Does your orthopedic billing company charge a percentage of collections for their coding and billing?

They might break out separate charges for statements or other services, but they also might combine the core coding and billing into one percentage-based fee like 6%.

The hard part is knowing what is legal for them to charge, what isn’t, and how you should approach mitigating these charges.


The federal government has an opinion on the subject of coding and billing based on percentage reimbursement.

The Office of Inspector General is the enforcement arm for HHS and Centers for Medicare and Medicaid (CMS), and they periodically issue position papers called Advisory Opinions.

In 1998 the OIG issued Advisory Opinions 98-1 and 98-4, as well as a Notice in the Federal Register titled “Publication of the OIG Compliance Program Guidance for Third-Party Medical Billing Companies” that provides guidance on this subject.

The OIG’s published 3rd party medical billing guidelines focus on a couple of areas:

  • Coding
  • Ensuring charges are not submitted for procedures/tests that have not been performed
  • Avoiding duplication

For the purpose of this article we will focus on the coding guidance provided by the OIG to understand why and how you should avoid percentage based reimbursement.

The OIG is primarily concerned with up-coding when it comes to coding and any incentives that might be created as a result of certain structures or business arrangements.

The language specifically says:

Billing company incentives that violate the anti-kickback statute or other similar Federal or State statute or regulation; 40 The OIG has a longstanding concern that percentage billing arrangements may increase the risk of up-coding and similar abusive billing practices. See, e.g., OIG Ad. Op. 98–1 (1998) and OIG Ad. Op. 98–4 (1998).

Tellingly, one of the subjects of the Advisory Opinions is an orthopedic billing arrangement. 

The premise of these is that the OIG is concerned about the incentive for up-coding in percentage-based billing arrangements because of the inherent incentive to upcode.


Saying that someone else is also non-compliant is not a defense. 

Your orthopedic billing company needs to be compliant, regardless of the practices of others.

It doesn’t matter if most companies are not compliant, the question is
“What do you want to do about this?”

Fortunately, there are a lot of good options for your orthopedic practice with little to no downside and potentially significant upside, so there is little reason not to do this.


If your practice already outsources its coding and billing to an orthopedic billing company or is considering outsourcing, your top options are:

  • Seperate your coding from billing

You could have a separate orthopedic coding company code your charts and then allow your billing company bill and collect. 

Of course, you would want to renegotiate your billing company’s rate lower to make up for the fact that they would no longer be doing coding.

  • Hire in-house coding

This requires some significant economies of scale. 

For a very large practice, this might be advantageous, but it seems like it would require at least a double-digit number of orthopedic surgeons.

Even then, finding a coder that is great at spine coding, as well as all the other sub-specialties like hand and ankle is very challenging.

Therefore, the “best-of-breed” might still be better than “one-stop-shop”.

  • Re-negotiate your billing contract

This is the simplest option. You can renegotiate the contract with your orthopedic coding and billing company and break out the coding separately.

This should be structured as a price per chart.

For option 1, even if you think your current billing company has the best coding, you should take this opportunity to compare them to other companies. 

This is a great opportunity to review the coding efficacy of the current process, and it gives your practice the chance to compare multiple coding solutions to see who is best at compliance and who would generate the most income by ensuring all codes, units, and modifiers are captured.

If your current billing company IS the best after doing the due diligence, then just choose option number 3.


Orthopedic practices should avoid contracts that include coding using a percentage-based reimbursement model.

There is a lot of upside and risk mitigation to this and little to no downside to implementation of this practice. 

If you have an agreement like this, it would be prudent to modify the contract or to find an alternate solution.

Contact us if you would like a copy of any of the OIG opinions.


Apache Health is an RCM analytics, benchmarking, and auditing company.  The founders of Apache formerly ran a large medical billing company that focused on spine and orthopedic billing.  Apache’s predictive analytics will benchmark billing performance and project exactly how much more revenue you should earn.  Using many factors and a blend of artificial intelligence and specialty specific benchmarks, the model projects whether changing the orthopedic billing process would improve collections for your particular mix of procedures and payers, and adds in our own coding tools that improve compliance and increase revenue.

Legal disclaimer: Apache Health is engaged in the business of healthcare revenue cycle management analytics.  We offer information about regulations, rules, and industry practices relating to compliance.  Apache has researched that subject and has set forth the results of that research herein.  Apache Health is not a law firm and we do not offer legal advice.  Apache does not guarantee the completeness nor the accuracy of its research.  You should consult with your qualified healthcare attorney.