For a small practice, outsourced medical billing commonly costs between 4 and 10 percent of collections under published pricing, while an in-house biller costs a median salary of about $48,000 according to the Bureau of Labor Statistics, plus 25 to 30 percent for benefits and payroll taxes, plus software, clearinghouse fees, training, and coverage whenever that one person is out. For a practice collecting around $1 million a year, the two options land surprisingly close on paper. What decides it is what each option collects, not what it charges, because a single stretched biller who lets denials age past payer deadlines can cost a small practice more than any outside fee. This guide walks through the full cost of each side, what changes when the practice has only one or two providers, and the questions that decide which option fits.
When a practice starts to struggle with billing, the question of whether to keep it in-house or outsource it usually comes up. It’s tempting to compare the salary of a billing employee with the fee a billing company charges and call it a decision, but that comparison leaves out most of what billing actually costs.
What in-house billing really costs
The visible cost of in-house billing is payroll, but the full picture is wider:
- Salaries, benefits, and payroll taxes for billing and coding staff. The Bureau of Labor Statistics put the median pay for medical records and health information specialists at about $48,000 in May 2023, and its employer cost data shows benefits and payroll taxes typically adding 25 to 30 percent on top of wages.
- Practice management software, clearinghouse fees, and coding tools
- Training and certification to keep up with coding and payer rule changes
- Coverage for vacations, sick days, and turnover, including the time it takes to hire and train a replacement
- Management time spent overseeing the billing team
- Revenue lost to denials that aren’t worked, claims that go out late, and A/R that ages past recovery
That last item is often the largest and the least visible. A billing team that’s stretched thin may cost less on paper while quietly leaving far more uncollected.
What outsourced billing really costs
Billing companies are commonly paid in one of a few ways, such as a percentage of what they collect, a flat fee per claim, or a flat monthly fee. Each model has tradeoffs. A percentage of collections ties the billing company’s income to what the practice actually receives, while flat-fee models can be easier to budget for but don’t reward collecting more.
Published pricing for full-service billing commonly runs 4 to 10 percent of collections, with per-claim fees often between $3 and $10, and the rate depends on your specialty, claim volume, average claim value, and the condition of your A/R. We break the models down with a worked example in how much outsourced medical billing costs.
There are also costs beyond the fee. Transitions take work, the practice still needs someone to handle charge entry and front desk tasks, and a poor fit with a billing company can be as expensive as a struggling in-house team.
The tradeoffs that matter more than price
Price matters, but these questions usually decide whether an arrangement works:
- Who actually works your claims, and will you be able to reach that person directly?
- Will they work inside your existing EHR and practice management system, or require you to change software?
- How do they handle denials and old A/R, and do they report on them?
- What will you be able to see each month, such as denial rates, days in A/R, and collections by payer?
- What happens to your data and access if you end the relationship?
Some billing companies prefer practices that are already running smoothly, because clean practices are easier to bill for. A practice that’s behind or struggling should ask directly whether a company takes on turnaround work, since cleaning up a backlog is different from maintaining a healthy account.
What changes when the practice is small
A practice with one to three providers usually has one person doing billing, often alongside front desk or office manager duties. That creates a single point of failure. A two-week vacation or a resignation means claims don’t go out, denials don’t get worked, and follow-up stops, and the practice feels it in cash flow a month later. An outside team spreads the work across several people, so coverage is built in.
Small practices also have less leverage with large billing companies and can end up as a low-priority account. Ask whether the company has a minimum monthly fee, how many practices each account manager handles, and whether a practice of your size gets a named contact. A smaller billing firm that works inside your existing software is often a better fit than a national vendor with a long client list.
A hybrid approach
It doesn’t have to be all or nothing. Some practices keep front desk tasks and charge entry in-house and outsource coding, claims, and follow-up. Others bring in outside help for a specific project, such as clearing aging A/R or reducing denials, and then decide how to handle billing long term.
How to decide
Before choosing, measure how your current billing is performing. Your clean claim rate, denial rate, days in A/R, and share of A/R over 90 days show whether the problem is capacity, process, or expertise. If the numbers are strong, keeping billing in-house may be the right call. If they’re slipping, the real cost of staying the course is the revenue that isn’t being collected, and that’s the number to compare against any outside fee.