Medical Billing - Software ROI

One of the most heated arguments in the medical billing world, at least when it comes to the software company, is ROI or return on investment. This is something that is very difficult to calculate as far as what you want your ROI to be and everybody has their own theory and opinion on the subject. If you're a software company just starting out, or better yet, thinking of starting a medical billing software company, there are some basic things you need to consider when figuring out what you want your ROI to be. What follows is a list of the most basic of these items. For starters, you have to figure out what your cost of production is going to be before you even hire any programmers to create this software. This basically involves the cost of the lease on the building you'll be using as well as any other fixed costs such as utilities, insurance, etc. Add all this up and put the estimated total in one column.

The next thing you're going to have to calculate is the salaries of all the people who will be responsible for getting your product out. This includes programmers, QA persons, support techs and all managers. You will also need a networking department who, though they won't be directly responsible for working on your software, will be keeping your operation going. You need to calculate these salaries not just for the time that the software will be developed but also for the time after while you're supporting the product, which will hopefully be for the lifetime of the product. Will you keep the same number of programmers. QA people and support techs? What salary increases do you foresee? Figure all this out and put it in a second column.

The next thing you have to figure out is the cost of any add on items that you intend to include with the software at no extra charge. For example, in the medical billing industry there are a ton of forms that customers are going to need. Are you going to include these forms or are you going to have your customers get them from an outside source? What about peripheral equipment? Are you going to include barcode and retail sales machines? If so, you need to include the cost of these. Also, you're going to need to calculate the cost of maintaining all the equipment. If you deal in peripherals, you're also going to need a tech staff.

After you have figured out what all your yearly costs are going to be, you then have to decide what you want your return to be. In other words, let's say you plan to spend $1,000,000 a year and you want a 10% profit each year. You first have to figure out how many software packages the market will allow in a year. Let's say it's 10,000. If you want a 10% return, then you want to sell $1,100,000 worth of product. If you sell 10,000 units, doing the math, you will need to sell each unit at $110. This is actually very cheap for medical billing software as most packages go for several thousand dollars. So most likely, if you price your software correctly, you will make much more than a 10% ROI.

This is of course greatly simplified, but basically, this is what you need to do in order to figure out what your ROI is going to be for your medical billing software.

Michael Russell Your Independent guide to Medical Billing