If you run a healthcare practice, you’ve probably asked yourself, “Should I outsource medical billing?” You’re not alone. The complexities of billing can feel overwhelming and, frankly, a major time drain that pulls you away from patient care. It’s no surprise that so many providers are turning to outsourcing as a solution for their billing workload. But is it the right decision for your practice? This guide will help you weigh the options and figure out if partnering with a billing specialist is the key to reclaiming your time and focus.
Why Should You Outsource Medical Billing?
While each practice will undoubtedly see benefits unique to its operating circumstances and needs, some of the biggest benefits will be seen across most providers. Here’s a look at the most common and prominent benefits nearly every practice can appreciate.
Focus on Patients, Not Paperwork
Without a doubt, one of the biggest benefits of partnering with an outsourced billing provider is the amount of time you can potentially save by outsourcing your medical billing workload. When healthcare providers try to manage billing in-house, the process can be exhaustive, requiring them to balance patient care with tedious administrative tasks.
Outsourcing frees up your in-house team to focus on their core duties. Your front desk team won’t have to juggle billing and appointment booking, and your patient care team won’t need to mix exam room time with
Minimize Costly Errors with Expert Support
Outsourcing your medical billing also gives you access to an army of professionals who specialize in just that. At AMS Solutions, we take pride in being able to deliver our team’s accuracy, up-to-date billing regulations knowledge, and speed, to practices that need help effectively managing their administrative work. This all adds up to fewer errors, quicker payments, and overall smoother daily operations.
Increase Revenue and Cut Overhead Costs
Another critical point of medical billing outsourcing, and whether or not it’s the right choice for you, is the cost-effectiveness of outsourcing versus keeping the work in-house. Hiring an in-house billing team will, at the very least, require screening candidates, allocating salaries, paying for benefits, conducting onboarding, supplemental or ongoing training as needed, and core infrastructure costs. For small or even medium-sized practices, this can lead to a substantial investment.
In contrast, outsourcing can eliminate virtually all of these challenges or costs for your practice. Your billing team comes already screened, trained, and ready to handle your office’s billing needs. This cuts your overhead down by a considerable margin, makes your costs more predictable, and allows you to shift the cost out of payroll and into a monthly service expense.
Gain Access to Advanced Technology like AI
Partnering with a medical billing company gives your practice access to technology and tools you might not be able to afford on your own. Top-tier billing services use sophisticated software, including artificial intelligence, to streamline their processes. AI can manage routine tasks like data entry, medical coding, and claim submissions with incredible accuracy, which frees up human experts to handle more complex issues. This tech-driven approach significantly reduces the chance of human error, leading to fewer claim denials and a healthier revenue cycle for your practice. It’s a way to level the playing field, giving you the same operational advantages as larger healthcare systems.
Reclaim Valuable Office Space
Here’s a benefit you might not have considered: outsourcing your billing can free up physical space in your office. An in-house billing department requires desks, computers, filing cabinets, and secure storage for sensitive documents. When you move these operations off-site, you reclaim that square footage. This new space can be repurposed for revenue-generating activities. You could add another exam room, expand your waiting area for better patient comfort, or even bring in new diagnostic equipment. It’s a simple change that can directly contribute to your practice’s growth and profitability by allowing you to serve more patients more effectively.
The State of Medical Billing Today
The world of medical billing is more complex than ever, and it’s constantly changing. For practice managers and physicians, staying on top of shifting regulations, intricate coding systems, and payer-specific rules is a monumental task. This complexity is a major reason why the conversation around outsourcing has become so prominent. The industry is seeing significant growth as more practices recognize the challenges of keeping billing in-house. Understanding the current landscape—from market trends to the root causes of claim denials—is the first step in figuring out if an outsourced solution is the right move for your financial health.
Market Growth and Trends
If you’re considering outsourcing, you’re in good company. The global market for outsourced medical billing was valued at nearly $12 billion in 2021 and is projected to grow by over 11% each year through 2030. This isn’t just a fleeting trend; it’s a fundamental shift in how medical practices approach their administrative operations. The growth reflects a widespread recognition that specialized expertise is required to manage the revenue cycle effectively. As healthcare becomes more intricate, practices are choosing to delegate these financial complexities to dedicated partners so they can focus their resources on what truly matters: patient care.
