An in-house billing team looks cheaper than it is. Payroll taxes, benefits, the practice management seat, the clearinghouse, the certified coder behind the claim, the credentialing that keeps the provider billable and the replacement hire when the biller leaves all land on the same side of the ledger. This is what the full in-house number looks like, what a percentage-based arrangement actually covers, and which contract terms decide whether a practice can change its mind later.
What this covers
- BLS puts the median annual wage for medical records specialists, the closest matching occupation to a biller or coder, at $51,140 in May 2025.
- Benefits are about 30 percent of private industry compensation, so a $51,140 salary carries roughly $73,000 in employer cost before software or clearinghouse fees.
- Medicare and Medicaid both restrict paying a billing agent a percentage of what is billed or collected, so percentage arrangements keep the payer’s money in the practice’s name.
- No public, audited benchmark for the percentage range exists. Published vendor rate cards put full-service billing in the mid single digits to about 8 percent of collections.
- Control is the part that does not show on a spreadsheet: who holds the ledger, who talks to the payer and who can prove the work was done.
The salary is the visible cost. The clearinghouse, the coding seat, the credentialing work and the replacement hire are the rest of it.A percentage fee prices the whole stack rather than the salary line.
A practice that counts only the biller’s wage against a vendor’s percentage is comparing one line of its own cost against the vendor’s whole fee. HFMA’s cost-to-collect framework is the yardstick worth borrowing. It puts salaries and fringe benefits, purchased services, outsourced arrangements, transaction fees and software maintenance in the numerator, and divides by total patient service cash collected.
The salary line is the smallest part of the answer
Start with the wage, because it is the number everyone already has. The BLS Occupational Outlook Handbook reports a median annual wage of $51,140 for medical records specialists in May 2025, up from $50,250 a year earlier. The occupation covers medical coders.
That median is not the employer’s cost. BLS reported in June 2026 that private industry employer compensation costs averaged $46.89 per hour worked, of which wages were $32.82 and benefits $14.07. Benefits were 30.0 percent of the total. Multiply a $51,140 salary by roughly 1.4 and the practice is near $72,000 before it buys software.
| Cost line | What it covers | How it scales |
|---|---|---|
| Wages | Billers, coders, a share of a supervisor | With volume and payer mix |
| Benefits and payroll taxes | Health, retirement, paid leave, FICA, unemployment | With headcount |
| Practice management and clearinghouse | Software seats, claim transmission, ERAs, eligibility checks | With providers and claim count |
| Coding and auditing | Certified coder time, chart audits, annual code updates | With service mix and audit findings |
| Credentialing and enrollment | Payer applications, CAQH upkeep, revalidations, EFT setup | With every provider and every payer |
| Coverage | PTO, sick days, vacancies, temp staffing | With the labor market |
A BLS wage figure covers wages. It leaves out the software seat, the clearinghouse, statement printing, lockbox fees and the cost of an empty chair, and it leaves out the credential: AAPC requires 36 continuing education units every two years and an active membership to hold a CPC.
The work that sits behind the billing seat
A billing seat produces revenue only after other things are in place. Someone has to enroll the provider with each payer, keep the CAQH profile current, work the credentialing calendar, build the fee schedule and keep the coding current. None of that is billing. All of it is a precondition for billing.
Medicare enrollment runs through PECOS. CMS publishes processing timeframes for the CMS-855 forms: for internet-based PECOS initial enrollments needing no site visit or development, 95 percent are completed within 15 calendar days and 100 percent within 50.
Commercial credentialing runs off the CAQH profile, which requires re-attestation every 120 days. Miss it and the profile goes to expired status, pausing every application that pulls from it.
Fee schedule, charge master, modifier rules and payer-specific edits. Get this wrong and the denials arrive before the first remittance does.
New, revised and deleted codes take effect each January. On 97153 the unit count has to match the authorization, and that rule is set by the payer rather than by the code book.
Headcount is a poor proxy for capacity. One experienced biller working with a certified coder and clean enrollment outperforms three people waiting on a credentialing file and re-keying denials.
Turnover is the line most practices leave out
Health care loses people faster than most industries. BLS Job Openings and Labor Turnover data for July 2026 put quits in health care and social assistance at 466,000 for the month, a seasonally adjusted rate of 1.9 percent. That is a monthly rate, so it compounds across a year.
