Search for how to choose a medical billing company and nearly every result reads the same way, a numbered checklist written by a billing company trying to sound helpful while it sells you something. Ask about experience. Ask about HIPAA compliance. Ask about references. None of that is wrong, but it is also not what actually keeps practice owners up at night when they are trying to make this decision.
The more specific, more useful version of these questions shows up in a different place. Threads in medical billing and coding communities, private practice groups, and specialty-specific forums are full of people describing exactly what went wrong with a previous billing company, what they wish they had asked before signing a contract, and what actually separates a good billing partner from a bad one once the honeymoon period ends. The forums and communities at Reddit (ex: r/CodingandBilling, r/Credentialing, r/PrivatePracticeDocs), where billers, practice managers, and providers talk to each other with no sales pitch attached.
This article works through those real questions and real experiences, organized around the decisions that matter most. Whether the fee structure you are being offered is even legal in your state, how to tell if a billing company is actually working your denials or just writing them off, what your accounts receivable aging should look like, what to ask before signing with an offshore vendor, and the clearest warning signs that came up again and again. None of this replaces doing your own diligence, but it should get you asking sharper questions than the standard vendor checklist ever will.
Key Takeaways
- Percentage-based billing is restricted or illegal in several states, including New York, Illinois, and Florida. Confirm the rules where you practice first.
- The biggest outsourcing risk is not cost, it is visibility. Providers get burned when they cannot see whether denials are being appealed or quietly written off.
- Healthy AR aging follows a U-shaped pattern: most dollars in the 0 to 60 day range, and only a small fraction unpaid past 150 days.
- Offshore billing can work well, but confirm Medicare capability and verify who on the team has real hands-on billing experience and authority.
- Billing companies that work directly inside your own EHR or practice management system offer far more visibility than a disconnected, black-box process.
- The clearest red flags: unusually low quotes with hidden add-on fees, generalist billers with no specialty experience, and vague reporting on your actual collection rate.
- Not every practice needs to fully outsource. Thorough documentation often makes billing straightforward, and a partner earns its fee mainly through denial follow-up and aged claim recovery.
Is Percentage-Based Billing Even Legal Where You Practice?
Most billing companies charge a percentage of what they collect, typically 3 to 8 percent, with 6 percent coming up often as a rough norm. What rarely gets mentioned is that percentage-based billing is restricted or outright void in several states.
New York has historically treated percentage-based billing as illegal fee splitting, and providers have received warning letters and recoupment demands as a result. Illinois prohibits the practice outright, with courts ruling these contracts void under the state’s Medical Practice Act. Florida restricts it as well, particularly around Medicaid billing. A handful of other states, including Virginia and Tennessee, have broad fee-splitting statutes that could apply depending on how the contract is written, with enforcement varying.
None of this means percentage billing is rare or shady where it is legal. It remains the industry standard in most states, as long as the billing company has no influence over clinical decisions, referrals, or patient volume, and the contract is structured as administrative work only. But if you are in one of the states with restrictions, ask directly how the vendor structures fees to stay compliant, and get that answer in writing before you sign anything.
How Do You Know a Billing Company Is Actually Working Your Denials, Not Just Writing Them Off?
This is the question that comes up most often from providers who have already been burned once. One practice manager described taking over billing oversight and discovering that a previous third-party biller had quietly written off close to a quarter million dollars in claims that were fully recoverable, simply because reworking denials took more effort than accepting the loss. A misspelled patient name, an easy fix, would get written off instead of corrected and resubmitted.
The lesson from that story and others like it is not that outsourcing is risky by nature. It is that outsourcing without visibility is risky. Whoever handles your billing, you need real access to your own claims data, not just a monthly summary report. Ask specifically what percentage of denials get appealed versus written off, how quickly denials get worked after they come in, and whether you can pull your own reports at any time rather than waiting for someone to send them.
What Should Your Accounts Receivable Aging Actually Look Like?
Providers rarely get taught how to read their own AR aging report, which makes it hard to know if a billing company, in-house or outsourced, is actually doing a good job. One useful benchmark that came up in a provider discussion. Healthy AR aging should follow something like a U-shaped curve. Most of your outstanding dollars should sit in the 0 to 60 day column. The 60 to 120 day column should be meaningfully smaller. Anything past 150 days should be a small fraction of your total AR, not a growing pile.
