By Dr. Heather Signorelli, DO, board-certified pathologist and founder of NatRevMD.
Quick answer: Most medical billing services charge a percentage of the money they collect for you. Quotes commonly fall between about 4% and 10% of collections. Some charge a flat monthly fee instead, often because a state limits percentage-based billing contracts. However, the rate alone won’t tell you the real cost. What’s included, what counts as “collections,” and how much money the company actually brings in matter more.
Practice owners ask us about price on almost every first call. That makes sense, because billing is one of your biggest outside costs. So below we lay out how billing companies price their work, what drives the number up or down, the fees that hide in contracts, and how to compare two quotes fairly.
The 2 main ways medical billing companies charge
| Model | How it works | Commonly quoted range | Best fit | Watch out for |
|---|---|---|---|---|
| Percentage of collections | The company keeps a share of the payments it collects for you | About 4% to 10%; complex specialties can run higher | Most practices with steady volume | Whether “collections” includes patient payments and old A/R |
| Flat monthly fee | One set price each month | Varies widely by size and services | Small practices with predictable volume | Caps on claims, and extra charges for denial work |
Ranges come from published industry surveys and the quotes practices commonly share with us. Older Healthcare Billing and Management Association survey data, reported by Physicians Practice, also showed rates varying by specialty. In short, treat any range as a starting point, not a price list.
Percentage of collections
This is the most common model. Because the company earns more only when you collect more, its incentives line up with yours. Still, read the contract closely. Some companies take their percentage on patient payments you collect at the front desk. Others charge a higher rate on old claims they inherit.
Flat monthly fee
A flat fee makes budgeting easy. In practice, though, it usually comes with a claim cap or a narrow list of included services. Ask what happens in a month when your volume jumps.
What changes the rate you get quoted
- Specialty. Surgery, orthopedics and other procedure-heavy specialties have more modifiers and bundling rules, so they often cost more to bill well.
- Claim volume and average payment. Many small, low-dollar claims cost more to work than fewer large ones.
- Payer mix. Heavy Medicare Advantage, Medicaid or workers’ comp volume adds prior authorizations and appeals.
- What’s included. Credentialing, coding review, patient calls and statements may be in the rate or billed separately.
- The state of your A/R. A backlog of old unpaid claims takes extra work, and some companies price that cleanup on its own.
Hidden fees to ask about before you sign
- Setup or onboarding fees
- Cleanup of old A/R, often at a higher percentage
- Patient statements, postage and patient phone calls
- Credentialing, often priced per provider per payer
- Software, EHR or clearinghouse fees
- Monthly minimums
- Early cancellation fees, plus who keeps your data when you leave
For example, a 5% rate with separate fees for statements, credentialing and A/R cleanup can cost more than an all-in 7% rate. That’s why you should ask each company to put every fee in writing.
Why the cheapest rate is rarely the cheapest option
Your net collection rate matters more than your billing fee. Net collection rate is the share of the money you’re owed that you actually collect. Say your practice collects $1.2 million a year. Every 1% drop in net collections costs you about $12,000. In other words, a billing company that saves you 1% on fees but lets 3% of claims slip through costs you money.
So compare quotes on what you’d take home, not on the rate. Ask each company for its average net collection rate, days in A/R and denial rate for practices like yours. Then ask how it reports those numbers to you each month.
How to compare two billing quotes
- Start with your last 12 months of collections, not charges.
- Apply each company’s rate to that number.
- Add every extra fee on its list.
- Ask what each company expects your net collections to be, and how it will prove it.
- Compare the money you’d keep, not the percentage.
If you’re weighing billing in-house against outsourcing, start with our in-house vs. outsourced billing comparison. And if you’re shortlisting vendors, our guide to choosing the best medical billing company lists the questions to ask.
Frequently asked questions
Most outsourced billing companies charge a percentage of what they collect for you. Quotes commonly fall between about 4% and 10% of collections. Some charge a flat monthly fee instead, often because state rules require it. Your specialty, claim volume and the services included move the price the most.
For most practices, yes. A percentage fee ties the billing company’s pay to the money you actually collect, so they earn more only when you do. In contrast, a flat fee stays the same whether your collections go up or down.
A fee on charges uses your full billed amount, before payer adjustments. A fee on collections uses only the money that reaches your bank. So 5% of charges can cost far more than 5% of collections. Always ask which number the quote uses.
Ask about setup fees, cleanup of old unpaid claims, patient statements and postage, credentialing per payer, software or clearinghouse fees, monthly minimums and early cancellation fees. Get every fee in writing before you sign.
Not usually. Your net collection rate matters more than the fee. For example, a practice that collects $1.2 million a year loses about $12,000 for every 1% drop in net collections. That loss can wipe out the savings from a lower rate.
Find out what your billing is really costing you
The rate on a quote is only half the story. The other half is the money you never collect. Our physician-led team reviews your claims, denials and A/R and shows you where money is leaking. See how we work with independent practices or book a free billing review.
