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What a medical billing company costs a practice.

A 5-provider practice collecting $600,000 per provider pays a billing company about $180,000 a year at 6% of collections. Billing the same claims in-house with an agent costs $84,069 in staff and software, and the denials and underpayments the agent catches bring money back on top.

Jeff Weinberg, JRW · Updated 22 October 2026

Your 5 providers collect $3,000,000 a year and pay a billing company $184,800 at 6%. Billing the same 23,400 claims in-house with an agent costs you $84,069 in staff and software, and fewer written-off denials and the underpayments the agent finds bring in $45,000. The difference is $145,731 a year, before our fee.

$184,800 Billing company fee, per year
  • Fee per claim: $8
  • Billers needed in-house, full-time equivalents: 3.5
  • In-house billing, staff and software, per year: $238,230
  • In-house with an agent, staff and software, per year: $84,069
  • Denied claims no longer written off, per year: $30,000
  • Underpayments found, per year: $15,000
  • Difference per year, before our fee: $145,731

How the number is worked out.

The model prices three ways of getting the same claims paid: a billing company at a percentage of collections, an in-house desk at loaded wages, and the in-house desk with an agent doing most of the hands-on work. It adds the two revenue lines the agent produces. Our own fee is not in it.

  1. 01The fee. Collections times the percentage, plus the monthly extras times twelve. Vendor guides put the percentage at 4% to 10%, most quotes 5% to 8%. Check whether yours is charged on net collections or on gross charges, which is a much larger base.
  2. 02Billers needed. Claims a year divided by the claims one biller handles. The only published figure is 6,700 a year, from 2008. At 6,700 the default practice needs 3.5 billers.
  3. 03What they cost. Biller hours times the hourly wage plus 30% for benefits and overhead, plus billing software and clearinghouse fees per provider. The wage default is the federal median for billing clerks.
  4. 04With an agent. The agent takes over 70% of the biller hours: eligibility checks, scrubbing, submission, status checks, payment posting, first-pass denial work. The hours left are a person reviewing findings, approving corrections, signing appeals and taking patient calls. The software stays.
  5. 05Denials that stop being written off. Claims a year, times the drop in first-pass denials, times the share that would have been written off, at the average claim value. MGMA puts first-pass denials at practices at 7% to 8%, and Premier found 15% at hospitals. The default starts at 10%. Premier also found 54% of denied claims eventually paid. The default writes off 20%.
  6. 06Underpayments found. Collections times 0.5%. Vendors circulate 7% to 11% of revenue without a source we could find. One practice we work with found $68k in a year. The default is well below both.

The defaults.

Dials you change are marked in colour. The last column says where each default comes from and what kind of source it is.

DialYoursDefaultWhere the default comes from
Providers who bill55JRW case study, 2026 JRW engagement
Collections per provider per year$600,000$600,000MGMA, 2024 Survey
Claims per provider per week9090JRW case study, 2026 JRW engagement
Fee, percent of collections6%6%GetPracticeHelp and other vendor guides, 2026 Vendor figure
Extras per month: statements, clearinghouse, minimums$400$400JRW, 2026 Our default
Claims one biller handles a year6,7006,700Physicians Practice, 2008 Vendor figure
Biller hourly wage$23$23US Bureau of Labor Statistics, Occupational Outlook Handbook, 2025 Official
Benefits and overhead on top30%30%JRW, 2026 Our default
Billing software and clearinghouse, per provider per month$300$300Vendor pricing pages and roundups, 2026 Vendor figure
Biller hours an agent takes over70%70%JRW, 2026 Our default
Claims denied first time, now10%10%JRW, anchored on MGMA and Premier, 2026 Our default
Claims denied first time, after5%5%MGMA Stat, 2026 Survey
Denied claims that end up written off20%20%JRW, 2026 Our default
Underpayments found, percent of collections0.5%0.5%JRW, 2026 Our default

Sources.

The fee ranges are the billing companies’ own and are labelled that way. The denial figures come from Premier’s hospital survey and MGMA’s polls and benchmarks; the wage is federal data.

