The Quick Answer
The big healthcare practices with more patients get a dedicated medical billing company with lower employee costs. You pay a fixed percentage and get a dedicated specialist for each task. Because you pay a percentage of the revenue earned, you will not have to worry about the cost of setup. Outsourcing medical billing to a third party can help you shoulder off your burden and give you long-term stability.
Your biller gives two weeks’ notice in the middle of February. Claims slow down, nobody touches the denial queue, and by the time a replacement is trained, a chunk of your AR has aged past 90 days. If you are managing a mid-size or small healthcare practice, a single resignation of an employee can have a negative effect on healthcare operations.
This is where a third-party medical billing plays a great role. This guide will draw a line between hiring in-house employees and outsourcing the medical billing to third-party services. We will also discuss some pros and cons and give you insight to decide what’s going to be better for you.
What In-House Medical Billing Really Involves
In-house medical billing means your own employees handle the revenue cycle from start to finish. On paper, that sounds like one job. In practice, it’s about nine distinct responsibilities:
1. Insurance Verification
Verifying insurance eligibility prior to patient visits.
2. Prior Authorizations
Submitting and aggressively chasing prior auths.
3. Medical Coding
Coding encounters correctly with appropriate modifiers.
4. Claim Submission
Entering charges and submitting initial claims clean.
5. Payment Posting
Posting payments from ERAs, EOBs, and patient deposits.
6. Denial Management
Working rejections, fixing errors, and filing appeals.
7. AR Follow-up
Relentless follow-up at 30, 60, 90, and 120+ days.
8. Patient Statements
Mailing patient bills and taking payment inquiries.
9. KPI Reporting
Pulling executive reports to verify cash flow status.
In a lot of small practices, one or two people cover all of that, often while also answering phones at the front desk. When they’re good and they’re present, it works. The weak spot is that your entire cash flow depends on their availability, their training and how much time they have left after the urgent stuff. Denial follow-up is almost always the first thing to slide on a busy week.
What Outsourced Medical Billing Covers
Outsourced medical billing means that a third-party medical billing business does some or all of that job for you. There are a lot of possibilities so knowing what you are comparing helps:
- Claims-only vendors: Submit claims and not much more. Denials and patient balances have a way of chasing you.
- Software Platforms: Automate aspects of the labour, but your crew does the work.
- Full-Service Medical Billing Businesses: Revenue cycle management outsourcing. These companies take care of the whole revenue cycle.
The billing team syncs with your current EHR or any practice management system that you are using. A medical billing team covers the full revenue cycle and gives you clear KPI’s. You will be reviewing the software, your patient numbers, and claims overview without requiring working on.
In-House vs Outsourced Medical Billing at a Glance
Here’s a quick medical billing services comparison before we get into the numbers:
| Feature / Metric | In-House Billing | Outsourced Billing |
|---|---|---|
| Cost structure | Fixed salaries, benefits and software | Percentage of collections, moves with revenue |
| Who does the work | One or two employees | A team with specialized roles |
| Coverage (PTO / Turnover) | Work stops or piles up | Continues without a gap |
| Denial follow-up | Depends on staff time | A core daily task |
| Scaling up | Hire, train and supervise staff | Capacity grows with volume |
| Control | Direct, day-to-day | Through reporting & account manager |
| Coding & payer rule updates | Up to your staff to keep current | Built into the vendor’s training |
| Key risk | A resignation stalls cash flow | A weak vendor lets claims slip |
Cost of In-House vs Outsourced Medical Billing
This is where most comparisons go wrong. People put a biller’s salary next to a vendor’s percentage and call it a day. A $50,000 biller is never a $50,000 cost.
The Fully Loaded Cost of One In-House Biller
The median pay for medical records specialists, the federal category that includes billers and coders, was $51,140 in May 2025. In physician offices specifically, the median was $47,120. Start there and add what it actually takes to keep that person seated and productive:
| Cost Item | Typical Annual Range |
|---|---|
| Base salary (physician office median) | $47,120 |
| Payroll taxes and benefits (25–30%) | $11,800 – $14,100 |
| PM software seat and clearinghouse fees | $2,000 – $5,000 |
| Training, coding updates and certification | $800 – $2,000 |
| Supervision time and desk overhead | $2,000 – $4,000 |
| Total for One Biller | ~$64,000 – $72,000 |
- The Costs Nobody Budgets For
The line items above assume your biller is working every day. They won’t be. Two or three weeks of PTO and sick days a year is normal, and the work doesn’t pause while they’re out. Turnover is worse: recruiting, a few weeks of slowed billing while someone new learns your payers, and claims that miss timely filing limits in the gap. Those losses never show up on payroll, but they show up in collections.
What Outsourcing Costs
The percentage model has one big advantage: the vendor only gets paid when you get paid. That keeps everyone focused on collected dollars, not claims submitted.
A Worked Example: Medical Billing Company vs In-House Biller
Comparing one in-house biller at ~$70,000/year with outsourced billing at 3% of collections:
| Metric | Practice A (Small) | Practice B (Mid-Size) |
|---|---|---|
| Monthly collections | $40,000 / mo | $80,000 / mo |
| In-house cost (1 biller / yr) | ~$70,000 | ~$70,000 |
| Outsourced cost at 3% (per yr) | $14,400 | $28,800 |
| Annual Difference (Savings) | ~$55,600 Saved | ~$41,200 Saved |
Interactive Savings Calculator
See your practice's direct cost comparison live
Estimated Annual Savings
Outsourcing saves your practice money while giving you a dedicated RCM team.