If your current AR aging looks flat across every column, or worse, keeps growing in the oldest buckets, that is a direct signal that claims are not being followed up aggressively enough regardless of who is doing the billing. When evaluating a new billing partner, ask exactly what their process looks like for working claims that have aged past 60 days, and ask to see an example of their own AR aging distribution for a comparable client if they will share it.
Offshore Billing: What Should You Ask?
Offshore billing companies, often based in India, Pakistan, The Philippines or elsewhere, are common in this industry and can be a reasonable options. However, providers who have had bad experiences with them consistently point to a few specific issues worth asking about directly.
Firstly, confirm whether the company can bill government payers like Medicare in your state. Some offshore arrangements are not set up to handle Medicare claims correctly, and this is not always disclosed upfront. Secondly, ask who on the team has actual billing experience and real decision-making authority over how claims for your practice get handled, rather than following a script. Thirdly, be aware that some offshore operations present themselves as domestic companies, using marketing content copied from American billing websites to sound more credible than they are. Asking directly whether the company is US-owned, and asking to speak with the person who actually has hands-on billing experience, is a reasonable and increasingly necessary step.
None of this means offshore billing is a red flag by default. Plenty of practices run offshore billing relationships without issue, particularly when the leadership includes people with real US healthcare billing backgrounds. The point is simply to verify rather than assume.
Should the Billing Company Work Inside Your Own System, or Run Everything Separately?
One pattern that came up repeatedly from providers who were happy with their billing arrangement. The billing company operated directly inside the practice’s own EHR or practice management system rather than running a separate, disconnected process. That meant real-time visibility into claims status, proactive eligibility and copay verification before appointments happened, and a dedicated point of contact who could answer questions directly instead of routing through a general inbox.
Providers who had switched billing companies also mentioned the value of a new partner doing real cleanup work: going back through what a previous biller had left unresolved rather than just picking up new claims going forward and ignoring the backlog. If you are evaluating a new billing company and you currently have unresolved AR sitting in your system, ask directly whether cleanup of existing aged claims is included or billed separately.
What Are the Clearest Red Flags?
A few warning signs came up consistently enough across different provider discussions to be worth calling out directly.
An unusually low percentage quote paired with a list of add-on fees for things like eligibility checks, patient statements, or reporting is a common pattern that ends up costing more than a straightforward, slightly higher all-in percentage. Generic billers who cannot speak specifically to your specialty’s coding requirements are another. Mental health, behavioral health, and telehealth billing in particular have enough nuance that a billing company without direct experience in your specialty will make mistakes that a generalist billing team would not catch. Poor or vague reporting, where you cannot get a straight answer on your actual net collection rate versus what was promised during the sales process, is a third.
One provider evaluating billing companies for a new telehealth practice put together a short, practical list worth adapting for your own vendor conversations. Does the company handle prior authorizations directly or outsource that piece separately, what is the actual net collection rate they are currently delivering for comparable clients, how do they handle patient statements and patient-facing billing questions, and do they have specific experience with the billing nuances of your specialty and care model.
One Vendor or Several? The Hidden Cost of Juggling Multiple Systems
A recurring dilemma for newer or smaller practices is whether to piece together separate vendors, one for the EHR, one for billing, one for prior authorization, or to find a single partner who handles more of it together. There is no universally right answer here. Multiple specialized vendors can each be excellent at their specific piece. But the administrative overhead of managing several different vendor relationships, several different points of contact, and several different reporting formats is a real and often underestimated cost, particularly for a practice that does not yet have dedicated administrative staff to coordinate all of it.
If you are a smaller or newer practice, it is worth weighing that coordination overhead honestly against the theoretical benefit of picking best-in-class vendors for each individual function.
Do You Actually Need a Full Billing Company at All?
Not every practice does, and it is worth saying that plainly. Providers who document thoroughly, with clear notes covering the history, exam findings, treatment plan, and medical necessity for each visit, often find that claim submission itself is genuinely straightforward, particularly in specialties like outpatient mental health where coding is comparatively simple. Where a billing partner earns their fee is in the parts that take sustained time and attention. This includes tracking down delayed claims, working denials and rejections until they are resolved, collecting from patients and payers alike, and handling the unusual cases that do not fit a standard workflow.
Plenty of solo and small practices manage their own billing without major issues. Others prefer to outsource specifically for the peace of mind, even at a modest cost. One solo behavioral health provider mentioned paying a flat few hundred dollars a month, not a percentage, for a biller who handles claim submission, modifier review, patient billing questions, denial follow-up, and ongoing credentialing consulting. That is a meaningfully different fee structure than the standard percentage-of-collections model, and it can make sense for very low-volume practices where a percentage fee would not attract a quality vendor’s attention in the first place.