Our defaults. Extras are set at $400 a month; many contracts run higher once statements and minimums are counted. The share of biller hours an agent takes over is 70% in the default case, because coding judgment, appeals and patient calls stay with a person. The agent at 90% case in the Practice menu is what a clean payer mix and electronic remittances on every payer look like: the person left reviews the agent’s work instead of keying claims. At the defaults, in-house billing without an agent costs more than the billing company. Adding the agent changes the comparison. At a five-provider internal medicine practice, first-pass acceptance rose from 84% to 96% and $68k in underpayments were found in the first year. The case. How we set defaults.

  1. Claims and payments at an internal medicine practice. JRW case study, 2026. Five providers, two locations, about 450 claims a week, two billers. After an agent began scrubbing claims against payer rules, working denials and checking every payment against the contract: first-pass acceptance 84% to 96%, days in A/R 46 to 31, $68k in underpayments found in the first year, 35 hours a week of billing staff time back. One engagement. Source
  2. 2025 MGMA Financials and Operations Data Report. MGMA, 2024. Total medical revenue per physician in primary care, $760,383 for 2024, up 3.8% on 2023. Includes ancillary and non-fee-for-service revenue, so the collections default here sits below it. Member survey; full tables behind membership. Source
  3. Medical billing cost guide: percentage of collections, per-claim and hidden fees. GetPracticeHelp and other vendor guides, 2026. Vendor price guides put outsourced billing at 4% to 10% of collections, with most small-practice quotes between 5% and 8%; per-claim pricing at $4 to $10; flat plans at $200 to $1,000 per provider per month. Specialists are often quoted lower percentages, 3% to 8%, because they bill fewer, larger claims. Some contracts charge on gross charges rather than net collections. Setup, clearinghouse, statement, resubmission and minimum fees come on top. No independent survey of fees exists; these are the companies' own ranges. A claim that in-house billing costs 13.7% of collections, attributed to MGMA, circulates in the same guides with no report named; we could not find it in any MGMA publication. Source
  4. JRW default. JRW, 2026. No public benchmark we trust. The number is a round figure in the range we see in engagements, chosen so the headline errs low. Replace it with your own. Source
  5. Biller benchmarks. Physicians Practice, 2008. An industry median of 6,700 claims processed per biller per year, no source named. Also, citing MGMA at the time: a median of 0.61 staff per full-time provider in patient accounting, general accounting and managed-care administration, costing multispecialty practices 2.7% of net medical revenue. Old, and the only claims-per-biller figure in print; the practice in our case ran 11,700 per biller and was behind on denials. Source
  6. Financial clerks, billing and posting clerks, median pay. US Bureau of Labor Statistics, Occupational Outlook Handbook, 2025. Median pay for billing and posting clerks $48,500 a year, May 2025; $23.32 an hour at 2,080 hours. 418,000 jobs, projected flat to 2035. All industries, not medical billing alone. Before benefits and overhead. Source
  7. Medical billing software and clearinghouse pricing. Vendor pricing pages and roundups, 2026. Cloud practice management and billing software quoted at $100 to $500 per provider per month, some up to $700; clearinghouse fees $0.25 to $1.00 per claim, or flat plans around $120 a month for unlimited claims. Vendor figures. Source
  8. First-pass denial rate, set between practices and hospitals. JRW, anchored on MGMA and Premier, 2026. MGMA puts first-submission denials at medical practices at 7% to 8%. Premier found 15% at hospitals. In Experian's 2025 survey, 41% of revenue cycle staff said more than 10% of their claims are denied. We start at 10%. Your clearinghouse report has your own rate. Source
  9. Days in A/R holds steady for most practices, but payer pressure persists. MGMA Stat, 2026. Poll of 203 medical group leaders, July 2026: days in A/R the same as a year ago for 43%, higher for 32%, lower for 22%. MGMA benchmarking puts first-submission denials at 7% to 8% over the past four years and says practices can get below 5% with targeted fixes. In a January 2026 poll, 48% named denials and appeals as their largest source of revenue leakage. Source

