Are billing companies worth it? Often, yes, though the answer depends on arithmetic you can run on your own numbers in about ten minutes.
A billing company takes a share of what you collect, and that money has to come back to you as something real, either saved payroll or extra collections. If neither shows up, the fee is a cost line and nothing more.
Most of the confusion comes from comparing the wrong things. Practice owners set a percentage against a salary and stop there, which leaves out benefits, software, coverage for time off, and the claims nobody has time to chase. This guide puts those pieces side by side, works out the break-even point, and flags the cases where staying in-house is the smarter call. Pull your last 12 months of collections before you read the tables. They land harder with your own number.
Key Takeaways
- One in-house biller costs about $73,000 a year once benefits are added, before software and coverage for time off.
- At a 6% fee, outsourcing costs less than that biller until annual collections pass roughly $1.2 million.
- Past that point, the fee has to earn its keep through fewer denials, cleaner claims, and faster payment.
- A 90% clean claim rate is a widely cited best practice, so ask any company for its real number.
- Outsourcing loses when your own process is the problem, when the contract locks you in, or when the percentage lands on billed charges instead of collections.
- A hybrid split, with your staff on the front end and an outside team on claims and denials, works when you write down who owns each handoff.
- Credentialing delays can erase the savings, so ask who handles enrollment.
What You Usually Get for a Billing Company’s Fee
The fee usually covers the full claim cycle. That means eligibility checks, charge entry, claim submission, payment posting, denial follow-up, and patient statements, though the exact list changes from vendor to vendor.
Companies price this as a percentage of collections, a price per claim, or a flat monthly fee. Our guide to medical billing service cost shows what each model runs and how to line up quotes. For the math below, assume a 6% fee as a working number and swap in your own quote.
Scope matters more than the headline rate. A 5% quote that leaves out denial work can cost more than a 7% quote that includes it.
The Break-Even Math Against an In-House Biller
Here is the comparison most owners skip. A biller on your payroll costs more than the paycheck, and the paycheck is the only figure most people use.
What One In-House Biller Costs
The Bureau of Labor Statistics reports a median annual wage of $51,140 for medical records specialists, the closest federal category for billing and coding work. Pay varies by region, so check your local market.
Benefits add to that. In June 2026, benefits made up 30.0% of total compensation for private industry workers, according to the BLS employer cost data. If wages are 70% of the total, a $51,140 wage points to about $73,000 in total compensation.
That figure still leaves out billing software, clearinghouse fees, training, and anyone to cover vacations and sick days. One person on the job also means one point of failure. When your biller is out, claims sit.
Skill matters too, since a single wrong code can send a claim back unpaid. We cover that in our piece on coding accuracy.
Where the Break-Even Lands
Set a 6% fee against that $73,000 and the break-even point is about $1.2 million in annual collections. Below it, outsourcing costs less than one biller. Above it, you pay more than one salary and the fee has to earn the difference.
| Annual collections | Fee at 6% | One in-house biller (wages and benefits) | Gap |
|---|---|---|---|
| $500,000 | $30,000 | About $73,000 | Outsourcing costs about $43,000 less |
| $1,000,000 | $60,000 | About $73,000 | Outsourcing costs about $13,000 less |
| $1,500,000 | $90,000 | About $73,000 | Outsourcing costs about $17,000 more |
Read the last row with care. At $1.5 million, outsourcing runs about $17,000 above one in-house biller. To cover that gap, the company has to find about $18,000 in extra collections, since the fee takes 6% of those dollars too. That works out to roughly 1.2% of your collections.
A different rate moves the line. At 5% the break-even sits near $1.46 million. At 8% it falls to about $913,000.
A practice collecting $1.5 million may also need more than one person on billing. With two billers on payroll, the break-even point moves out to about $2.4 million, and outsourcing looks better across a wider range.
How Denials and Clean Claims Change the Answer
Payroll is the part of the math you can see. Denials hide.
KFF reported that ACA Marketplace insurers denied 19% of in-network claims in 2024, with rates ranging from 3% to 36% depending on the insurer. Those are Marketplace plans, so your payer mix will look different. The spread still tells you something. Two payers can treat identical claims in very different ways, and someone has to know which payer wants what.
KFF also found that consumers appealed fewer than 1% of denied claims. That is a patient-side figure, but it shows how rarely a denial gets challenged once it lands. A team that works denials every week can recover money a stretched front office lets slide. Our denial management work exists for exactly that gap.
