When healthcare practices consider outsourcing billing, one of the first questions they ask is how much do medical billing companies charge. This question is important because pricing models can vary significantly across providers.
How much do medical billing companies charge depends on how fees are structured, which services are included, and how much responsibility the billing company takes for collections. Without clarity on these factors, practices may face unexpected costs or misunderstand why revenue does not meet expectations. A clear understanding of billing pricing helps practices make informed decisions instead of reacting to financial surprises.
This article explains common medical billing cost structures, outlines which services are typically included, and clarifies which services may result in additional charges. It also explains how financial concepts such as the allowed amount in medical billing affect actual revenue received by healthcare practices. Each section focuses on a clear, practical understanding rather than technical language, making the information easy to follow even for readers without a billing background.
How Much Do Medical Billing Companies Charge on Average
Medical billing companies usually follow predictable pricing patterns across the industry, even though individual rates differ. Most practices encounter pricing that fits within a consistent range based on workload, complexity, and level of service provided. Understanding these averages helps practices set realistic expectations before reviewing proposals.
In most cases, practices pay between 4% and 10% of monthly collections when using percentage-based pricing. Smaller practices or those with complex billing requirements often fall toward the higher end of that range, while larger practices with stable claim volume and fewer denials typically qualify for lower percentages. These percentages reflect not only claim submission but also follow-up, denial resolution, and payment monitoring.
Some billing companies offer flat monthly pricing instead of collection-based fees. These fees usually range from $500 to $5,000 per month, depending on claim volume and service scope. Flat pricing can appeal to practices that prefer predictable expenses, though it requires careful review of service limits. Per-claim pricing exists but is less common and generally applies to low-volume or specialized use cases.
Common Pricing Models Used by Medical Billing Companies
Medical billing companies generally rely on three pricing models, each designed to match different practice needs and risk preferences. Choosing the right model depends on claim volume, revenue stability, and how much financial accountability the practice expects from its billing partner.
Percentage-Based Pricing
Percentage-based pricing means the billing company charges a percentage of collected revenue. This is the most widely used model because it aligns incentives between the billing company and the practice. When collections improve, both parties benefit, which encourages consistent follow-up and denial management.
However, percentage rates vary based on practice size and specialty. Smaller practices or specialties with frequent denials may pay higher percentages because billing requires more effort. This model works best when claim volume is steady and payer behavior is reasonably predictable, allowing collections to reflect billing performance accurately.
Flat Monthly Fee Pricing
Flat monthly pricing involves paying a fixed fee regardless of how much revenue is collected. This model provides cost stability and simplifies budgeting, which appeals to practices with consistent workflows and predictable claim volume.
Flat fees are often most effective for high-volume practices that generate steady claims each month. However, practices must confirm exactly what services are included, as some billing companies limit denial follow-up, appeals, or reporting under flat pricing agreements. Understanding these boundaries prevents gaps in service expectations.
Per-Claim Pricing
Per-claim pricing charges a set fee for each submitted claim, typically between $3 and $10 per claim. This model can work for practices with very low claim volume or specific short-term needs.
As volume increases, per-claim pricing becomes expensive and often excludes essential services such as denial management or payment posting. Because of these limitations, this model is less common for full-service billing arrangements.
Medical Billing Pricing Models Comparison
| Pricing Model | Typical Cost Range | Best For | Key Considerations |
| Percentage-Based | 4%–10% of collections | Small to mid-size practices | Costs vary with revenue |
| Flat Monthly Fee | $500–$5,000 per month | High-volume practices | Service limits must be clear |
| Per-Claim Pricing | $3–$10 per claim | Low-volume practices | Denials may cost extra |
What Services Are Included in Medical Billing Costs
Most medical billing companies include a standard set of services designed to manage the full billing lifecycle, from claim creation to payment reconciliation. These services form the foundation of routine billing operations and are typically covered under base pricing.
Included services usually begin with charge entry and claim submission. Billing teams review encounter documentation, apply appropriate codes, and submit claims to insurance payers. Accurate submission at this stage reduces errors and improves first-pass acceptance rates.
Payment posting follows claim processing. Insurance payments are recorded and reconciled against expected amounts so financial reports reflect actual revenue. Denial management is also a core service, where billing teams identify rejection reasons, correct issues, and resubmit claims when appropriate.
Most billing companies also manage patient billing, including statement generation and balance follow-ups. Standard reporting, such as aging summaries and collection reports, is commonly included to support financial oversight.
