The decision to outsource billing usually gets made on two numbers: a salary and a percentage of collections. Those two numbers do not answer the question. What answers it is a profile: how many claims arrive, who pays them, why they deny, how long a billing seat stays filled, and what the current process costs per dollar collected. Measure those five and the choice becomes arithmetic rather than preference.
What this covers
- Five diagnostics decide the question: claim volume, payer mix, denial composition, billing-staff turnover and the fully loaded cost of the current process.
- BLS puts the median annual wage for billing and posting clerks at $48,500 in May 2025. At the private-industry benefit share, that wage carries about $69,400 in employer cost.
- Payer mix changes the labor as much as the rates. Commercial PPO rates averaged 147 percent of FFS Medicare in 2024, and commercial plans are where prior authorization work concentrates.
- A denial rate quoted for a whole population is not your denial rate. Pull it by reason code and payer from your own remittance advice.
- In-house is the better answer when volume is high and repetitive, the team is stable, and the denials come from documentation or charge capture that a vendor cannot fix.
The cost question comes last, because it needs the other four answers to be honest first.A payer-mix problem and a volume problem produce different answers on the same spreadsheet.
Outsourcing solves specific problems. A billing company can absorb a payer-mix problem, a vacant seat and an aged backlog, because those are labor and infrastructure. It cannot repair a documentation problem or a charge-capture problem, because the claim it receives is the claim the practice created. The five questions below separate the problems that transfer from the ones that do not.
The five questions that decide this
A practice that cannot state its own numbers is choosing between two costs it has not measured. These five questions carry the decision, and each one has a number attached.
| Question | The number to pull | Where it lives |
|---|---|---|
| Claim volume | Claims submitted per month, and the lines each claim carries | Practice management system |
| Payer mix | Share of charges and payments by payer type | Charge and payment reports |
| Denial composition | Denial rate by reason code and payer, plus first-pass acceptance | Remittance advice and clearinghouse reports |
| Turnover | Weeks each billing seat sat empty over the last 24 months | Payroll and HR records |
| Cost of the current process | All-in billing cost divided by net collections | Invoices, payroll and bank deposits |
The order matters. Payer mix and denial composition determine how much labor the work needs. Volume determines whether that labor can be amortized across enough claims. Turnover determines whether it will be there next quarter. Only then does the cost comparison mean anything.
A practice that has already decided to move the work can read outsourced medical billing services as the alternative. The diagnostics still come first, because they decide what the arrangement has to cover.
A vendor can carry a vacant seat and a denial backlog. A documentation gap or a broken charge capture travels with the practice, because the claim the vendor receives is built upstream of the billing desk.
Question one: what claim volume has to amortize
An in-house billing function is mostly fixed cost. A software seat, a clearinghouse connection, an enrollment process and a plan for vacation and sick days cost the same whether the practice submits 400 claims a month or 4,000. Volume is what converts that fixed cost into a per-claim number.
The answerable version of the question is capacity. How many claims can one trained person keep current, including eligibility checks, scrubbing, submission, posting and denial follow-up? That figure moves with payer mix, coding complexity and the denial rate, so a number borrowed from another practice rarely survives contact with your own.
Claims per billing FTE is quoted widely on vendor pages, and those ranges come from companies selling the service. MGMA and HFMA publish their benchmarks through paid survey data sets rather than free public tables. Measure your own: claims per month divided by the hours your team spends on them.
- Claims submitted per month, with the average lines per claim.
- Payer count, and how many portals your team logs into each week.
- Denials per month, broken out by reason code.
- Biller hours taken from the timekeeping record rather than from memory.
- The weeks in the last two years when the work queue was not current.
Question two: what payer mix does to the labor
MedPAC compares Medicare’s fee schedule with private insurance every year. Its March 2026 report put preferred provider organization payment rates for clinician services at 147 percent of FFS Medicare rates in 2024, up from 140 percent in 2023. Medicaid sits on the other side of the range: a 2025 Health Affairs update put Medicaid physician fees at roughly 71 percent of Medicare fees in 2024.
