Ask a practice owner what billing costs and you get one of two numbers: a payroll line, or a billing company’s percentage fee. The two are not comparable, and treating them as comparable is how a practice pays more for less. The payroll line hides benefits, software, clearinghouse fees, enrollment work, turnover, denial rework and the physician minutes spent on coding questions.
What this covers
- BLS puts the median annual wage for medical records specialists, the occupation that includes medical coders, at $50,250 in May 2024.
- BLS reports benefits at 30.0% of private industry compensation, so a salary line understates what a billing employee costs.
- The 2024 CAQH Index prices one manual claim status inquiry at $13.80 in provider labor, against $3.64 electronic.
- KFF found HealthCare.gov insurers denied 19% of in-network claims in 2024, and consumers appealed fewer than 1%.
A fee is only comparable to a payroll line when both are divided by the same collected dollars.Two numbers, one denominator, or the decision is guesswork
Most in-house versus outsourcing decisions get made on one line item: the salary of the person who runs claims, against a percentage of collections. Both numbers are real and both are incomplete. What follows is a way to build the missing parts of each.
Why the two numbers are not comparable
A percentage fee is charged on collections. A salary is paid whether or not a claim is paid. One number scales with the money that arrives, the other does not, which means a comparison between them only becomes meaningful once both are converted into cost per collected dollar.
The salary line covers one person’s wages. A billing company’s fee covers a team, software, clearinghouse connectivity, payer enrollment work and the labor of chasing denials. That gap is what outsourced medical billing services are priced against.
Every figure below is attributed to its source, and the worked example is labeled as an illustration with its assumptions stated. Where no public benchmark exists, the article gives the method instead of quoting a number.
The full cost model of in-house billing
Build the in-house number from seven lines. Each has something to measure and an anchor you can open.
| Cost line | What to measure | Sourced anchor |
|---|---|---|
| Billing staff wages | wages for everyone who touches a claim | BLS: $50,250 median, medical records specialists, May 2024 |
| Benefits and payroll taxes | employer benefit cost above wages | BLS: benefits are 30.0% of private industry compensation, June 2026 |
| Practice management software | monthly license per provider | your invoice; CAQH excludes system costs |
| Clearinghouse and portal fees | per-claim or monthly charges | CMS: MACs supply free HIPAA-compliant software |
| Enrollment and credentialing hours | hours per payer application | CMS (2017 enrollment guidance): 30 to 35% of Medicare applications hit delays, typically 30 to 45 days when incomplete |
| Turnover and retraining | vacancy weeks, recruiting, time to productivity | BLS: 14,200 openings a year, many from replacement |
| Denial rework | denied claims per month times minutes per follow-up | 2024 CAQH Index: $13.80 per manual claim status inquiry |
| Physician time on coding questions | clinician minutes per week on billing questions | Sinsky et al., Annals of Internal Medicine, 2016: 49.2% of the office day |
Two lines go missing most often. Denial rework hides inside the same payroll line as clean-claim work, so it reads as free. Physician time never appears in a billing budget.
What the published benchmarks actually cover
The 2024 CAQH Index is the strongest public source for the labor cost of individual billing transactions, and it is narrow on purpose. CAQH counts the labor time required to conduct a transaction, excludes system costs, and excludes the time spent gathering information and following up afterward. Its average across the transactions it tracks is $7.93 per manual transaction for a medical provider, against $3.39 electronic.
| Transaction (medical provider) | Manual | Electronic |
|---|---|---|
| Eligibility and benefit verification | $8.57 | $2.00 |
| Prior authorization | $12.88 | $5.38 |
| Claim submission | $6.33 | $3.05 |
| Claim status inquiry | $13.80 | $3.64 |
Use these as labor unit costs. Add software, clearinghouse and portal fees on top, then label the total as your cost of billing.
Denial rework, the line that stays invisible
KFF’s analysis of federal transparency data found that HealthCare.gov insurers denied 19% of in-network claims in 2024, with denial rates across insurers running from 3% to 36%. Consumers appealed fewer than 1% of those denials, and insurers upheld 66% of the internal appeals they received. A practice cannot assume patients will challenge a denial, so the work lands on staff.
A denial is not a single event. It is a claim status inquiry, a corrected claim, sometimes a records request, then a redetermination. Each step consumes minutes that would otherwise go to the next claim.
Billing vendors publish cost-per-denied-claim figures that feed a sales model. Those are not benchmarks, and none will match your payer mix or your staff wage. Measure your own: denied claims per month, times minutes per follow-up, times your loaded staff cost per minute.
