By Loryn Einstein, Managing Director and Founder at Medbill

Insights from Medbill on billing, compliance and revenue management to support a financially sustainable practice.

Revenue Risk and Leakage in Private Practice

More than 18 years of industry experience consistently shows that 10–15% of billable revenue in private practice is never collected. This isn’t fraud or bad luck — it’s structural leakage that occurs when billing isn’t actively managed as a business function.

The Key Sources of Revenue Leakage

The key sources of revenue leakage are under-billing, claim rejections, write-offs accepted too easily, and cash-flow timing that creates hidden costs.

The average specialist loses 10–15% of billable revenue each year. That’s revenue you’ve earned, but never collected.

Under-billing is an increasingly common source of leakage. Doctors routinely bill less than they are entitled to – using lower-value item numbers due to lack of billing knowledge, missing eligible items during complex procedures, or defaulting to simpler codes due to fear of DoH or PSR audit.

Claim rejections go unresolved. Every rejected claim that isn’t followed up is revenue permanently lost. Many practices lack the systems or resources to track rejections, investigate the cause, and resubmit within the required timeframes.

Write-offs are accepted too easily. Patient debts, insurer shortfalls, and complex claims are often written off without investigation. In many cases, these amounts are recoverable – they simply require follow-up that isn’t happening.

Cash-flow timing creates hidden costs. Delayed billing, slow claim submission, and poor payment follow-up push revenue out by weeks or months. For a practice carrying fixed costs – rent, staff, insurance – cash-flow gaps have real financial consequences.

If your practice turns over $1.5 million in billable revenue, a 10% leakage rate means $150,000 per year in lost income. Most of that is recoverable with the right systems and attention.

Key Takeaway:
The critical reframing here is that billing is not an administrative function. It is a strategic business function with a direct, measurable impact on your income.

The Australian Private Healthcare Ecosystem

Australia operates a mixed public–private healthcare system. As a private practice doctor, you sit at the intersection of multiple funding streams, regulatory bodies, and patient expectations. Understanding how these pieces fit together is the foundation of sound billing practice.

Revenue From Multiple Sources

Medicare

Australia’s universal health insurance scheme. Provides rebates for services on the Medicare Benefits Schedule (MBS). Typically covers only a portion of your fee.

Private health insurers

Cover hospital and, in some cases, Medical costs for patients with private cover. Each fund has different gap schemes, contracts and claim rules.

Patients

Responsible for the gap between Medicare and insurer payments (if any) or your full fee. Gap payments and full fee payments from patients are an increasingly significant part of practice revenue.

Hospitals & third parties

Hospitals, day surgeries and third-party administrators influence billing rules, claiming processes and payment timelines, particularly for procedural services.

Your income depends on multiple payers, each with different rules. A billing error with any one of them doesn’t just cost you money – it can trigger audits, repayments, and compliance action.

Billing Operations and Compliance Governance

Effective billing governance means having clear processes, defined responsibilities, and regular oversight of your practice’s billing and compliance performance. Without it, you are relying on assumptions — and assumptions are where risk hides.

Know what can be delegated and what cannot.

You can delegate the mechanics of billing: claim submission, payment reconciliation, follow-up, reporting. What you cannot delegate is the clinical accuracy of what is billed. The item number must match the service you provided, and that responsibility is always yours.

You can delegate claim submission, payment reconciliation, follow-up and reporting. You cannot delegate the legal responsibility of what is billed under your provider numbers.

Build reporting into your operations.

At a minimum, your practice should track: claims submitted and paid, rejection rates and reasons, average days to payment, outstanding patient debt, and revenue per referral or procedure type.

Track these key metrics: claim submitted and paid, rejection rates and reasons, average days to payment, outstanding patient debt, and revenue per referral or procedure type.

Reconciliation is non-negotiable.

Every claim should be matched to a payment. Every payment should be matched to a deposit in your bank. Gaps between what you billed and what you received should be identified and investigated, not assumed to be correct.

The reconciliation process moves from claim billed, to payment received, to bank deposit matched. Investigate any gaps. Don’t assume they’re correct.

Compliance monitoring is ongoing.

MBS rules and item numbers change. Fund rules change. Your claiming patterns evolve as your practice grows. Governance means regularly reviewing your billing against current rules, not just relying on whatever was set up when you started.

Ongoing monitoring includes reviewing MBS updates, reviewing fund rules and policies, analysing claiming patterns, identifying and correcting risk areas, and documenting and actioning improvements.

The doctor’s job is not to do the billing. It is to make sure the billing is being done correctly, completely, and compliantly. That requires governance, not just delegation.