Making the Decision
The providers who end up satisfied with their billing company, whether in-house, outsourced domestically, or outsourced offshore, tend to share a few habits in common. They keep direct access to their own claims data rather than relying solely on vendor-provided summaries. They ask specific, pointed questions about denial follow-up and AR aging rather than accepting general reassurances. And they treat the first conversation with a prospective billing company as an interview, not a sales pitch to sit through politely.
Choosing a Billing Vendor FAQ
Is it legal for a medical billing company to charge a percentage of collections?
In most states, yes, as long as the billing company has no influence over clinical decisions or referrals and the arrangement is structured as administrative work. Several states, including New York, Illinois, and Florida, restrict or prohibit percentage-based billing arrangements, so it is worth confirming the rules in your specific state before signing a percentage-based contract.
What is a normal accounts receivable aging pattern for a healthy practice?
A healthy AR aging report generally follows a pattern where most outstanding dollars sit in the 0 to 60 day range, a smaller amount sits in the 60 to 120 day range, and only a small fraction remains unpaid past 150 days. If your aging report looks flat across all time ranges, or the oldest bucket keeps growing, that usually points to insufficient follow-up on older claims.
What questions should I ask an offshore medical billing company?
Ask whether they can properly bill government payers like Medicare in your state, ask who on the team has direct hands-on billing experience and real authority over how your claims are handled, and confirm whether the company is transparent about being based outside the United States rather than presenting itself as a domestic operation.
How do I know if my current billing company is actually working denials?
Ask directly what percentage of denials get appealed versus written off, how quickly denials are worked after they are received, and whether you have direct access to your own claims and denial data rather than only receiving periodic summary reports.
Do small practices need to outsource billing at all?
Not always. Practices with thorough documentation and straightforward coding needs, particularly in specialties like outpatient mental health, often manage billing internally without major issues. A billing partner tends to add the most value in denial follow-up, aged claim recovery, and patient billing support, which are the areas that take the most ongoing time and attention.
What percentage do medical billing companies typically charge?
Most percentage-based medical billing services charge between 3 and 8 percent of collections, with figures around 6 percent coming up frequently as a rough industry norm, though flat fee and hybrid pricing models are also common, especially for smaller practices.
What is the biggest risk of outsourcing medical billing?
The most commonly reported risk is reduced visibility into what is actually happening with your claims, particularly around whether denials are being worked and appealed rather than simply written off. This risk is manageable with a billing partner that provides direct, real-time access to your claims data.
How do I switch medical billing companies without losing track of old claims?
Ask any new billing company directly whether cleanup and follow-up on your existing aged accounts receivable is included in their engagement or billed as a separate project. Providers who have switched billing companies report that this cleanup work matters as much as how the new vendor handles claims going forward.
Summary: How to Choose a Medical Billing Company, Per Reddit Questions & Answers
Choosing a medical billing company comes down to a handful of decisions that a generic vendor checklist tends to gloss over. Confirm that the fee structure you are being offered is actually legal in your state, especially if it is percentage-based. Push past reassurances about denial management and ask for specifics on appeal rates and turnaround time. Learn to read your own AR aging report so you can tell whether claims are being followed up aggressively, regardless of who is handling billing. If you are considering an offshore vendor, verify Medicare capability and confirm who actually has hands-on billing experience and authority. Favor a billing company that works inside your own system over one that operates as a black box, and treat an unusually low quote, a generalist biller, or vague reporting as reasons to keep looking rather than reasons to feel lucky.
Above all, remember that not every practice needs to fully outsource its billing. Some are well served by strong documentation and a lighter-touch billing relationship. The right decision depends on your claim volume, your specialty, and how much time your practice can genuinely dedicate to following up on denials and aged claims if you keep that work in-house. The providers who end up satisfied with their billing arrangement, whatever form it takes, are the ones who ask specific questions upfront and keep direct access to their own data afterward.
Medwave provides medical billing, credentialing, and payer contracting services to healthcare practices across the country. It doesn’t matter if you’re evaluating a billing partner for the first time, cleaning up aged claims a previous vendor left behind, or trying to understand why your denial rate has not improved despite outsourcing, our team brings the transparency and direct access to your own data that the providers at Reddit were asking about and paraphrased here.
Co-Founder and COO of Medwave, bringing more than 30 years of hands-on experience in healthcare revenue cycle management, payer contracting, and medical credentialing.