Pros and Cons Analysis
In-House Medical Billing
- Pros
- ProsDirect control over priorities and every claim
- Biller knows your providers, patients, and workflow
- Quick in-person answers to internal questions
- Processes stay fully under your roof
- Works well for large groups with a billing manager
- Cons
- Fixed cost whether collections rise or fall
- One sick day or resignation stalls cash flow
- Hard for one person to keep up with payer rule changes
- Denials and 90+ day AR often get worked last
- Hiring, training, and supervising falls on management
Outsourced Medical Billing
- Pros
- Cost tied to collections (vendor paid when you are)
- Full team covers every step, even during staff PTO
- Specialty coders and payer-rule knowledge built in
- Scales with new providers without hiring overhead
- Regular executive reporting on denials, AR, and revenue
- Cons
- Less hallway-level direct control
- A weak vendor can let denials and aged claims slip
- Onboarding takes 30–60 days of handover
- Pricing varies; some vendors lock you into long contracts
- Requires strict HIPAA compliance & BAA safeguards
How Each Model Performs on Denials and AR
MGMA data on first-submission denials put the rate at 8% for single-specialty groups, and in a 2024 poll, 60% of practice leaders said their denials were rising. The reasons they gave are the everyday kind: missing documentation, eligibility and ID errors, late filing, and modifier 25 mistakes.
None of those are exotic. They’re the problems that pile up when the person responsible is stretched thin. A denied claim that nobody works within a few weeks often becomes a claim nobody collects. That’s why denial follow-up is where in-house and outsourced teams tend to separate. For a billing company, working denials is the job. For a busy in-house biller, it’s the task that waits until Friday.
5 Core Billing KPIs You Should Track Monthly:
1. Clean Claim Rate
Share of claims paid on first submission
2. Denial Rate
Share of claims denied the first time
3. Days in AR
Average duration to receive payment
4. AR Over 90 Days
Money most at risk of non-collection
5. Net Collection Rate
Percent collected vs. total owed
When In-House Makes Sense vs. When Outsourcing Wins
- Keep Billing In-House If:
- You collect well above $2.5 million/year and run a full billing department
- You have a dedicated billing manager who tracks KPIs
- Your team has been stable for years with a low denial rate
- Outsource If:
- One or two people handle all your billing
- Your denial rate is above 5–8% or AR over 90 days keeps growing
- You're adding providers, locations, or a new specialty
- You are opening a new practice and can't afford setup delays
- The practice owner spends evenings managing billing questions
How to Choose a Medical Billing Company
Not all medical billing service providers are equal. Before you request medical billing quotes, use this 9-point checklist:
Pricing in Writing
Clear percentage, scope of fees, and exit terms.
Contract Terms
Ability to leave with reasonable notice without multi-year locks.
Specialty Experience
Certified coders experienced in your specific medical domain.
Reporting Access
Clear regular KPI walkthroughs and dashboard transparency.
Denial & AR Workflow
Speed of denial appeals and active pursuit of 120+ day claims.
HIPAA Safeguards
Formal Business Associate Agreement (BAA) signed prior to access.
EHR Compatibility
Works inside your existing EHR/PM system directly.
Transition Strategy
Seamless handover plan for existing AR balance.
Client References
Direct peer references from practices in your specialty.
Discover Where Revenue is Slipping in Your Practice
At Swift Billing Solutions, our team handles the full revenue cycle inside your existing EHR—from eligibility checks and prior auths to coding, claims, payment posting, denials, and AR recovery.
- Flat 3% of Collections
- Zero Setup Fees
- No Long-Term Contracts
Frequently Asked Questions
It is mostly cheaper for small or mid-size practices to outsource revenue management to third-party medical billing services. On the other hand, one in-house biller costs approximately $64,000 to 72,000 dollar. This is not the end but you have to keep in mind the extra costs such as taxes, software training etc. While 3% to 4% collection is the money that medical billing companies charge.
Not all medical billing companies work on the same fee schedule. Most of them charge a percentage of overall collections, such as 10% to 4%. It also depends on the speciality and number of invoices. Some service providers charge setup fees depending on the longevity o the contract while others charge per claim.
Outsourcing medical billing tasks to a third-party medical billing company saves you a lot of money. Not only that, outsourcing gives you access to the medical billing company who have medical billing specialists working in every speciality. You know that not every healthcare speciality is the same and it requires experience in coding and denial management.
You will never lose control of your billing side. You will have access to your EHR Software, your data and the policies like collections. Any reliable medical billing company will give you full access to the reporting dashboard where you will see your reimbursement cycle and number of claims due or paid.
Of course! Outsourcing is equally beneficial as it is for big hospitals. When you are outsourcing, you will get specialized support in medical billing from medical billing speciality experts.
Most transitions take almost 30 to 60 days but reliable medical billing can quickly sync with your operations. Claims should keep going out during the handover. You can also confirm the status when you are switching.
It should be, as long as the company follows HIPAA. Under federal rules, a billing company that handles patient information is a business associate and must sign a BAA with you. Ask about their access controls, staff training and how they secure data before you sign.
Swift Billing Solutions Team
Our team shares practical guidance on medical billing, coding, denial management, and revenue cycle operations. We write for physicians and practice managers who want to understand billing challenges, reduce avoidable errors, and keep payments moving.