MGMA’s Stat poll on 2025 turnover drew 357 practice responses. About 70 percent said turnover was the same or lower than the prior year and 29 percent said it had increased. Among practices reporting improvement, billing and coding staff sat on the list of roles with the highest churn. Billing and coding is a mobile skill, and insurers, health systems and revenue cycle firms hire it into remote roles.
The replacement cost is only part of it. SHRM’s 2025 benchmarking reports put the average cost-per-hire for nonexecutive roles at $5,475. That covers recruiting, not the weeks a new biller spends learning the payer mix, the portal logins and the practice’s own edit rules. A Health Affairs comparison of US and Ontario practices put the US figure at $82,975 per physician per year in payer interaction.
When a billing seat is empty, the claims do not stop arriving. They queue. Cash slows, denials age toward the end of the appeal window, and the remaining staff absorb the work. The practice carries the cost of the delay.
What a percentage arrangement covers
A percentage arrangement prices the cycle as a share of what is collected. The practice pays when money arrives, the vendor carries the labor, the software and the staffing risk, and a month with no collections costs nothing. That is the appeal, and it is real for a practice that cannot absorb a vacancy.
On the number itself, be skeptical of anyone quoting a market rate. Published vendor rate cards put full-service revenue cycle management in the mid single digits to about 8 percent of collections, with per-provider software seats quoted separately in the low hundreds of dollars a month. Those are list prices from companies selling the service, and a starting point for a scope conversation.
Neither MGMA nor HFMA publishes a public, audited percentage-by-practice-size table for billing fees. Every widely repeated range traces back to a vendor describing its own market. Treat any single percentage as a quote rather than a benchmark, and ask what sits inside it.
| What moves the percentage | Direction | Why |
|---|---|---|
| Payer mix | Up | Medicaid and commercial plans take more follow-up and rework than Medicare |
| Claim volume | Down | Fixed setup, technology and supervision costs spread across more claims |
| Coding complexity | Up | Behavioral health, surgery and infusion need modifier and authorization handling |
| Scope of service | Up | Credentialing, prior authorization, patient calls and statement handling add labor |
| Denial history | Up | An aged denial backlog is work the vendor has to absorb on day one |
Ask what the percentage excludes. Statement printing, patient balance follow-up, eligibility transactions, credentialing, prior authorization and coding audits are the usual exclusions.
The rule that limits percentage billing on program claims
42 CFR 424.73 lets Medicare pay an agent who furnishes billing and collection services only if the agent receives payment under an agency agreement, the agent’s compensation is not related in any way to the dollar amounts billed or collected, the compensation does not depend on actual collection, the provider can modify or revoke the payment disposition instructions at any time, and payment is made in the provider’s name.
Medicaid says the same in 42 CFR 447.10(f). Payment may be made to a business agent such as a billing service only if the agent’s compensation is related to the cost of processing the billing, is not related on a percentage or other basis to the amount billed or collected, and is not dependent on the collection of the payment.
This is why the common percentage arrangement is structured the way it is. The payer’s money goes to the practice, and the practice pays the vendor from its own funds. The restriction attaches to payment made through the agent, so the funds path has to stay clean.
Enforcement is not theoretical. OIG Advisory Opinion 98-1 examined a billing arrangement paid 20 to 25 percent of collected revenues and concluded that percentage compensation could constitute prohibited remuneration under the anti-kickback statute. New York’s Medicaid Fraud Control Unit has sent providers letters demanding repayment where the billing agent was paid on a percentage of collections. Florida’s Medicaid electronic data interchange agreement prohibits billing agents from charging based on a percentage of the total dollar value of claims billed.
If your agreement pays the vendor a percentage of what it bills or collects on Medicare or Medicaid claims, have counsel review it before signature. Structures that hold up bill program work per claim, hourly or at a flat fee, or keep the percentage entirely off program claims.
What the practice gives up
Outsourcing moves work, and it moves visibility with it. Before signing, decide which of these you are willing to hand over and which you are not.
- The ledger. If the vendor’s system holds the only copy of the accounts receivable, your aging report is a vendor report.
- The claims record. The 837 and 835 files are the practice’s data. Ask for a delivery format and a schedule.
- The payer relationship. Calls, portal logins and credentialing contacts can end up held in the vendor’s name.
