Should I Outsource My Medical Billing or Keep It In-House?
By Brad Becker, CRCR, Regional Billing Manager at AMS Solutions. 13-page printable PDF, free.
There is no universal answer. Some practices run excellent internal billing departments; others spend years propping up an in-house model without the staffing depth or management it needs; and some outsource only to pick the wrong partner. This guide gives you a way to compare the two operating models honestly, on performance, visibility, expertise, continuity, scalability, cost and accountability, and a worksheet to put your own numbers to it.
What’s inside
- The seven things any billing model has to deliver, and why “salary vs. a percentage” is the wrong comparison
- The real cost of in-house billing: people, technology, management and continuity
- The one-person billing department problem, and what a durable internal operation needs
- When in-house billing works extremely well (and should be protected)
- What you are actually buying when you outsource, and the risks of a bad outsourced relationship
- The hybrid model: what a practice may keep and what an outside partner may handle
- A true-cost-of-in-house-billing worksheet and how to convert it to a comparable percentage
- Questions any outsourcing proposal should answer, and a five-question decision test
Who it’s for
Physician owners, practice administrators and office managers who are weighing a change in billing model, or who want to check that the current model is still the right one.
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The better question
Medical practices eventually run into a deceptively difficult question: should we keep billing in-house or outsource it? The better question is which operating model gives the practice the best combination of performance, visibility, expertise, continuity, scalability, cost and accountability. The first rule is not to compare an employee salary against a billing-company percentage and call the analysis complete. Compare the entire operating model on both sides.
The real cost of in-house billing
A salary is only the most visible expense. A durable internal billing operation also carries payroll taxes, benefits, PTO, recruiting, onboarding, training and overtime; practice-management tools, clearinghouse costs, coding resources, eligibility and payment tools; leadership time spent supervising performance and resolving issues; and backup coverage when people are sick, on leave, overwhelmed, terminated or resign. For context, the U.S. Bureau of Labor Statistics reported a May 2025 median annual wage of $47,120 for medical records specialists working in physician offices; actual billing compensation varies substantially by role, geography, specialty and responsibility. The point is not that an internal team is expensive. The point is that the cost should be measured honestly.
The one-person billing department problem
Small practices often rely on one highly capable employee to carry an enormous amount of revenue-cycle knowledge: charge entry, claim submission, rejections, denials, payment posting, A/R follow-up, patient statements, payer portals, credentialing issues, reports, payer workarounds and institutional knowledge. It can work beautifully until that person is unavailable. The AMA has identified reliance on one or two billing employees as a vulnerability for small practices because even short absences can interrupt revenue-cycle operations. If your billing depends heavily on one person, that risk belongs in the cost calculation. A durable in-house operation needs documented workflows another person can follow, backup coverage so PTO does not stop claims, performance metrics for A/R, denials, collections and claim lag, training and access to current payer and coding information, leadership that actively manages billing performance, and enough technology and staffing depth to scale with the practice.
When in-house billing works extremely well
There are real advantages to keeping billing internal: direct access between providers and the billing team, deep practice knowledge, direct control over staffing and priorities, and, for a sufficiently large or mature practice, competitive economics. If your internal operation is consistently producing strong collections, controlled A/R, good denial management, useful reporting and reliable coverage, protect it. Not every practice should outsource. The decision becomes more interesting when the internal operation is fragile, hard to staff, poorly measured, expensive to manage or no longer keeping pace with the practice.
What you are actually buying when you outsource
A strong outsourced billing company should provide more than a person submitting claims. You are buying an operating structure: a consistent outbound claim workflow with rejection monitoring, reliable ERA/EOB posting and reconciliation, denial ownership with appeals and root-cause analysis, structured payer follow-up and aged-balance management, patient statement workflows, reporting on performance and trends, and management with accountability and escalation. The structural advantages are built-in coverage, specialization, scalability and redundancy.
Outsourcing has risks too. A bad outsourced relationship can mean poor communication, weak account management, generic workflows, slow response, high internal turnover, inadequate offshore oversight, poor reporting, weak denial follow-up and contract terms that make leaving difficult. Outsourced should never mean out of sight: the AMA recommends that practices continue to monitor and manage third-party billing companies carefully, with clear contracts, transparent expectations, routine reporting and active engagement.
What about a hybrid model?
The choice does not have to be all or nothing. A practice can keep eligibility and authorizations, charge capture, front-office collections and an internal billing manager while an outside partner handles claim submission, payment posting, denials and appeals, and A/R or coding capacity.
What problem are you actually trying to solve?
Before changing models, name the problem: cost, turnover, aging A/R, accumulating denials, weak reporting, growth beyond current capacity, hiring, leadership bandwidth, expertise or continuity. If the problem is narrow, fix the narrow problem. If the problems are structural, a different operating model may solve more than another hire.
The true cost of in-house billing worksheet
The downloadable guide includes a worksheet for your actual annual numbers: people (salaries, manager allocation, payroll taxes, benefits, overtime, recruiting, training), technology (PM software, clearinghouse, coding, eligibility, patient-payment and reporting tools) and operations (equipment, management time, consulting and compliance support, temporary coverage). Do not forget turnover: a replacement hire creates recruiting, interview, training, temporary-coverage and productivity costs that rarely appear on the billing budget. Then convert the total to a comparable percentage: total annual billing operating cost divided by annual net collections. For example, $180,000 of internal billing cost against $3,000,000 of net collections is 6% of collections.
Cost is only half the equation. A cheaper model can still cost more if it produces slower collections, more denials, older A/R or unnecessary write-offs. If one option costs $120,000 and collects $3.5 million while another costs $150,000 and collects $3.7 million, the more expensive option leaves the practice with more revenue. Compare cost, performance and scope together.
Questions any outsourcing proposal should answer
What exactly is included? Who submits claims and works rejections? Who handles payment posting? Who owns denials and old A/R? Are coding or credentialing included? What reports will we receive? Who is our day-to-day account manager? What performance metrics are tracked? How is internal staff turnover handled? What happens when our volume grows? What is the implementation process? What happens if we eventually leave?
The five-question decision test
- Is our current billing performance actually good? Look at collections, A/R, denials, claim lag and reporting, not frustration alone.
- Do we have enough staffing redundancy? If your best biller quits tomorrow, what happens?
- What does the entire in-house operation actually cost? Include more than salary.
- Does leadership have the time and expertise to manage billing well? Practice-manager and physician-owner time are not free.
- What would outsourcing allow our internal team to stop doing? Value the time returned to patients, scheduling, authorizations and growth.
Sometimes the answer is “not yet”: the current team deserves one chance to correct performance, you need better data first, or a contract still has time to run. If you do decide to outsource, build the transition before giving notice. At AMS, our preferred transition model protects the two bookends of the revenue cycle first, outgoing claims and incoming payments, then works inward, so that on the agreed go-live date there is one accountable team.
Prefer the printable version with the worksheets and checklists? Use the form above. And if you would like a second set of eyes on your own numbers, AMS Solutions offers a no-obligation review of your A/R and recent billing performance: call 866-973-2221 or email info@ams-solutions.com.
This guide is for general operational and educational purposes. Payer rules, contracts, timely-filing limits and practice circumstances vary; results are not guaranteed.