The rate tells you what a clean claim is worth. It does not tell you what the claim costs to get paid, and payer mix moves both.
| Payer lane | Rate anchor | Where the labor lands |
|---|---|---|
| Commercial | PPO rates averaged 147 percent of FFS Medicare in 2024 | Prior authorization, eligibility changes and appeals on claims the plan does not pay first time |
| Medicare fee for service | Set by rulemaking, below commercial rates, less utilization management | Volume and clean-claim accuracy; Medicare pays clean claims within 30 days and owes interest on late payments |
| Medicaid | Fees around 71 percent of Medicare in 2024 | Eligibility churn, state policy variation and follow-up on lower-dollar claims |
MedPAC states the trade plainly: commercial insurers do not pay every claim submitted to them and impose prior authorization requirements, while FFS Medicare generally does not. A 2024 AMA survey cited in the same report found that physicians handling prior authorizations completed an average of 39 requests a week, about 13 hours of work.
Adding a Medicaid product lowers the rate on unchanged work and raises the follow-up attached to each claim. That is the most common way a practice crosses the line between one billing seat and two without hiring anyone.
Question three: read the composition of your denial rate
Published denial rates exist, and they are easy to misread. KFF’s analysis of CMS transparency data found that HealthCare.gov insurers denied 19 percent of in-network claims in 2024 and 37 percent of out-of-network claims, with in-network rates running from 3 percent to 36 percent across insurers. Administrative reasons accounted for 25 percent of reported denial reasons and medical necessity for 5 percent. Consumers appealed fewer than 1 percent of the denials, and insurers upheld 66 percent of the internal appeals.
Medicare Advantage produces a different pattern. KFF’s analysis of insurer-reported data found that plans fully or partially denied 4.1 million prior authorization requests in 2024, about 7.7 percent of the 53 million submitted. Only 11.5 percent of those denials were appealed, and 80.7 percent of the appeals were partially or fully overturned. CMS measures payment accuracy separately: the Medicare fee-for-service improper payment rate was 7.66 percent in fiscal year 2024, a figure built on documentation and coding problems rather than a payer’s refusal to pay.
Each number above describes a population. The KFF rates measure insurer decisions on marketplace claims, and the CMS rate measures Medicare’s own payment accuracy across a sample. Your denial rate depends on your specialty, payer mix and charge capture, and it is the only one that prices your rework.
- Denial rate by reason code, not one blended figure.
- First-pass acceptance rate on submitted claims.
- Denied dollars by payer, so a few large claims do not hide behind a low rate.
- Average days to work a denial to a resolution.
In the KFF data, administrative reasons outnumbered medical necessity five to one. Administrative denials come from process: eligibility, authorization, timely filing and data entry. Those are the denials a billing function can remove, which is the count that matters before deciding who does the work.
Question four: turnover measured as claim age
Billing staff are not expensive at the wage line and they are not cheap once they leave. BLS counted 404,060 billing and posting clerks nationally in May 2025, with a median annual wage of $48,500 and a mean of $51,070. Offices of physicians were the largest single employer of them, at 65,230.
The wage is the smaller half of the cost. BLS reported that private industry employers spent an average of $46.60 per hour worked in March 2026, $32.60 in wages and $14.01 in benefits, which made benefits 30.1 percent of total compensation. A $48,500 wage therefore carries roughly $69,400 in employer cost before software.
Turnover is where the number stops being academic. MGMA’s May 2026 Stat poll drew 303 responses: 28 percent of practice leaders said staff turnover was higher than the year before, and 69 percent said it was about the same or lower. Billing and revenue cycle departures were named among the pressure points, and MGMA notes the cash consequence directly: claims submission, denial follow-up and patient balance work age quickly when experienced billers or team leads leave. A practice that hands the queue to medical billing services is often buying coverage for a vacancy before it buys a lower rate.
The useful number is not the recruiting cost. It is the age of the account receivable during the weeks a seat sat empty, plus the denials that ran past an appeal window while nobody was working the queue. Ask payroll for the unfilled weeks over the last 24 months, then read days in A/R for those same months.
Question five: what the current process costs per collected dollar
This question comes last because it needs the other four answers to be honest. It also needs two totals built rather than looked up.
- Wages and payroll taxes for every person who touches a claim, including a share of the supervisor.
- Benefits at the practice’s own rate rather than a national average.
- Practice management, clearinghouse and statement costs, plus any per-portal fees.
- Enrollment and credentialing hours, which are billing preconditions rather than billing.
- Denial follow-up labor: denials per month times minutes per denial times loaded cost per minute.
- The practice manager’s time spent supervising the billing function.
Divide that total by net collections for the same 12 months. The result is a cost per collected dollar, and it is the only form in which a payroll line and a percentage fee can sit in the same sentence. Vendors describe the benefits of outsourcing medical billing in percentages and turnaround times. Those claims are worth testing against your own totals, on your own denominator.
