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How to Choose a Medical Billing Company
Most billing companies lead with a percentage. The questions that decide whether outsourcing pays are elsewhere: how the company computes net collections, whose bank account the payers deposit into, who owns the data when the contract ends, and how much notice it takes to leave. This is the checklist Vector Medical Billing would want a practice to use on any billing company, including us.
98%Published NCR
24hClaim Submission
BAASigned with every client
AAPCCertified coders
AHIMACertified coders
E&OErrors and omissions insured
50 StatesRemote billing nationwide
Before you sign
What a billing company actually takes over
Everything between the finished encounter and the posted payment. Not the clinical decisions.
A billing company handles charge entry, coding review, eligibility checks, claim submission, payment posting, denial follow-up, and patient statements. It does not decide what was done for the patient. The OIG’s compliance guidance for third-party billing companies (63 FR 70138, 1998) expects the company to code from the provider’s documentation and to ask the provider when that documentation is unclear.
The fee is one line in the decision. A low percentage on a weak collection rate costs more than a higher percentage on a strong one. A contract with a long exit and no data handback can cost more than either. The pricing page shows what US billing companies charged in the Tebra 2026 survey.
Get these in writing
- The fee basis and exactly what it is calculated on
- The net collection rate formula and the months behind it
- A signed business associate agreement before any patient data moves
- The notice period and what is handed back when the contract ends
Twelve questions to ask before you sign
Each question has an answer you can check. A vague answer is the answer.
| Question | What a straight answer looks like |
|---|---|
| 1. What is the fee calculated on? | Net collections, per claim, or a flat monthly amount, stated in the agreement. Ask whether patient payments, refunds, and old A/R are in the base. New York practices should expect a flat or per-claim fee; here is why. |
| 2. Is there a setup fee or a monthly minimum? | Only 19% of billing companies in the Tebra 2026 survey charge no setup fee. If there is one, the agreement should say what work it pays for. |
| 3. How do you calculate your net collection rate? | Payments divided by charges minus contractual adjustments, over a period old enough for claims to settle. A rate quoted without the formula and the time window cannot be compared with anyone else’s. |
| 4. Whose account do payers deposit into? | The practice’s own account. Medicare does not allow a billing agent that receives the payment to be paid a fee tied to the amounts billed or collected (42 CFR 424.73(b)(3)). Deposits to the practice keep the cash in your control. |
| 5. Will you sign a BAA first? | Yes, before any patient data is shared. HIPAA requires a business associate agreement with a billing company (45 CFR 164.504(e)). |
| 6. Who codes our claims, and from what? | Certified coders, such as AAPC CPC or AHIMA CCS holders, coding from the provider’s note and querying the provider when it is unclear. Never “we can raise your codes.” |
| 7. Which system will you work in? | Ideally your own EHR or practice management system, so the claim history stays in a system you license. |
| 8. What reports do we get, and how often? | Monthly at a minimum: charges, payments, adjustments, A/R by age and payer, denials by reason code, and the net collection rate with its formula. |
| 9. Who works denials, and how fast? | A named process tracked by reason code, with a deadline inside the payer’s appeal window. The denial codes guide shows what each code needs. |
| 10. What happens to claims already in A/R? | Old A/R is usually priced as a separate engagement. Ask for the cut-off date and the price in writing. |
| 11. How much notice to leave? | Thirty days’ written notice is common. Auto-renewals and minimum terms should be visible on the first page, not in an exhibit. |
| 12. What do we get back when it ends? | Claims, payments, and patient balances in a readable export, payer correspondence, and portal logins transferred back. See switching billing companies. |
Red flags in a billing proposal
Any one of these is worth a second question. Two together are worth walking away.
A collection rate with no formula
A 98% or 99% figure means nothing until you know what was divided by what, and over which months. Ask for the formula and a de-identified report behind it.
Payments routed to the biller
If payers deposit into the billing company’s account, the company controls your cash, and a percentage fee on Medicare receipts runs into 42 CFR 424.73. Payments should go to the practice.
Promises to raise your codes
A billing company that promises more revenue by moving visits to higher levels is describing upcoding. More money should come from fewer denials and faster follow-up, not code inflation.
Data only in the vendor’s software
If the claim history lives only in the billing company’s system, leaving means rebuilding it. Ask what system holds your data and who holds the license.
Long lock-ins and auto-renewal
A 12-month minimum with a 90-day notice and automatic renewal keeps you paying while you try to leave. Thirty days’ notice is common in this market.
BAA “after onboarding”
Patient data cannot be shared with a billing company before a business associate agreement is signed. A company that offers to start first and paper it later is telling you how it treats compliance.
In-house biller or billing company?
The comparison is not one salary against one fee. It is the full cost of each against what each collects.
When in-house works
A practice with steady volume, one or two main payers, and a biller who has stayed for years often does well in-house. The practice keeps direct control and pays no percentage.
The Bureau of Labor Statistics median wage for medical records specialists, the group that includes billers and coders, was $50,250 in May 2024. That is before benefits, payroll tax, software, clearinghouse fees, and cover for vacations and turnover.
When a billing company works
Outsourcing tends to pay when denials are piling up, A/R over 90 days is growing, the practice bills many payers or specialties, or one person’s absence stops claims going out.
A billing company spreads coding, follow-up, and credentialing across a team. Compare its written fee with the full in-house cost and with the collections each would produce, using the same net collection rate formula.
Put a billing company through these questions
Send your monthly charges, top payers, and EHR name. We answer all twelve questions in writing, with an audit of your open A/R and a written rate.
Written
Monthly rate
98%
Published NCR
50
US States
BAA
Every Client
Choosing a billing company: questions
Short answers for practices comparing billing companies.
What should I look for in a medical billing company?
A written fee basis, a net collection rate with its formula, deposits into your own account, a signed BAA before any data moves, certified coders who code from documentation, monthly reports by payer and reason code, a short notice period, and a full data handback when the contract ends.
How much does a medical billing company charge?
In Tebra’s 2026 survey of 190 US billing companies, 63% charged 7.99% of collections or less, and 28% used a non-percentage model such as per claim or flat monthly. The rate depends on specialty, volume, payer mix, and how much of the cycle is handed over. New York practices pay a flat or per-claim fee.
Is a lower percentage always cheaper?
No. At 5% on $40,000 collected, the practice keeps $38,000. At 7% on $46,000 collected, it keeps $42,780. What the billing company collects matters more than its rate, which is why the collection rate formula matters.
Do medical billing companies need a license or certification?
There is no federal license for a medical billing company. Certification is individual: coders hold credentials such as the AAPC’s CPC or AHIMA’s CCS. Ask which credentials the people coding your claims hold and whether the company carries errors and omissions insurance.
Can a billing company charge a percentage of Medicare collections?
Outside New York, yes, when Medicare pays into the practice’s own account. Medicare’s restriction in 42 CFR 424.73(b)(3) applies to a billing agent that receives the payment. New York practices pay a flat or per-claim fee because of the state’s fee-splitting and Medicaid rules.
How long does it take to change billing companies?
Plan around the notice period in your current contract, often 30 days. Clearinghouse and remittance enrollments can take days to several weeks per payer, so they start as soon as the new agreement is signed.