What a medical billing company costs.

Billing companies quote 4% to 10% of collections. Most quotes to a small practice land between 5% and 8%; specialists who bill fewer, larger claims get 3% to 8%. These are the companies’ own ranges. We found no independent survey of them.

Five primary care providers collecting $600,000 each pay $180,000 a year at 6%. Add the things the percentage does not cover, patient statements, clearinghouse pass-through, software seats, a monthly minimum, and the calculator puts it at $184,800. That is about $7.90 a claim on 23,400 claims a year.

Two things about the percentage. It rises with revenue, whatever the work: a practice that adds a provider or renegotiates a contract pays more for the same claims. And the base matters. A fee on gross charges is a fee on a number two or three times larger than net collections. Read which one your contract says.

A billing company takes the charge from your EHR, checks the codes, scrubs the claim against payer edits, submits it through a clearinghouse, posts the payment when it arrives, works the denials, sends patient statements and follows up on what is unpaid. Good ones report on all of it monthly. Many also credential providers with payers, for a separate fee.

Usually excluded: claims with dates of service before the contract began, old accounts receivable, coding itself, and appeals past the first level. Each is either billed extra or left undone, so ask before you sign.

The work takes real time. CAQH measured a manual claim status call at 25 minutes, the longest administrative task it tracks. A biller who handles 6,700 claims a year, the one published benchmark, is doing a real job. The question is the price and what it rewards.

A company paid on collections wants collections. That aligns with you on the big claims. It aligns less on the small ones, because the labor is theirs and the fee on a $90 visit is five dollars. A denial on that visit costs more to fight than it earns, so the company lets it wait and then writes it off. Premier found 54.3% of denied claims were eventually paid, but only after someone wrote an appeal for each. In MGMA’s January 2026 poll, 48% of practice leaders named denials and appeals as their biggest source of lost revenue.

Underpayments are the same story. Checking a remittance against the contract line by line is slow, and the recovery on any one claim is small. Vendors claim payers underpay by 7% to 11%; we could not find the study, and the real number for your practice is whatever a line-by-line check finds. At one five-provider practice it was $68,000 in a year.

A percentage fee pays for collections, and the company staffs to match. If you want denials worked and remittances audited, the contract has to say so and the reporting has to show it.

Medicare’s rules let a billing agent receive payment on a provider’s behalf only if the agent’s pay is not related in any way to the amounts billed or collected. That is why percentage billers have payments sent to the practice. State law goes further. In 2008 the Illinois Appellate Court voided a billing contract at 4.5% of reimbursements as fee-splitting. Illinois has since changed the law: a percentage fee for billing and collection is allowed if the practice controls what is charged and collected and the money goes straight to the practice. In 2017 New York’s Medicaid Fraud Control Unit sought recoupment, plus 9% interest, from providers who paid billers a percentage of Medicaid collections, and the state medical society told members to pay billers by time or a flat fee.

Each state has its own rule. Virginia and Tennessee make percentage fee-splitting a misdemeanor; California allows most percentage agreements at fair market value. Most billing companies operate on percentages anyway. If you are in New York, or bill Medicaid anywhere, ask a healthcare lawyer what your contract exposes you to. This is not legal advice.

Run the same five providers in-house. 23,400 claims at 6,700 per biller is three and a half billers. At the federal median wage of $23.32 plus 30% for benefits and overhead, that is about $220,000 a year, plus $18,000 in software and clearinghouse fees. That is more than the billing company charges.

Vendors say in-house billing costs 13.7% of collections and attribute it to MGMA. We could not find that figure in anything MGMA has published, and the guides that quote it name no report. Ignore the number. The direction is still right for a small practice: billing staff are a fixed cost, they turn over, and when one leaves the claims stop.

The 6,700 is also from 2008. The practice in our case ran 11,700 claims per biller with two people. One claim in six came back, and the billers had no time to check the payments. Without help, an in-house desk either overstaffs or leaves denials unworked.

Most billing hours are repetitive: checking eligibility, scrubbing a claim against rules that can be written down, sending it, reading the acknowledgement, checking status, posting the remittance, sorting denials by reason. An agent inside your EHR and clearinghouse does those on each claim, the same way each time. A person reviews what it finds, approves corrections, signs appeals and talks to patients.

At the five-provider practice, first-pass acceptance went from 84% to 96%, days in A/R from 46 to 31, and the two billers got 35 hours a week back. The case. The calculator prices the in-house desk with an agent against the percentage fee for your own numbers, and labels the result before our fee. Our fee is a fixed price per automation.