Services That May Cost Extra
Standard billing fees usually cover routine claim processing, posting, and follow-up. Some services fall outside day-to-day billing operations and are priced separately because they involve additional labor, specialized expertise, or defined project timelines.
Credentialing and provider enrollment are common examples. This work often occurs during onboarding or when a new provider joins a practice. Because it requires direct payer coordination and has a clear beginning and end, it is typically billed as a separate service.
Old accounts receivable recovery may also incur additional charges. Aged claims require deeper investigation, repeated payer contact, and manual follow-up beyond routine billing cycles. Many billing companies treat this work as a recovery project rather than ongoing billing.
Other add-on services may include coding audits, compliance reviews, or customized financial reporting. These tasks require specialized skills or additional time beyond standard reporting. In some cases, access to billing or practice management software is licensed separately. Clarifying these exclusions early helps practices plan budgets accurately.
Understanding the Allowed Amount in Medical Billing
Allowed amount in medical billing refers to the maximum amount an insurance payer agrees to reimburse for a specific service. This amount is defined by payer contracts rather than provider charges, which makes it a key factor in understanding real revenue.
In most cases, the allowed amount is lower than the billed amount. The difference between the two is written off as a contractual adjustment rather than collected from the payer. Understanding allowed amounts helps practices avoid confusion when payments are lower than charges.
This concept directly influences medical billing cost analysis, as collections should always be evaluated based on allowed amounts rather than billed totals.
Allowed Amount vs. Billed Amount
Allowed amount vs. billed amount is frequently misunderstood because practices often focus on what they charge rather than what contracts allow. The billed amount represents the provider’s listed charge for a service, while the allowed amount reflects what the insurance payer has agreed to pay under contract terms.
When the allowed amount is lower than the billed amount, the difference is not a financial loss but a contractual adjustment that was expected. Clear reporting helps practices focus on payments and adjustments instead of raw charge figures, which can otherwise distort financial performance analysis.
How to Calculate the Allowed Amount in Medical Billing
How to calculate the allowed amount in medical billing begins with payer contracts, which define reimbursement limits for each procedure. These limits vary by payer and service type, making contract knowledge essential.
After claim processing, the explanation of benefits shows the billed amount, allowed amount, contractual adjustments, and payment. The calculation follows a simple sequence: start with billed charges, apply contractual adjustments, subtract patient responsibility, and arrive at insurance payment. Billing companies track these values to ensure payments match contractual terms and identify discrepancies early.
Example: Billed vs. Allowed Amount
| Description | Amount |
| Billed Amount | $300 |
| Allowed Amount | $180 |
| Contractual Adjustment | $120 |
| Insurance Payment | $150 |
| Patient Responsibility | $30 |
This example shows how allowed amount in medical billing determines final revenue rather than the original charge.
How Medical Billing Cost Impacts Practice Profitability
Medical billing costs reflect more than fees paid to a billing company. It also reflects how effectively revenue is collected and protected. Lower fees may appear attractive, but weak follow-up or inconsistent denial management can reduce collections significantly.
High-quality billing improves cash flow, shortens payment cycles, and limits write-offs. Practices should evaluate billing partners using metrics such as clean claim rates, denial rates, and days in accounts receivable rather than focusing on pricing alone.
Factors That Influence Medical Billing Company Pricing
Several factors influence how much medical billing companies charge. Practice size plays a role because higher claim volume reduces per-claim effort. Specialty complexity also matters, as certain services require deeper billing expertise.
Insurance mix affects workload, since government payers often require more follow-up than commercial insurers. Reporting requirements and compliance obligations also influence pricing. Each practice’s operational profile ultimately shapes billing costs.
How to Choose the Right Medical Billing Company
Choosing a billing partner involves more than comparing percentages. Practices should confirm which services are included, how denials are managed, and how performance is measured. Clear contracts and transparent reporting reduce misunderstandings over time.
Regular communication, defined accountability, and clear exit terms matter more than low fees. Practices should also confirm data ownership before signing agreements to protect long-term operational control.
Conclusion
Choosing a billing partner is about more than comparing fees. It requires understanding how pricing connects to performance and long-term revenue.
Understanding how much do medical billing companies charge helps practices make informed outsourcing decisions without relying on surface-level pricing alone. Clear service scope, consistent follow-up, and transparent reporting are just as important as cost. This approach is reflected in how Precision Hub manages medical billing, using structured workflows and clear reporting that make concepts like allowed amount in medical billing easier to track in real terms. When pricing and performance stay aligned, billing becomes a source of stability rather than uncertainty.
