What independent practices get wrong when they hire a billing company

When an independent practice shops for a billing company, the first question is almost always the same: what percentage do you charge? It is the wrong place to start, and starting there is how practices end up paying less and collecting less at the same time.

The headline rate, the 4 or 5 or 7% of collections, is the least informative number in the entire conversation. It tells you what the billing company costs. It tells you nothing about what you will actually collect, which is the only number that reaches the practice's bottom line. A company at 4% that leaves money on the table through unworked denials is far more expensive than a company at 7% that collects what you are owed.

Here is what practices get wrong, and what to ask instead.

First, they compare percentages without comparing scope. A 4% quote and a 6% quote are not comparable until you know what each includes. Does the rate cover patient statements and collections? Denial management and appeals? Prior authorizations? Credentialing? Reporting? Often the lower quote is lower because half of those functions are carve-outs billed separately or are not performed at all. Get the scope in writing and compare like for like.

Second, they do not ask for the metrics that predict revenue. Two numbers tell you most of what you need to know about a billing operation: first-pass clean claim rate and net collection rate. Clean claim rate tells you how often claims go out correctly the first time, which drives how fast you get paid. Net collection rate tells you what share of collectible revenue the company actually captures after contractual adjustments. Ask for both, ask how they are calculated and ask for them by specialty if the company serves more than one. A vendor that cannot produce these numbers, or will not, is telling you something.

Third, they ignore days in accounts receivable and how aged claims get worked. The percentage-of-collections model has a built-in misalignment: the company earns on what it collects, which can quietly reward chasing the easy claims and letting the hard, aged ones sit. Ask how AR over 90 and 120 days is handled, who works it and what the trend looks like across their book of business. A clean claim rate can look fine while a growing pile of old claims slowly writes itself off.

Fourth, they overlook data ownership and the exit terms. Your billing data is your practice's asset. Before you sign, know who owns the data, how you get a full export if you leave, what format it arrives in and how long it takes. Practices that skip this discover the cost only when they try to switch and find their historical data effectively held hostage by a slow or incomplete offboarding. The time to negotiate the exit is before you sign the entrance.

Fifth, they treat all billing companies as interchangeable when specialty fit is decisive. Coding rules and payer behavior vary enormously by specialty. A company that excels at primary care may be mediocre at orthopedics, dermatology or behavioral health. Ask for references in your specialty specifically, not just references in general, and call them.

The market is also far more fragmented than most practices realize, which is both an opportunity and a hazard. There are thousands of billing companies operating in the United States. The only way to tell them apart is the diligence above: scope in writing, the two metrics that matter, the AR question, the data-ownership terms and specialty references you actually call.

None of this takes special expertise. It takes refusing to let the percentage be the headline. The practices that get billing right are not the ones that negotiated the lowest rate. They are the ones that treated the decision as hiring a revenue partner, asked what that partner actually delivers, and measured the relationship on net collections rather than on the number printed at the top of the contract.

Jim Edwardson is a practice-management consultant who advises independent medical practices on the operational core of running a practice — revenue cycle and accounts-receivable cleanup, credentialing, managed-care contracting and medical billing. A Board Certified Medical Practice Executive (CMPE) through MGMA since 1992, he brings more than 38 years in group practice management and healthcare administration across a range of specialties. He partners with GetPracticeHelp on editorial covering the operational and vendor-selection decisions independent practices face.