Medical Billing Costs
“How much does medical billing cost?” sounds like it should have a one-line answer. It doesn’t, because billing companies price their services in different ways, include different work in the price, and quote rates that depend on your specialty, claim volume and payer mix. Two quotes with the same headline number can lead to very different monthly bills.
This guide explains the common medical billing pricing models, what is usually included and excluded, what drives the price up or down, how to compare an outsourced quote with the true cost of billing in-house, and which questions to ask before you sign. It is written for independent practices, including behavioral health, mental health and physical therapy practices.
Key takeaways
- Common models: percentage of collections, per claim, flat monthly fee, per FTE, and hybrids.
- Compare what each quote includes; eligibility, authorizations, credentialing and old A/R are often extra.
- Compare total cost and net collections, not just the headline fee.
In this guide
The main medical billing pricing models
| Model | How it works | Works best when | Watch for |
|---|---|---|---|
| Percentage of collections | The billing company keeps a percentage of what it actually collects for you | You want the vendor’s income tied to your collections | Which collections count (patient payments? old A/R?), monthly minimums |
| Per claim | A fixed fee for each claim submitted | Predictable, high volume of simple claims | Fees charged per resubmission; little incentive to work denials |
| Flat monthly fee | A fixed fee per month or per provider | Stable volume; you want predictable costs | Scope limits; what happens when volume grows |
| Per FTE or dedicated staff | You pay for a dedicated biller’s time | Larger groups that want staff augmentation and direct control | You carry the risk of productivity and results |
| Hybrid | Combinations, such as a lower percentage plus a monthly base | Practices with unusual volume or payer mix | Complexity that makes quotes hard to compare |
Percentage of collections
This is the most common model for full-service medical billing. The appeal is alignment: the billing company earns more only when you collect more. The details matter, though. Ask whether the percentage applies to insurance payments only or to patient payments too, whether it applies to collections on claims submitted before the contract started, and whether there is a minimum monthly fee that applies when collections are low.
Per-claim pricing
Per-claim pricing can look inexpensive, especially for practices with many low-dollar visits. The risk is that the fee is earned when a claim is submitted, not when it is paid, so the vendor has less financial reason to chase denials and underpayments. If you consider it, ask what follow-up, appeals and A/R work are included.
Flat monthly fees
Flat fees make budgeting easy. They work well when volume is steady and the scope is clearly defined. Ask how the fee changes when you add providers or locations and what happens if claim volume rises or falls significantly.
What is usually included, and what may cost extra
Before comparing prices, make sure the quotes cover the same work. A full-service medical billing and revenue cycle arrangement often includes:
- Charge entry and claim creation
- Claim scrubbing and electronic submission
- Payment posting from ERAs and EOBs
- Denial management and appeals
- Accounts receivable follow-up
- Reporting on collections, denials and A/R
Services that are often priced separately, or not offered, include:
- Insurance eligibility verification and benefits checks
- Prior authorization requests and tracking
- Provider credentialing and payer enrollment
- Medical coding, if your providers do not code their own visits
- Patient statements, payment plans and patient phone support
- Cleanup of old A/R that existed before the contract started
- Setup or onboarding fees
- Clearinghouse or software fees
The cheapest quote is often the one that leaves the most work with your staff.
What drives the cost of medical billing
- Specialty complexity. Behavioral health billing involves time-based codes, carve-out payers and authorizations. Physical therapy billing involves timed units, discipline modifiers, plans of care and visit limits. More complexity usually means more work per claim.
- Claim volume. Higher volume often lowers the percentage or per-claim rate, but may raise minimums.
- Average claim value. A practice with many low-dollar claims costs more to bill, as a share of revenue, than one with fewer high-dollar claims.
- Payer mix. Medicaid managed care, workers’ compensation and auto claims typically need more follow-up than routine commercial claims.
- Scope. Adding eligibility, authorizations or credentialing increases the price and, often, the value.
- Starting condition. A large backlog of unpaid claims or unresolved denials means more work in the first months.