- The enrollment. EFT and ERA enrollment is filed under the practice’s NPI and TIN, and whoever holds the form can change it.
- The exit. The cost of leaving is set in the contract, not on the day the relationship ends.
The exit is the one practices underestimate. A clean exit needs current data in a usable format, a named transition contact and enough notice to stand up a replacement.
Contract terms that protect the transition
These terms decide what happens on the day the practice wants its revenue cycle back. They belong in the agreement before the first claim goes out, while the practice still has room to negotiate.
- Fee basis stated by service line, with program claims priced per claim, hourly or flat rather than as a percentage.
- Written scope naming the payers, the claim types and the functions included, and naming what is excluded.
- A business associate agreement meeting 45 CFR 164.504(e), signed before any protected health information moves.
- Practice ownership of the raw 837 and 835 files, the charge master, the fee schedule, the payer contracts and the credentialing file.
- Reporting on a fixed schedule: claims submitted, first-pass acceptance, denials by reason code, A/R aging, collections by payer and cost to collect.
- Performance standards with a defined remedy attached to each one.
- Termination for convenience on 30 to 90 days notice, and termination for cause with a cure period.
- Transition cooperation spelled out: data handover format, a named contact and a defined window.
- No automatic renewal longer than the practice can plan for, and no fee change without written notice.
- Audit rights, so the practice can check the work against the ledger.
Per claim, hourly, flat or percentage. Then ask which services sit inside it and which do not.
837 and 835 files, charge master, fee schedule, payer contracts and the credentialing file.
Notice period, data format, transition support and the date the last file arrives.
A vendor that will not put those terms in writing is telling you what the relationship will be like. A vendor that will is telling you the same thing.
In-house and outsourced billing questions
Sometimes, and rarely by the margin the salary suggests. BLS puts the median wage for medical records specialists at $51,140 in May 2025, and benefits add roughly 30 percent on top of wages in private industry. Add software seats, clearinghouse fees, certification, credentialing work and the cost of replacing a biller, and the gap narrows.
Published vendor rate cards put full-service billing in the mid single digits to about 8 percent of collections, and no public, audited benchmark for that range exists. The fee moves with specialty, payer mix, claim volume, coding complexity and how much of the cycle the vendor takes. Ask for the fee basis in writing and ask what it excludes.
Medicare will not pay an agent whose compensation is related in any way to the dollar amounts billed or collected, under 42 CFR 424.73. Medicaid applies the same limit at 42 CFR 447.10(f). In practice the payer’s money goes to the practice and the practice pays the vendor from its own funds.
Longer than the hiring timeline suggests. CMS timeframes allow 95 percent of internet-based PECOS initial enrollments without a site visit to complete within 15 calendar days, but commercial credentialing runs off the CAQH profile, which requires re-attestation every 120 days. A new biller also needs months to learn your payer mix and edit rules.
Using the May 2025 BLS median of $51,140 and a benefit load near 30 percent, wage and benefit cost lands around $72,000. Practice management software seats run in the low hundreds of dollars per provider per month, clearinghouse fees sit on top, and a certified coder costs more than a biller. A vacancy adds slower cash on top of all of it.
The fee basis by service line, the written scope, a business associate agreement meeting 45 CFR 164.504(e), data ownership for the 837 and 835 files, a fixed reporting schedule, performance standards with remedies, termination for convenience, and a written transition commitment with a data format and a named contact.
The bottom line
The in-house cost is the salary plus everything the salary needs to produce a dollar: benefits, software, clearinghouse, coding, credentialing and the replacement hire. The percentage fee replaces that stack with one number, and it moves when specialty, payer mix and scope move. The decision turns on two questions the spreadsheet will not answer. Who holds the ledger, and what does the contract say happens on the day the practice wants it back.
What would your billing seat really cost this year?
Send us twelve months of collections by payer, your billing headcount and your software and clearinghouse invoices. We will build the in-house cost stack line by line, price the same scope as a percentage arrangement, and show you which functions are cheaper to keep. Our team runs outsourced medical billing services for medical practices, with a focus on ABA and behavioral health billing.
Request a free billing cost comparisonThis article describes general billing practice and the regulatory requirements in force at the time of writing. Contract terms, payer policies, state Medicaid rules and fee levels vary, so confirm the fee basis, the enrollment requirements and the payment rules that apply to your own practice before you act.