The Challenge of Coding Complexity
One of the biggest drivers of billing errors is the sheer complexity of medical coding. The transition to the ICD-10 coding system dramatically increased the number of codes, making accurate billing a much more difficult task. A single mistake—a transposed digit or a mismatched code—can lead to a denied claim, delaying payment and creating more administrative work. Keeping an in-house team trained on the latest coding updates and payer requirements is a continuous and costly effort. Professional billing companies, on the other hand, employ certified coders whose entire job is to stay current and ensure every claim is coded correctly from the start.
A Look at Industry-Wide Claim Denial Rates
Claim denials are a major drain on a practice’s revenue and resources. Industry-wide, it’s estimated that around 30% of all medical claims are denied each year. That represents a significant amount of lost income and time spent on appeals and resubmissions. This is where the expertise of an outsourced team really shines. A well-run billing service can drastically reduce that number. By ensuring claims are clean—meaning they are accurate and complete—before submission, outsourcing partners can often cut a practice’s denial rate down to between 5% and 10%. This improvement has a direct and immediate impact on your cash flow and overall profitability.
Understanding the Financials of Outsourcing
Once you see the operational benefits, the next logical question is about the cost. Making a smart financial decision requires looking beyond the price tag and understanding the different ways billing companies structure their fees. It’s also important to compare these costs to the true expense of managing billing in-house, which includes salaries, benefits, training, and technology. A clear understanding of the pricing models, potential hidden fees, and key financial metrics will help you evaluate whether outsourcing is a sound investment for your practice. The goal is to find a partner that provides a strong return by increasing your collections and reducing your overall costs.
Common Pricing Models Explained
Medical billing companies typically use a few different pricing structures, and knowing how they work is key to finding the right fit. There isn’t a single “best” model; it really depends on your practice’s size, specialty, and claim volume. The most common approaches include charging a percentage of the money they collect for you, a flat fee for each claim they process, or a subscription-based fee. Some may also offer a hybrid model that combines elements of different structures. Understanding these options will help you ask the right questions and compare proposals from potential partners on an apples-to-apples basis.
Percentage of Collections
This is one of the most common pricing models in the industry. With this structure, the billing company charges a percentage of the revenue they successfully collect on your behalf, typically ranging from 3% to 10%. The exact rate often depends on your specialty and average claim value. The main advantage here is that the billing company is directly motivated to maximize your collections—if you don’t get paid, they don’t get paid. This aligns their goals with yours and encourages them to be persistent in following up on denied or underpaid claims.
Flat Fee Per Claim
Another popular option is the flat-fee model, where you pay a fixed dollar amount for every claim submitted, regardless of its value. For example, a company might charge between $4 and $10 for a full-service claim submission. This model offers predictability, making it easier to budget your monthly expenses since you know exactly what you’ll be paying based on your patient volume. It can be a great option for practices with high-value claims, as the fee remains the same whether the claim is for $100 or $10,000. However, it’s important to ensure the service includes diligent follow-up on denials.
Hourly and Subscription Models
Less common but still available are hourly and subscription-based models. With an hourly rate, you pay for the actual time the billing staff spends working on your account, which might range from $20 to $35 per hour. A per-provider subscription model involves a fixed monthly fee for each physician or provider in your practice, often between $200 and $1,000. These models can work well in certain situations, but they can also be less predictable. The key is to have a clear understanding of the scope of work included to avoid unexpected costs.
From Fixed Salaries to Variable Costs
One of the most significant financial shifts when you outsource is converting the fixed costs of an in-house billing team into a variable operational expense. When you manage billing internally, you’re responsible for salaries, health insurance, retirement benefits, payroll taxes, and paid time off for your billing staff. These are costs you have to pay regardless of your collection rates. Outsourcing eliminates these fixed overhead expenses. Instead, you pay a service fee that is often directly tied to the revenue being collected, making your costs more flexible and scalable as your practice grows.
