Outsourced medical billing fees generally range from 4% to 10% of your collections. Some medical billing services, such as ours here at PMN, offer rates starting at 3%, with no setup fees or long-term contracts.

If you’re looking at the fees side by side, it becomes clear pretty quickly that in-house billing is cheaper. But only at first glance. A single in-house biller can cost practices over $70,000 a year once benefits and payroll are added. That’s even before software, training, or turnover are considered.

So, what’s the real cost of outsourcing medical billing? You can find it in the claims themselves, from the number of claims paid the first time and how long your money is left in accounts receivable, to what happens if your one in-house biller quits with a short notice period.

In this guide, we take a look at what the numbers actually show for a small or mid-sized practice making the decision between outsourced and in-house billing in 2026.

The Cost of Outsourcing Medical Billing: What It Includes

Some medical billing companies charge per claim instead of a percentage, while others charge a flat monthly fee based on staffing needs. If you’re considering outsourcing, asking what’s included is key to deciding whether it’s worth it for your practice, whichever model you’re quoted.

A rate that appears to be low, for example, may exclude denial appeals or credentialing support, services which you’ll then need to complete later on anyway.  

What Does In-House Medical Billing Really Cost?

The median annual wage for a medical records and billing specialist was $50,250 as of May 2024, according to the Bureau of Labor Statistics. And that salary is just the starting point.

Benefits and payroll expenses add roughly 43% on top of these wages. Combined, these figures mean hiring an in-house biller costs $72,000 a year before a single claim is even processed.

The costs don’t stop there for most practices: 

– Billing software and clearinghouse fees add a recurring monthly cost. 

– Coding certification and training are necessary every year, since CPT and ICD-10 codes change annually. 

– Turnover means recruiting and retraining a replacement, on top of the claims that aren’t resolved while you complete this process. 

These hidden expenses are a huge reason why practices often underestimate the real cost of keeping billing in-house.

The Cost Nobody Puts on the Timesheet: Physician Oversight Time

In our 25+ years of experience in medical billing, there’s one in-house billing cost that many of our current clients who previously used this model didn’t consider: the physician’s own time. The American Medical Association’s 2024 physician time-use data found doctors spend an average of 7.3 hours a week on administrative tasks such as prior authorization and insurance forms, on top of documentation and other indirect patient care.

Those 7.3 hours add up to well over 350 hours a year spent on work that isn’t seeing patients. Of course, some of that time is unavoidable under any billing model. But reviewing denied claims or tracking down a specific account is work a fully staffed billing team can handle instead.

The Real Cost Comparison: In-House vs Outsourced Billing

Let’s consider the real-life numbers rather than percentages. We compared an in-house biller against PMN’s 3% starting rate across three practice sizes, using the wage and benefits data above and typical staffing needs at each level:

*Figures reflect fully loaded biller wages and benefits only, calculated from BLS wage and Employer Costs for Employee Compensation data. They exclude software, training, and turnover costs, which raise the in-house total further.

The gap in collections is clear at $500,000, becoming smaller as practices grow. However, fee comparisons are only half of the picture. More than 41% of providers now report a denial rate above 10%, well past the 5% to 10% range HFMA considers acceptable. 

If you’re comparing in-house versus outsourced billing options, another area that’s often overlooked is the revenue that actually reaches your practice. This isn’t shown in most fee percentage or salary figures.

The average initial claim denial rate across US hospitals and physician practices climbed to 11.8% in 2024, according to Kodiak Solutions benchmarking data (reported through HFMA). Roughly one in nine claims comes back the first time, and each one needs to be caught and corrected before payment.

On the flip side, PMN’s first-pass claim acceptance rate is 99.98%, with a denial rate below 0.02%. 

Reworking a single denied claim can cost between $25 and $181, depending on how long it’s left and the complexity of resubmission. Some billing operations may appear to charge less for their services, but they’re likely to work out more expensive overall if a high percentage of your claims are denied. Comparing medical billing costs purely on percentage fees means you’ll miss this difference in uncollected revenue.