In-Sourcing vs Outsourcing Billing – Control, Risk, and Wellbeing

Every private practice faces a fundamental decision: manage billing internally, outsource it to a specialist, or adopt a hybrid model. There is no universally correct answer, but there are clear trade-offs that should inform your choice.

Expertise

In-House Billing: Depends on staff skill; hard to recruit specialists and trained staff.

Outsourced Billing: Dedicated Medicare, DVA, Health Fund, third party insurer and patient fee collection expertise at scale.

Key Person Risk

In-House Billing: Knowledge concentrated in one or two staff.

Outsourced Billing: Institutional capability: no single point of failure

Cost Model

In-House Billing: Salary + super + leave + training (fixed cost)

Outsourced Billing: Percentage of collections (variable, incentive-aligned)

Compliance

In-House Billing: Manual checking: relies on individual knowledge

Outsourced Billing: Specially designed billing system that includes compliance checking of all billing; systematic validation & automated workflows

Scalability

In-House Billing: Each new doctor needs more admin headcount.

Outsourced Billing: Scales without proportional headcount increase.

Reporting & Reconciliation

In-House Billing: Various system reports & manual spreadsheets; often ad hoc or reactive

Outsourced Billing: Structured reporting, automated reconciliation & real-time visibility

Control

In-House Billing: Direct oversight of day-to-day billing coupled with the responsibility for staff management.

Outsourced Billing: Defined service parameters & regular reporting. Support available when required.

In-house billing gives you proximity and control. Your staff handle claims, you can oversee the process directly, and you retain all institutional knowledge internally. However, in-house billing requires trained, specialist staff. Practice managers and receptionists rarely have the MBS and PHI expertise needed to manage complex specialist billing. Having staff also requires a high level of HR management and the ability to quickly recruit new staff when practice staff depart.

Outsourced billing provides ongoing specialist capability. A dedicated billing provider brings MBS and fund-specific expertise, compliance systems, and scalable capacity. Choosing the right partner, defining service levels, and maintaining oversight are essential.

Software driven compliance tools are changing the equation. Modern billing platforms use rule engines to validate claims against MBS, Health Fund and third party insurer rules before submission, catching errors that manual review misses. Whether you manage billing in-house or outsource it, access to this type of technology is increasingly important.

Incentive alignment matters. If your billing partner is paid a percentage of collections, their incentive is aligned with yours – they only earn when you earn. If your in-house staff are salaried regardless of billing performance, there is no built-in incentive to pursue every dollar.

Wellbeing is a valid consideration. Billing complexity and compliance anxiety are real stressors for doctors. Removing billing friction – whether by hiring well or outsourcing well – reduces cognitive load for both you and your clinical staff.

The question is not whether you can afford to outsource billing. It is whether you can afford the cost of getting billing wrong – in lost revenue, compliance risk, and personal stress.

Business Foundations for a Sustainable Medical Practice

Billing does not operate in isolation. It sits within a broader set of business disciplines that collectively determine whether your practice is financially sustainable. While this guide focuses on billing, it is important to understand where billing connects to the wider business picture.

Strong billing supports a strong practice through practice structure, cash flow, practice valuation, billing data and decision-making, reconciliation, and financial advice.

Practice Structure

Whether you operate as a sole trader, company or through a trust affects how billing revenue flows, how expenses are managed, and how tax obligations are met. Your accountant and lawyer will advise on structure – but your billing setup needs to align with it.

Cash flow

Faster and accurate payments improve cash flow stability.

Practice Valuation

Consistent, well-managed revenue increases the value of your practice.

Billing Data & Decision-Making

Your billing data is one of the richest sources of business intelligence in your practice. Revenue by procedure type, payer mix, collection rates, seasonal trends – this information should inform your financial planning, staffing decisions, and growth strategy.

Reconciliation

Your billing records (what was invoiced and to whom) and your accounting records (what was received and deposited) must match. Discrepancies between the two indicate either billing errors, payment issues, or both.

Financial Advice

Your accountant and financial adviser need accurate billing data to give you useful advice on tax planning, superannuation strategy, practice valuation, and investment. The quality of your billing operations directly affects the quality of your financial advice.

The doctors who run the most financially successful practices are not necessarily the best clinicians – they are the ones who remain engaged with the business.

Connect with Loryn Einstein

medbill.com.au | 1300 809 484

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This article is adapted from Medi Financial’s comprehensive 96-page Industry Priority Report - a practical guide to the financial, legal and operational considerations involved in establishing and growing a successful private practice.

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