Uncovering Potential Hidden Fees
When evaluating a billing partner, it’s crucial to ask for a complete picture of their fees. While a company’s primary pricing model might seem straightforward, there can sometimes be additional costs that aren’t immediately obvious. Be sure to ask about potential hidden fees such as one-time setup charges, monthly software access fees, costs for generating reports, or extra charges for patient statement mailing. A transparent and trustworthy partner will be upfront about all potential costs. Getting a detailed fee schedule in writing ensures there are no surprises down the road and helps you accurately calculate your total investment.
Measuring Success with the Cost-to-Collect Metric
Simply choosing the billing service with the lowest price tag can be a mistake. A more effective way to measure the value of a potential partner is by looking at your “cost-to-collect.” This metric compares the total cost of your billing operations (whether it’s the salaries of your in-house team or the fees paid to an outsourced company) to the total amount of money you collect. A slightly more expensive service that dramatically increases your collection rate and reduces denials will provide a much better return on investment than a cheaper option that lets revenue slip through the cracks.
Setting Performance Expectations
Choosing to outsource your medical billing is the first step; the next is establishing a successful partnership. This requires setting clear, measurable performance expectations from the very beginning. You need to know what success looks like and how it will be tracked. A great billing partner will not only meet industry benchmarks but will also work with you to set specific goals for your practice. By defining key performance indicators (KPIs) and establishing a regular reporting schedule, you can ensure your partner is accountable and your revenue cycle is performing at its peak.
In-House vs. Outsourced Billing: A Data Comparison
The data often speaks for itself when comparing in-house and outsourced billing performance. One of the most important metrics is the “clean claim rate”—the percentage of claims accepted by payers on the first submission without any errors. Studies have shown that outsourced billing services achieve an average clean claim rate of 96.5%, compared to 94.5% for in-house teams. While a 2% difference might seem small, it translates into faster payments, significantly less rework for your staff, and a more consistent cash flow for your practice over the course of a year.
Key Performance Goals for Your Billing Partner
When you bring on a billing partner, you should have a clear idea of the results you expect. A reputable company should be able to meet or exceed key industry benchmarks. For example, you should look for a partner that aims for a clean claim rate of at least 95%. Another critical goal is the average number of days it takes to get paid, often referred to as “days in accounts receivable” or “days in A/R.” A strong performance target for this metric is typically between 30 and 45 days. These are the kinds of concrete goals you should discuss and agree upon before signing a contract.
Potential Downsides and Common Myths
It’s important to have a balanced perspective, and that means acknowledging the potential concerns and risks associated with outsourcing. Many practice owners worry about losing control over a critical part of their business or how an outside company will interact with their patients. There are also several common myths about outsourcing—particularly regarding cost and security—that can cause hesitation. By addressing these potential downsides and misconceptions head-on, you can make a more informed decision and learn how to mitigate risks by choosing the right partner.
Addressing the Risks of Outsourcing
Handing over your billing operations to a third party naturally comes with some risks, but they can be managed with the right approach. The two most common concerns are a perceived loss of direct control over the billing process and the potential impact on the patient experience. While these are valid points to consider, a professional and transparent billing partner will work to minimize these risks. They do this through clear communication, detailed reporting that gives you full visibility into your financials, and a patient-centric approach to handling billing inquiries.
Loss of Direct Control
The fear of losing control is a significant hurdle for many physicians. In fact, one survey found that 30% of doctors cited a lack of control as the biggest drawback to outsourcing. However, it’s helpful to reframe this from a “loss of control” to a “delegation of tasks.” You’re not giving up oversight; you’re entrusting the execution to specialists. A quality billing partner will provide you with regular, comprehensive reports and maintain open lines of communication, so you always have a clear view of your practice’s financial performance without being bogged down in the day-to-day administrative work.
