Differences Between Closed, Open, Isolated, and Cloud-based Systems
When choosing a medical billing system, it’s important to consider the size and complexity of your practice.
| Features | Closed Medical Billing Systems | Open Medical Billing Systems | Isolated Medical Billing Systems | Cloud-Based Medical Billing Systems |
| Scope of Use | Best for stand-alone medical practices | Common in larger healthcare organizations | Typically used by smaller practices or independent providers | Suitable for practices of all sizes, especially with remote teams |
| Data Sharing | Data remains within the practice, no external sharing | Patient data is shared between provider and external entities | Limited data sharing, typically with insurers as needed | Data is accessible by multiple users and integrated with external systems |
| Billing Accuracy | Lower accuracy within the practice with manual entry. | Faster processing, fewer errors due to integration | More prone to errors, as claims are processed manually | High accuracy with automated coding and error reduction |
| Cost & Scalability | Lower initial cost, less scalable | Higher initial setup cost, but scalable for larger organizations | Minimal cost, but not scalable for larger practices | Scalable and cost-effective, suitable for growing practices |
Final Thoughts
The choice of medical billing system can significantly impact the financial health of a healthcare provider. Whether you opt for a closed, open, isolated, cloud-based system, each comes with its own set of advantages and challenges. As your practice grows and your billing needs become more complex, and while understanding the strengths and limitations of each type of medical billing system, you can make an informed decision that aligns with your practice’s goals, size, and resources.
Otherwise, consider partnering with a professional medical billing company like MedCare MSO, which offers reliable digital billing solutions for simplifying complex billing processes. Ensure accuracy on every step while just allowing healthcare providers to focus on patient health and care.