Setting a salary next to a percentage of collections compares one line of the practice’s cost with the whole of the vendor’s price. Twelve months of net collections on both sides, or the exercise produces a preference dressed as an analysis.
When in-house is the better answer
Outsourcing is a decision about labor and infrastructure. It is the wrong answer when the problem is neither one.
- Volume is high, concentrated and repetitive. A single-specialty practice billing the same codes to the same two payers gives its own team repetition a vendor would have to rebuild.
- The team is stable and credentialed. A certified coder and a biller in place for years already hold the payer knowledge, the edit rules and the provider preferences.
- The fixed costs are already owned. Software, clearinghouse connectivity and a working enrollment process would be paid for twice in a transition year.
- The denials come from documentation or charge capture. A vendor works the claims it receives, and a claim built from an unsupported note denies for reasons no billing team controls.
- The practice wants patient financial conversations and the ledger in its own hands.
- The transition cost exceeds the yearly difference. Implementation and a term commitment can consume the first year of any saving.
Check the denial mix first. When medical necessity, missing documentation and code selection lead the list, the repair belongs in coding, documentation and charge capture. A billing vendor inherits those denials, and the practice pays a fee on the same lost dollars.
The order to run the decision in
Twelve months of net collections, the same period on both sides.
Claims per month, payer mix, denial reasons, first-pass acceptance and days in A/R by payer.
Wages, benefits, software, clearinghouse, enrollment hours, denial follow-up and supervision against the fee basis, per-claim charges and the hours that stay behind.
Move the wage, the denial rate and the vacancy weeks one at a time. If a small change flips the answer, the decision is not settled.
Outsourcing decision questions
Start with the operational profile, then the cost. Pull claims per month, payer mix by charges, denial rate by reason code, days in A/R by payer and the weeks each billing seat sat empty. Net collections for the same 12 months become the denominator. The cost comparison comes last, because a wage total and a vendor fee are only comparable once both divide by the same collected dollars.
It depends on the denominator, and the salary line is the smaller half of the in-house side. BLS put the median annual wage for billing and posting clerks at $48,500 in May 2025, and benefits were 30.1 percent of private-industry compensation in March 2026, so that wage carries roughly $69,400 in employer cost. Software, clearinghouse fees, enrollment hours and denial follow-up sit on top.
There is no audited public benchmark, and the pages that quote one are selling the service. Capacity moves with payer mix, coding complexity, the denial rate and how much manual portal work your payers require. Measure it internally instead: claims submitted per month divided by the hours your team actually spends on them, taken from the timekeeping record rather than from memory.
Yes, because it changes the rate and the labor attached to each claim. MedPAC reported that commercial PPO payment rates for clinician services averaged 147 percent of FFS Medicare rates in 2024, and commercial plans are where prior authorization work concentrates. A 2025 Health Affairs update put Medicaid fees near 71 percent of Medicare. A Medicaid-heavy or authorization-heavy mix needs more hours per collected dollar, which can put a practice past the point where one seat is enough.
None of the published figures is your rate. KFF’s 19 percent measures what HealthCare.gov insurers denied on in-network claims in 2024, and the CMS improper payment rate of 7.66 percent measures Medicare’s own payment accuracy across a sample of claims. Pull your own denial rate by reason code and payer. In the KFF data, administrative reasons outnumbered medical necessity five to one, and that split decides what a billing change can fix.
Keep it in-house when volume is high, repetitive and concentrated in a few payers, when the team is stable and credentialed, and when the practice already owns the software, clearinghouse and enrollment process. Keep it in-house when the leading denial reasons are medical necessity, documentation or code selection, because those are repaired upstream. A vendor cannot fix them, and a fee on the same lost dollars makes the loss larger.
The bottom line
The outsourcing question is a set of measurements rather than a matter of taste. Volume and payer mix decide how much labor the work needs, denial composition decides what that labor can recover, and turnover decides whether the seat will be filled when the next denial lands. Run the cost comparison last, on one denominator, and the answer usually stops being arguable.
Which of these five answers would change your decision?
Send us twelve months of charges and remittances with a payer mix report. We will build the operational profile, price the current process per collected dollar, and separate the denials that come from billing work from the ones that start upstream of it. Then the decision has numbers under it.
Request a free billing decision reviewThis article describes general billing and practice operations analysis rather than legal or financial advice, and wage, fee, denial and turnover figures vary by specialty, payer, state and year, so confirm them against your own records and the current source documents before you act.