The physician minutes already inside the cost
Sinsky and colleagues reported in Annals of Internal Medicine in 2016 that physicians spent 49.2% of the office day on EHR and desk work and 27.0% on direct clinical face time. For every hour of face time, nearly two hours went to computer and desk work inside the clinic day, with another one to two hours after hours.
Billing questions travel inside that load, and they arrive as coding questions. A modifier, a documentation gap, a code pair a payer edits: each one pulls a clinician out of a room. Take 97153 as an example. If the note does not support the units billed, someone has to ask the clinician who wrote it, and the answer costs money even when it takes two minutes.
The AMA’s physician survey on prior authorization adds a comparable figure: 45 prior authorizations per physician per week, about 14 hours of physician and staff time, with 35% of physicians employing staff dedicated to that work.
To price it, count the clinician minutes per week that go to billing and coding questions, then multiply by your own physician cost per minute. The cost being measured is the visit that did not happen.
The comparison method that holds up
One metric settles the argument: cost per collected dollar. It forces every hidden line onto one side or the other, and it refuses to let a percentage fee hide behind a bigger collections base.
Use net collections for the same twelve months on both sides. Different revenue periods make the answer meaningless.
Wages, benefits, software, clearinghouse and portal fees, manager time spent on billing, enrollment hours, recruiting and training, and denial follow-up labor.
The percentage fee, per-claim charges, implementation and migration fees, and the staff time that stays in your workflow.
Compare cents per dollar collected. A percentage against a salary is not a comparison.
Move the denial rate, the wage and the collection rate one at a time. If a small move flips the answer, the decision is not yet a decision.
- The quote states the fee basis: charged claims, paid claims or collections.
- Denial and appeal work is named, with turnaround expectations in writing.
- Payer enrollment and revalidation responsibility is assigned to one side.
- Reporting shows denial reasons and days in A/R by payer, not one collection percentage.
- The contract says who pays clearinghouse, portal and statement fees, and who owns your data.
Assumptions: one billing specialist at $22.00 an hour for 2,080 hours; the BLS benefits ratio of 30.0%; $6,000 a year for software and clearinghouse fees; 1,500 claims a month; a 19% denial rate; one claim status inquiry per denied claim at $13.80 of provider labor (2024 CAQH Index). Wages of $45,760 load to $65,371, and with fees the practice sits at $71,371, or 3.0 cents per dollar collected on $2,400,000. Denial follow-up adds 285 inquiries a month, $47,196 a year, moving the in-house total to $118,567, or 4.9 cents. A 4% fee on the same collections is $96,000.
The benefits of outsourcing medical billing are real only when that arithmetic comes out that way for your practice. Run both sides on one denominator and you will know.
Cost of medical billing questions
There is no single national figure, and any vendor quoting one is quoting a sales model. The closest public unit costs are labor costs per transaction in the 2024 CAQH Index: $3.05 to submit a claim electronically, $6.33 manually, and $13.80 for one manual claim status inquiry. Add your own software, clearinghouse and denial follow-up costs.
It depends on the denominator. On $2,400,000 of collections, 4% is $96,000. One biller at $22.00 an hour for 2,080 hours costs $45,760 in wages, and $65,371 once benefits are loaded at the BLS ratio. The comparison closes only when denial follow-up, software and clearinghouse fees join the in-house side and both totals divide by the same collections.
It is all-in billing cost divided by net collections for the same period. If a practice spends $118,567 to collect $2,400,000, the cost is about 4.9 cents per dollar. Expressing an in-house team and a billing company this way puts them on one scale.
Yes. BLS reports that benefits were 30.0% of total compensation for private industry workers in June 2026, so wages alone understate the cost of a billing employee by roughly a third. Use your own payroll records where you have them, because the BLS figure is a national average.
Multiply denied claims by the minutes staff spends on each follow-up, then by your loaded staff cost per minute. KFF found HealthCare.gov insurers denied 19% of in-network claims in 2024, with rates from 3% to 36% across insurers, so your own remittance data is the only reliable input. The 2024 CAQH Index prices a manual claim status inquiry at $13.80 in provider labor.
The bottom line
The percentage fee is not the cost of outsourcing, and the payroll line is not the cost of in-house billing. They become comparable only after every dollar is counted and both sides are divided by the same collected revenue. Run that arithmetic on your own invoices and remittances, because the only benchmark that matters is your practice.
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Our team builds the full cost model with you: payroll, benefits, software, clearinghouse fees, enrollment hours and denial rework, then runs the same denominator against a percentage fee. Meet the team.
Request a free billing cost reviewThis article sets out a general cost method for US medical practices and is not financial advice; your own invoices, payroll records and payer contracts are the authoritative inputs.