The Patient Experience
Your relationship with your patients is paramount, so it’s natural to worry about how a third-party company will handle financial conversations. Some patients may prefer to discuss billing questions directly with your office staff whom they already know. However, a professional billing service is staffed with representatives trained to handle these sensitive conversations with empathy and professionalism. Often, they can resolve issues more efficiently, which can actually improve the patient experience. This also allows your in-office team to focus on clinical care, strengthening the provider-patient relationship where it matters most.
Debunking Common Outsourcing Myths
One of the most persistent myths about outsourcing medical billing is that it’s more expensive than keeping it in-house. When you factor in the total cost of an internal team—including salaries, benefits, training, and software—outsourcing is frequently the more cost-effective option. Another common misconception is that it’s less secure. In reality, reputable billing companies invest heavily in HIPAA-compliant technology and security protocols, often providing a higher level of data protection than a small practice can maintain on its own. Ultimately, a good partner costs less and collects more, delivering a strong return on investment.
How to Choose the Right Medical Billing Partner
Finding the right medical billing partner is a critical decision that can shape the financial future of your practice. It’s not just about offloading tasks; it’s about finding a team that functions as an extension of your own. The selection process should be thoughtful and thorough. It starts with an internal assessment of your practice’s unique needs and challenges. From there, you can begin vetting potential companies by asking the right questions about their experience, processes, and communication style to ensure you find a partner who is truly aligned with your goals.
Questions to Ask Your Practice First
Before you start interviewing billing companies, take some time to look inward. A clear understanding of your own situation will help you identify what you truly need in a partner. Ask yourself and your team some key questions: Is your staff feeling overwhelmed or stressed by billing tasks? Is your claim denial rate higher than you’d like? Are your days in A/R creeping up? Are you confident that you’re collecting every dollar you’ve earned? Answering these questions honestly will help you define your goals for outsourcing and create a scorecard for evaluating potential partners.
Vetting a Potential Billing Company
Once you know what you’re looking for, you can start the vetting process. This is your opportunity to dig deep and ensure a company has the expertise and processes to meet your needs. Beyond their pricing structure, you’ll want to inquire about their track record, their technology, and their approach to customer service. Key areas to focus on include their experience with your specific medical specialty and their commitment to transparent reporting and communication. A good partner will be happy to provide detailed answers and give you the confidence that you’re placing your revenue cycle in capable hands.
Specialty-Specific Experience
Medical billing is not a one-size-fits-all service. The coding and billing rules for a cardiology practice are vastly different from those for a dermatology clinic or a mental health provider. That’s why it’s essential to choose a partner with proven experience in your specific field. Don’t be afraid to ask for case studies or references from practices similar to yours. A company that understands the unique nuances of your specialty will be far more effective at maximizing your reimbursement and avoiding costly, specialty-specific billing errors. This is where a partner like AMS Solutions, with experience across a wide array of specialties, can be invaluable.
Transparent Reporting and Communication
To avoid that feeling of lost control, you need a partner who is committed to transparency. Before signing a contract, ask a potential billing company what kind of reports you will receive and how often you will get them. You should expect regular updates on key metrics like claim submission volume, clean claim rate, denial rate, and days in A/R. A great partner will not just send you data; they will help you understand it and identify trends. Clear, consistent communication is the foundation of a strong partnership and ensures you always have a pulse on your practice’s financial health.
Medical Billing Company vs. a Temp Agency
When facing a staffing shortage or a backlog of claims, some practices consider hiring temporary staff from an agency. While this can provide a short-term fix, it’s very different from engaging a dedicated medical billing company. A temp agency provides temporary labor, but a medical billing service provides a team of dedicated experts who specialize exclusively in revenue cycle management. These specialists bring deep industry knowledge, advanced technology, and established processes designed for long-term efficiency and financial improvement, making them a more strategic solution for the sustained health of your practice.
Building a Successful Long-Term Partnership
The relationship with your billing company should be a true partnership, built on trust and shared goals. Success starts with a thorough and collaborative onboarding process. Be prepared to share your practice’s goals, challenges, and expectations from the very beginning. A great partner will take the time to understand your unique workflow and develop a detailed plan for a smooth transition. By committing to open communication and working together from day one, you can build a successful, long-term relationship that supports your practice’s growth and allows you to focus on providing excellent patient care.
