How Much Do Medical Billing Companies Charge? Percentage, Per-Claim and Flat-Fee Pricing Explained

If you are starting a medical billing company, or you are a practice owner comparing proposals, the first question is usually the same: what does billing cost? There is no single answer, but there are standard models and a straightforward way to calculate a price that works for both sides.

The common pricing models

Percentage of collections

This is the most common model for full-service billing. The billing company earns a percentage of what the practice actually collects, which aligns incentives: you are paid more when the practice is paid more. The trade-off is that you carry the risk of slow months and payer delays.

Per-claim pricing

A fixed fee per claim submitted can suit high-volume practices with simple claims, such as labs or some therapy practices. It is predictable for the client but does not reward you for chasing denials, so contracts often add fees for follow-up and appeals.

Flat monthly fees

Some small practices prefer a set monthly amount. Tie it to an expected range of claims or encounters, and include a clause to revisit the fee if volume changes.

What drives the percentage up or down

• Practice size: a practice collecting $150,000 a month can get a lower percentage than a solo therapist collecting $9,000, because the absolute fee is still large
• Specialty complexity: surgery, multi-specialty and DME billing take more expertise than routine office visits
• Payer mix: heavy Medicaid or many small commercial payers mean more follow-up
• Scope: eligibility checks, prior authorizations, patient calls and credentialing add work
• Front-end quality: a chaotic front desk creates denials you will spend hours fixing
• Who supplies the software: if you provide the billing platform and clearinghouse, your price must cover them

Worked example: pricing a solo therapist

A solo therapist sees 25 clients a week and collects about $9,500 a month.

If you need to earn $60 per hour to cover your costs and pay yourself:

12 × $60 = $720 per month

$720 ÷ $9,500 = about 7.6% of collections

You might quote 7.5% with a $400 monthly minimum, so a month with vacations or illness does not leave you working for almost nothing.

Worked example: pricing a larger practice

A four-provider family practice collects about $160,000 a month and needs about 80 hours of billing work.

At a blended $50 per hour, the cost-based fee is $4,000 a month, which is just 2.5%. Market rates for a practice like this might be 4–5%, so you have room to either win on price or deliver more value (monthly coding audits, eligibility checks, detailed reporting) at a market rate.

Defining "collections" in the contract

Disputes often come from vague definitions. Spell out:

• ☐ Which payments count (insurance and patient payments on claims you billed)
• ☐ Whether front-desk copays count
• ☐ How refunds and payer recoupments are handled
• ☐ Whether claims billed by the previous biller fall under a separate A/R recovery rate
• ☐ When your fee is invoiced (monthly, based on the prior month's deposits)
• ☐ Fees for work after the contract ends (run-out of open claims)

The Medicare payment flow question

Medicare's billing agent rules restrict how an agent that receives Medicare payments on a provider's behalf may be paid; when payment is made to the agent, compensation generally cannot be tied to amounts billed or collected. Billing companies that charge a percentage usually keep payer payments flowing into the provider's own bank account, under the provider's control, and invoice their fee separately. State Medicaid programmes may have similar rules. Have a healthcare attorney review your fee structure and payment flow.

Tip: Never have payer payments deposited into your billing company's account. Use read-only access to the practice's remittances and bill your fee as a separate invoice.

One-time and add-on fees

Sample proposal table

How practices should compare quotes

If you are on the practice side, the cheapest percentage is not always the cheapest service. Ask each company for:

• Their typical days in A/R and net collection rate for similar practices
• What exactly is included (patient calls? appeals? eligibility checks?)
• Who owns the data and how it is returned if you leave
• Proof of errors and omissions and cyber insurance
• A signed business associate agreement
• References from practices in your specialty

A billing company that collects 97% of what is owed at 7% will usually leave a practice with more money than one that collects 90% at 4%.

Run the comparison with real numbers

Imagine a practice with $100,000 in collectible monthly charges after contractual adjustments:

Company B costs more on paper but leaves the practice about $3,800 more every month. When you are the billing company, this is the most persuasive table you can put in a proposal, as long as your results are real and documented.

Raising your prices

Review pricing every year. If a client's scope has grown (more providers, more payers, new services) or their front end creates excessive rework, propose a revised percentage or added fees with 30 to 60 days' notice, as your contract allows. Back the request with data from your monthly reports.

Pricing is one decision in a much larger set. Starting a Medical Billing & Coding Business covers certification paths, HIPAA and business associate agreements, compliance with billing laws, clearinghouses and software, denial workflows, contracts, client acquisition and a 30/60/90-day launch plan, so your pricing sits on a business that can deliver.