What outsourced medical billing costs a small practice

Outsourced medical billing is usually priced as a percentage of the money your practice collects. There is no official price list, so the useful skill is turning any quote into dollars and comparing it with what your current billing actually costs.

How outsourced billing is priced

Percentage of collections is the most common structure. An HFMA article by two industry authors says outsourced billing is usually priced as a percentage of collections that typically varies little with the vendor's performance, and argues the rate "should be tied to the billing agency's performance."^[2]

Flat monthly fees, per-claim fees and hourly rates also exist. We could not find an independent, published price range for any of them, and ranges printed on vendor blogs are not a reliable basis for a decision. Get quotes in writing and compare them on the same terms. Scope drives price too: a company that only submits claims is a different purchase from one that runs full revenue cycle management. For each pricing model, pin down these points:

• Percentage of collections: is the fee charged on money actually received or on amounts billed, and does patient-paid money count?
• Flat monthly fee: what claim volume does it cover, and what happens above that?
• Per claim: are resubmissions and appeals charged again?
• Hourly: who sets the hours, and how are they reported to you?

A benchmark for a sanity check

An MGMA Stat article from June 2025 says: "Industry benchmarks often estimate billing/RCM costs around 5% of collections." The article does not cite the underlying data, and the figure covers billing and revenue cycle work done by in-house staff or by an outsourced service.^[1] Use it as an anchor for your own math, not as a price list. Quotes vary with specialty, claim volume, payer mix and how much of the revenue cycle the company handles.

Turn a quote into dollars

Each percentage point of fee costs 1% of your collections, which is $600 a month on $60,000. The table shows monthly dollars for four hypothetical collection levels. The 5% column applies the rough benchmark from the MGMA article above. It is an example, not a quote.

Ask what the fee buys. A lower rate with slow follow-up can cost more than a higher rate that collects faster, so compare quotes on scope and results, not on the rate alone.

What an in-house biller costs

The wage is only part of it. The Bureau of Labor Statistics reports a median annual wage of $51,140 for medical records specialists (May 2025 data).^[5] Job titles and duties vary, so treat that as a rough reference point for billing and coding staff, not a salary offer.

BLS also reports that in June 2026 benefits made up 30.0% of employer compensation costs for private industry workers, with wages and salaries making up the other 70.0%.^[6] Dividing the median wage by 0.70 gives roughly $73,000 a year for one hire. That is an illustration built from national averages. It leaves out software, clearinghouse fees, training, supervision, recruiting and coverage during time off.

Set that beside a percentage fee. At $60,000 in monthly collections, 5% is $36,000 a year. At $120,000 it is $72,000. A 5% fee equals the $73,000 estimate at about $122,000 in monthly collections, so below that level the fee costs less than one hire and above it, more. Neither side is clean: a small practice may need less than a full-time biller. Our article on in-house billing costs builds the comparison with a break-even table, and the contract checklist below shows what to ask an outsourcing company to cover.

Set performance targets in writing

If the fee is supposed to track performance, you need agreed measures. Published benchmarks differ by source, so ask the company which target it will commit to.

The sources define these measures slightly differently. HFMA's list is general guidance for providers, and the Global Open article was written for plastic surgery practices. Treat each row as a range and agree on definitions before you sign.

Why percentage fees need coding oversight

Percentage pay can give a billing company a reason to code higher. In its 1998 compliance guidance for third-party billing companies, the HHS Office of Inspector General wrote that it has a "longstanding concern that percentage billing arrangements may increase the risk of upcoding and similar abusive billing practices."^[3] Ask how the company audits its own coding, and consider having a provider review a sample of claims each quarter.

State law can matter too. In a discussion of management services organizations, MGMA says, without citing a statute, that New York law prohibits revenue cycle entities from being paid based on a percentage of revenue or collections.^[4] Ask your attorney whether a percentage fee is allowed for your arrangement and payers.

What the contract should cover

• A business associate agreement. HIPAA lets a covered entity disclose protected health information to a business associate if it obtains satisfactory assurance that the information will be safeguarded, and that assurance must be documented in a written contract or other written agreement.^[11] The definition of business associate lists billing among its functions or activities.^[13]
• Termination and data return. HIPAA requires the contract to address return or destruction of protected health information at termination, where feasible, and to let you terminate if the company violates a material term.^[12] That covers patient information, not a usable export of your billing history, so ask for that in writing. The same HFMA article also recommends defining what triggers termination for cause, notice and a chance to cure, and the return of documents and billing data.^[2]
• Early termination penalties and access to old data. A 2012 Family Practice Management article on adopting a new EHR advised practices leaving a billing company to start by checking the contract for early termination penalties and for access to old practice data.^[14]
• Where payments are deposited. Prefer an account your practice controls. Medicare may pay an agent that furnishes billing and collection services only if, among other conditions, the agent's compensation is not related in any way to the dollar amounts billed or collected and does not depend on actual collection.^[15] A percentage-of-collections fee does not fit that description, so keep Medicare deposits in your own account and ask your attorney how your arrangement meets the rule.
• The fee base and extras. Which payments count toward the percentage, and whether there are setup fees, minimums, or separate charges for clearinghouse and statement costs.
• Reporting. Monthly days in A/R, denial rate and clean claim rate, broken out by payer.
• Who does the work. A named contact, and a clear answer on who covers when that person is out.

This is general information, not legal advice. Have your attorney review any billing agreement.

Get a second opinion on a quote

If you already have a quote, our free billing audit reviews your aging report and denials so you can compare them with the targets above. Request the audit.