Why Practices Trust AMS for Medical Billing
AMS Solutions is renowned for delivering highly accurate, efficient, and reliable medical billing and collection services. Our robust technology, coupled with our team’s profound expertise, ensures your practice remains compliant while also increasing your revenue. We also stay up-to-date on all billing regulations and industry best practices, so that you don’t have to and so that your business can steer clear of violations and penalties like fines.
Ready to Simplify Your Billing & Collections?
So, should you outsource your medical billing? The benefits are clear: increased efficiency, access to expertise, cost savings, and more. AMS Solutions places as high of a value on your practice’s success as much as you do, providing superior service to help you focus on what truly matters, and giving your patients an unbeatable level of care. Reach out to AMS today for a free consultation, and allow us to design a customized solution to enhance your practice’s financial health while you concentrate on the rest of your practice.
Frequently Asked Questions
How can paying a billing service a percentage of my collections actually save my practice money? It seems counterintuitive, but it’s all about shifting your perspective from a fixed expense to a performance-based investment. When you have an in-house team, you pay salaries, benefits, and training costs regardless of how much revenue they collect. By partnering with a billing service, you convert that fixed overhead into a variable cost that’s directly tied to your success. A great partner will increase your collection rate and reduce denials so effectively that the additional revenue they bring in more than covers their fee, ultimately improving your bottom line.
I’m worried about losing visibility into my practice’s finances. How do I stay in the loop? This is a completely valid concern, but a good partnership is built on transparency, not secrecy. You shouldn’t feel like you’re handing over the keys and walking away blind. A quality billing partner will provide you with regular, easy-to-understand reports on all the key metrics that matter—like your clean claim rate, denial rate, and how quickly you’re getting paid. Think of them not as taking control, but as giving you a clearer, higher-level view of your financial health without you having to manage the day-to-day grind.
How will outsourcing affect my patients? I don’t want them to have a bad experience discussing their bills. Your patient relationships are everything, and a professional billing company understands that. Their representatives are trained to handle sensitive financial conversations with clarity and empathy. In many cases, this can actually improve the patient experience because your patients get quick, accurate answers from a dedicated expert. This also frees up your front-office staff to focus on scheduling and in-person care, ensuring the patient’s experience inside your practice remains positive and supportive.
My practice has a very specific specialty. How do I know a billing company can handle our unique coding needs? This is one of the most important questions you can ask during the vetting process. Medical billing isn’t a one-size-fits-all service, and expertise in your specific field is non-negotiable. A reputable company should be able to provide clear evidence of their experience with your specialty, whether it’s through case studies or references from similar practices. Don’t hesitate to ask them directly about their team’s familiarity with the specific codes and payer rules that are unique to your area of medicine.
What does the transition process look like? How much work is involved on my end to get started? A smooth transition is a sign of a great partner. The process should feel collaborative, not overwhelming. Initially, you’ll provide access to your current systems and share information about your practice’s specific procedures and challenges. A dedicated onboarding team will then guide you through every step, from system integration to establishing communication protocols. While it requires some initial involvement from you and your team, a good billing company does the heavy lifting to ensure the switch is seamless and causes minimal disruption to your daily operations.
Key Takeaways
- Shift your team’s focus from paperwork to patients: Outsourcing your billing frees up your staff to concentrate on core clinical duties and patient care. A specialized partner handles the complexities of the revenue cycle, leading to fewer errors and faster payments.
- Look beyond the price tag to find true value: The cheapest option isn’t always the most profitable. A better way to evaluate a billing service is by its impact on your “cost-to-collect”—a partner who significantly increases your collection rate offers a much stronger return on investment.
- Demand specialty experience and transparent reporting: A one-size-fits-all approach doesn’t work for medical billing. Vet partners for proven experience in your specific field and insist on regular, clear reports on key metrics to ensure you always have a pulse on your practice’s financial health.