Also consulted

  1. 2024 CAQH Index, claims transactions. CAQH, 2024. Calendar-2023 data from plans and providers. Provider cost and time per transaction, manual versus fully electronic: claim submission $6.33 versus $3.05, 12 minutes versus 5; claim status inquiry $13.80 versus $3.64, 25 minutes versus 7, the longest manual task CAQH measured; remittance advice $5.67 versus $2.95, 9 minutes versus 5; eligibility verification $8.57 versus $4.50 partial, 16 minutes versus 4. Labor only, excluding system costs and follow-up. Source
  2. Top KPIs physician practices should be monitoring. MGMA with Conifer Health Solutions, 2023. April 2023 benchmark paper: net collection rate minimum 95%, optimal 97% to 99% (citing the AAFP); clean claims rate 98%; days in A/R 30 to 40, under 30 achievable; A/R over 90 days under 10%; industry average denial rate 5% to 10%; bad debt under 5%. Targets assembled from several published sources, not one survey. Source
  3. New York Medical Society warns providers to avoid percentage-based fees. Mintz, 2017. New York's Medicaid Fraud Control Unit sent recoupment letters to providers whose billing companies were paid a percentage of Medicaid collections, seeking the overpayment plus 9% interest, under 18 NYCRR 360-7.5(c), which requires a billing agent's pay to be unrelated to the amounts billed and collected. The Medical Society of the State of New York warned members in February 2017 to pay billers by time or a flat fee. Source
  4. Medical Practice Act, prohibition against fee splitting, 225 ILCS 60/22.2. Illinois General Assembly, 2026. Subsection (d) allows a fair market value fee to a billing or collection company, including a percentage of fees billed or collected, provided the licensee at all times controls the fees charged and collected and all charges collected are paid directly to the licensee or the practice, or into an account in its name. Source
  5. Changing laws on third-party billing and the percentage-based model. Liles Parker, 2022. A health-law firm's review: every state is different. New York is the most restrictive, California allows most percentage-based agreements at fair market value, and Virginia and Tennessee make percentage fee-splitting a misdemeanor. Source
  6. Underpayment rates circulated by vendors. Vendor blogs citing MGMA and Change Healthcare, 2025. Vendors say payers underpay physician groups by 7% to 11% of net revenue and attribute it to MGMA; we could not locate the MGMA study. A Change Healthcare figure of 5% to 15% of claims underpaid and an MGMA 2019 finding that 69% of organizations reported commercial underpayments circulate the same way, second-hand. The calculator default is 0.5% of collections, far below these. Source

Where a billing company’s hours go.

  • Checking and sending claims

    Codes against the note, the claim against the payer’s rules, then out through the clearinghouse. An agent reads the note in your EHR and does this on every claim, the same way each time. How we automate claims in your EHR.

  • Status checks and posting

    The longest manual task CAQH measured is a claim status call, 25 minutes. The agent reads acknowledgements and remittances as they arrive, posts payments to the encounter and chases what is late.

  • Denials and underpayments

    The agent sorts denials by reason, corrects and resubmits them where the fix is clear, and drafts appeals where it is not. It checks each payment against the contract, and no claim is written off before a person has seen it.

The claims and payments case: 35 hours a week back, acceptance 84% to 96%, $68k in underpayments found.

Questions.

Is in-house billing cheaper than a billing company?
Not by itself, at these defaults. Three and a half billers at a loaded $30 an hour plus software cost more than a 6% fee on $3 million. The vendor claim that in-house billing costs 13.7% of collections has no source we could find. The comparison changes when an agent does most of the hours.
What does the agent at 90% case assume?
The same five-provider practice, with the agent handling 90% of biller hours instead of 70% and first-pass denials at 4%, the figure from our case. It needs every major payer on electronic remittance and a payer file with no fax-only holdouts. Some practices get there in the second year. Most start at 70%.
Why isn’t your fee in the number?
It is fixed and quoted on a call, not a percentage of collections, and it depends on your EHR and clearinghouse. The output is labelled before our fee so you can subtract it yourself.
What counts as collections?
Net collections: what payers and patients paid. Some contracts charge on gross charges, a much larger base. If yours does, raise the percentage dial until the dollar figure matches your last invoice.
Why 6,700 claims per biller?
It is the only published figure, and it dates from 2008. The practice in our case ran 11,700 per biller with two billers and was behind on denials. Put in your own: claims a year divided by billing staff.
Is a percentage fee legal?
Medicare’s rule bars paying a billing agent on a percentage when the agent receives the payment. New York’s Medicaid fraud unit has sought recoupment from providers who had one. Illinois allows one if the practice controls the fees and receives the money. Each state has its own rule. Ask a lawyer in yours.

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Related: Medical billing statistics · What a medical billing company costs · How to replace your billing company · Claims and payments case study · Claims and payments automation