Then there is the clean claim rate, the share of claims that pay on first submission without rework. MGMA consultant Kem Tolliver calls 90% a generally accepted best practice, according to MGMA Stat in November 2024. Medwave holds a 98% clean claim rate. Ask every company for its real figure, and ask how it measures it.
If your own rate sits near 80%, one claim in five needs rework before it pays. Rework eats staff time and pushes cash back. Our post on key revenue cycle metrics covers the numbers worth watching.
Try this test. Pull the last three months of denials, sort them by reason, and count how many you resubmitted. If the answer is most of them, and quickly, your in-house process works. If the answer is some, that gap is the room a billing company would fill.
When a Billing Company Is Not Worth It
Outsourcing does not always win.
Your process may be the problem. MGMA’s 2018 outsourcing guidance warns that an outsourced vendor performing collection work will probably not be able to correct internal processes gone awry. If claims stall because of registration errors or missing authorizations, a billing company inherits the same bad data.
Your in-house team may already be strong. A biller with a 95% clean claim rate, short days in A/R, and a habit of chasing denials is hard to beat on price. Keep that person.
Volume can work against you. A very small practice may hit a minimum monthly fee that pushes the effective rate well above the quoted percentage.
Claim size matters as well. If your claims are high in dollar value and uniform, a percentage can cost more than a flat per-claim price, as the cost guide above shows.
The contract can sink the whole thing. Long terms, steep exit fees, and a vendor that holds your data turn a service into a trap. More on that below.
The Hybrid Model: Splitting Billing Between Your Staff and an Outside Team
Not every practice has to hand over the whole revenue cycle. Plenty of owners keep the front end at the desk and outsource everything after the claim leaves the building.
The most common split looks like this. Your staff handles scheduling, eligibility checks, charge entry, and patient payments at checkout. The billing company takes claim submission, payment posting, denial work, and A/R follow-up. That back half is where the hours pile up, and it is where in-house teams fall behind first when the schedule gets busy.
A hybrid setup can lower the fee, since the company is doing less. It also keeps money conversations with patients in the hands of people they already know. The risk is the handoff. When two teams touch one claim, a missing diagnosis code or an unsigned note can sit in the gap for weeks while each side assumes the other has it.
If you go hybrid, write down who owns each task before you sign. Put a turnaround time on each side of every handoff. Settle who reworks a denied claim when the fix needs a chart note from a provider. A one-page responsibility list that both teams can see does more good than another software login.
Hybrid tends to fit practices with a capable office manager and steady volume, but nobody with the time to chase payers.
How to Get the Most From an Outsourced Billing Setup
Hiring a billing company is the start of the work, not the end of it. The practices that see the best results treat the company like part of the team and hold up their end.
- Send encounter notes and charges within a day or two of the visit, since late documentation holds up claims before they are even built.
- Name one internal contact who can answer coding and clinical questions the same week.
- Keep provider enrollment, fee schedules, and payer IDs current, and tell the company about any new provider or location before the first patient is seen.
- Read the monthly report. Look at denial rate by payer, days in A/R, and the oldest unpaid claims, then ask about anything that moved.
- Hold a short standing call each month for the first quarter, then space it out once the numbers settle.
- Confirm that payments land in your own bank account and that you can check claim status in the portal at any time.
If a number looks off, ask about it that month. Waiting a quarter turns a small fix into a write-off.
Five Numbers to Ask For Before You Decide
Whether you are vetting a vendor or checking your current one, these five numbers settle most arguments.
- Clean claim rate, and how the company calculates it
- Days in accounts receivable, by payer if possible
- Net collection rate
- Denial rate, with the top three denial reasons
- Share of denied claims that get appealed or resubmitted
A company that tracks its work can hand these over fast. If you wait weeks for them, you have learned something about how it runs.
Contract Terms That Tip the Math
A good vendor on paper can still cost you if the contract is lopsided. Read these terms with a pen in hand.
Start with what the percentage applies to. A fee on collections is owed only when money arrives. A fee on billed charges is owed whether or not the payer pays, so it can cost far more. Confirm which one you are signing.
Check the term and the exit. Ask what it costs to leave, how much notice you owe, and how you get your data back and in what format. A company confident in its work does not need a trap.
Look at the extras. Setup fees, software fees, clearinghouse charges, and separate pricing for appeals or patient statements add up. Ask for an all-in annual cost on your real collections, then compare totals instead of rates.