How to compare an outsourced quote with billing in-house
The fair comparison is not “billing company fee versus zero.” In-house billing has real costs, and many of them are easy to overlook:
| In-house cost | What to include |
|---|---|
| Staff | Salary, payroll taxes and benefits for billers, plus time from front-desk staff and providers spent on billing tasks |
| Coverage | Vacation, sick time and turnover; what happens to claims when the biller is out or leaves |
| Training | Annual code and payer policy updates |
| Technology | Practice management or billing software, clearinghouse fees, eligibility tools |
| Space and equipment | Workstation, phone, office space |
| Lost revenue | Denials never appealed, claims past timely filing, underpayments not caught |
A simple way to run the numbers
Use your own figures:
- Add up a month of in-house billing costs from the table above.
- Estimate the revenue currently lost to unworked denials and aged A/R. Your A/R aging report and denial log are the best sources.
- Calculate the outsourced cost: for a percentage model, multiply your expected monthly collections by the quoted rate, then add any separate fees (setup, statements, credentialing, minimums).
- Compare total cost against expected net collections under each option, not just against the fee.
A hypothetical example shows the arithmetic. The numbers are invented for illustration and are not typical or recommended rates. Suppose a practice collects $50,000 a month and receives a quote of 5% of collections plus a $100 monthly statement fee. The outsourced cost is $2,500 plus $100, or $2,600 a month. If the practice’s in-house costs (staff time, software, clearinghouse) total $3,200 a month, and its denial log shows about $1,500 a month in claims that are never appealed, the comparison is not $2,600 versus nothing. It is $2,600 plus whatever internal work remains, against $3,200 plus the revenue currently being lost.
If outsourcing would recover revenue you are currently losing, the net effect can differ a great deal from the headline fee. If your in-house process already collects well and costs little, outsourcing may not pay for itself. The point of the exercise is to compare like with like.
Questions to ask before you sign
- What exactly is included in the rate, and what is billed separately?
- Does the percentage apply to patient payments, and to collections on claims submitted before the contract?
- Is there a setup fee, monthly minimum or termination fee?
- How long is the contract, and what notice is required to end it?
- Who works claims submitted before the start date, and on what terms?
- What reports will we receive, and how often?
- How are denials worked, and how quickly?
- Who owns the data, and how do we get it if we leave?
- What experience do you have with our specialty and our main payers?
- Will you sign a HIPAA business associate agreement?
Frequently asked questions
Is percentage-based billing better than a flat fee?
Neither is better in every case. Percentage pricing ties the vendor’s income to your collections; flat fees give predictable costs. Compare the total cost for your actual volume and the work each quote includes.
Why do behavioral health and therapy practices sometimes pay more for billing?
Specialty billing often involves more work per claim: authorizations, time-based or unit-based coding, carve-out payers, visit limits and plan-of-care requirements. Rates usually reflect that work.
Do billing companies charge to clean up old A/R?
Many do, either at a separate percentage or as a project fee, because recovering aged claims takes more effort. Ask how old claims are handled before you sign.
Are there hidden costs in medical billing contracts?
Costs are not hidden if you ask the right questions. The ones practices most often miss are setup fees, monthly minimums, patient statement fees, credentialing fees and termination terms.
How long are typical billing contracts?
Terms vary widely, from month-to-month to multi-year agreements. Read the termination clause closely, including notice periods and how claims in progress are handled after termination.
Work with Fastora
Get a quote you can actually compare
The real cost of medical billing is the fee plus the work left with your staff plus the revenue you are not collecting. A good quote makes all three visible.
Fastora Medical Billing Solutions provides medical billing and revenue cycle management for practices including behavioral health, mental health, psychiatry and physical therapy, with services such as eligibility verification, prior authorization, credentialing, coding, claims, payment posting, denial management and A/R follow-up. To see how pricing would work for your practice, visit our pricing page or contact Fastora. If you are weighing a change, our guide on how to switch medical billing companies may also help.