Your claim history and patient data should stay available to you after the contract ends. Make sure the paperwork says so.
Who Tends to Get the Most From Outsourcing
An MGMA Stat poll from November 2024 drew 352 applicable responses from practice leaders. About 36% said they planned to outsource or automate part of their revenue cycle in 2025, 50% said no, and 14% were unsure. Collections, billing, and coding were the most common areas. The market is split, and that matches the math. Outsourcing depends on your numbers.
Practices tend to get the most when billing pulls staff away from patients, or when growth is outrunning one biller. A new practice often fits too, since nobody has built a billing process yet and mistakes in the first months are expensive.
Do They Handle Credentialing Too?
A billing company can only bill payers that have enrolled your provider. Delays in medical credentialing mean claims you cannot submit, and no clean claim rate fixes that. We cover the dependency in why you can’t bill what you can’t credential.
Contracted rates matter as well. They set what each claim pays, so a billing team working from a weak fee schedule can only collect a weak number. If you are adding providers or payers, price billing and payer contracting together, or at least ask how the billing company hands off to whoever handles them.
Billing Company FAQs
Are billing companies worth it for small practices?
Often, yes. At a 6% fee, outsourcing costs less than one full-time in-house biller until annual collections pass about $1.2 million. Small practices also avoid the cost of software, training, and coverage for time off. The exception is a practice with a skilled in-house biller and a high clean claim rate.
How much do billing companies charge?
Many charge a percentage of collections, a price per claim, or a flat monthly fee. Rates vary by specialty, volume, and scope. Ask each company for an all-in annual cost based on your own collections so the quotes compare fairly.
Do billing companies increase collections?
They can, mainly by sending cleaner claims and working denials that a busy office lets go. The gain depends on how much money your current process leaves behind. Pull three months of denials and count how many were resubmitted. That gap is your room to improve.
How much does an in-house biller cost?
Using BLS data, a median wage of $51,140 and benefits at 30.0% of total compensation point to about $73,000 a year for one full-time employee. Software, clearinghouse fees, training, and coverage for time off come on top.
What is a good clean claim rate?
MGMA consultant Kem Tolliver describes 90% as a generally accepted industry best practice. Ask any billing company for its own figure and how it measures it. Medwave holds a 98% clean claim rate.
When is in-house billing the better choice?
In-house billing tends to win when you already have a skilled biller with strong results, when you want daily control over the work, or when a vendor contract would lock you in on poor terms. It can also win when your claims are high in dollar value and a percentage would cost more than the work is worth.
Can I keep some billing tasks in-house and outsource the rest?
Yes. Many practices keep scheduling, eligibility checks, and patient payments at the front desk and outsource claim submission, denial work, and A/R follow-up. Put each side’s tasks and turnaround times in the contract so claims don’t stall at the handoff.
What should I ask before signing with a billing company?
Ask whether the percentage applies to collections or billed charges, what the all-in annual cost is, how denials and appeals are handled, what happens to your data if you leave, and what the exit terms are. Also ask for its clean claim rate, days in A/R, and net collection rate.
What should my practice do after hiring a billing company?
Send charges and notes promptly, name one internal contact, keep provider and payer information current, and review the monthly report. Staying involved during the first 90 days helps you catch problems while they are still small.
Does a billing company handle credentialing?
Not always. Credentialing is often a separate service with a separate price. A payer cannot pay claims for a provider it has not enrolled, so ask whether credentialing is included or how the company coordinates with whoever does it.
Can a billing company fix a broken process?
Not on its own. A vendor works from the data your office hands it. If registration errors or missing authorizations cause your denials, fix those first or choose a company that will help you correct them at the front end.
Summary: How Medwave Handles Billing, Credentialing, and Contracting
So, are billing companies worth it? When the fee costs less than your in-house alternative, or when the company finds more money than it charges, yes. When your process is the problem or the contract is lopsided, no.
Medwave does medical billing, credentialing, and payer contracting for practices, and the three work better when one team sees all of them. We have supported more than 15,000 providers, we hold a 98% clean claim rate, and our credentialing averages 85 days. You can read about the medical billing service or check our pricing page.
Bring your collections figure and your current fee, and we will tell you straight which side of the break-even line you are on. Book a consultation to start.
Co-Founder and COO of Medwave, bringing more than 25 years of hands-on experience in healthcare revenue cycle management, payer contracting, and medical credentialing.