Why the Math Looks Different for California Practices

Along with claim denial rates, it’s also important to consider in-house billing salaries in your local area. For instance, in California, Glassdoor salary data shows that billing specialists earn around 12% more than the national average. The state’s payroll tax and workers’ compensation costs are also higher.

In-house billing salaries therefore tend to surpass the $72,000 national baseline. So, if you’re comparing quotes using generic, nationwide salary figures, you’re likely underestimating what an in-house biller costs your Orange County or Los Angeles practice specifically.

Two 2026 Costs Most Comparisons Miss

1. Faster Prior Authorization Deadlines Are Raising the Bar

Under CMS-0057-F, most payers must now respond to standard requests within seven calendar days and expedited requests within 72 hours. They must also give a specific reason for any denial, meaning payers, including Medicare Advantage plans, have less time to decide on prior authorization requests.

That’s good news for practices waiting on authorizations. But it also means denials and appeals now move on a tighter clock, affecting in-house billers who already juggle already stretched coding, collections, registration, and other duties. Dedicated billing teams will find it much easier to adjust to this shift.

2. The Data Security Risk 

Choosing in-house billing also means your practice must manage the security risk of storing and transmitting patient billing data on your own systems. 

Small practices accounted for 55% of the financial penalties the HHS Office for Civil Rights issued for HIPAA violations in a recent enforcement year. OCR settlements involving small practices have ranged from $25,000 to $350,000 per incident in 2024 and 2025 resolution agreements.

Most small practices don’t have a dedicated security staff member, part of why they’re overrepresented in that data. Outsourcing to a partner with established security infrastructure doesn’t eliminate the risk, but it moves a meaningful share of it away from a practice’s own systems and staff.

When Does Outsourcing Medical Billing Services Pay for Itself?

No single collections threshold works for every medical specialty, but a simple framework helps: compare the cost of one in-house biller to your practice against what PMN would charge at your current collections volume, starting at 3%.

For a practice collecting $600,000 a year, PMN’s starting rate works out to $18,000. A single in-house biller, once benefits alone are factored in, already costs roughly four times that before any other expenses are added.

This gap gets smaller as your collections grow. However, for most solo and small-group practices, in-house billing needs a close-to-flawless denial rate to compete with the cost of outsourcing to a specialized partner.

Should Your Practice Outsource Medical Billing?

Finding yourself spending more time chasing denials than seeing patients? Or maybe you’ve never calculated the cost of in-house billing beyond salaries. Either way, we’d recommend running the numbers properly before committing to either option.

The cost of outsourcing medical billing is easy to compare on paper, but the cost of getting it wrong in-house is harder to see until your practice has experienced it. You’ll see the real difference in claims that are paid the first time and physician hours returned to patient care.

Why Practices Switch to PMN

We hear the same frustrations from practices before they switch to PMN: claims get denied and nobody follows up, the billing company is hard to reach, reports on aging accounts arrive vague or slow, and at larger national billing companies, providers lose direct access to anyone who can explain their account.

Sunil Bhandarkar, MD, a client for more than eight years, put it this way: 

“Ray and Sunny are always available by phone and email and reply quickly, always the same day… My collections have increased every year while working with them.”

The accessibility described here is a structural part of our services. As a family-owned company, our clients work directly with the founders rather than a call center, with visibility into their own billing performance and aging accounts. 

PMN has helped healthcare providers manage medical billing and coding for more than 25 years, with a 99.98% first-pass acceptance rate and rates starting at just 3% of collections. Interested in finding out what outsourcing and revenue cycle management could look like for your practice? Book a call with our specialists, reach out here, or call (949) 215-5055.

FAQs

How much does it cost to outsource medical billing?

Most billing companies charge 4% to 10% of collections, though pricing models vary. Some charge per claim or a flat monthly fee instead of a percentage. PMN’s rates start at 3%, with no setup fees or long-term contracts. Always confirm what’s included, since denial appeals or patient statement processing sometimes cost extra.

Is outsourcing medical billing cheaper than hiring in-house staff?

Outsourcing medical billing is often cheaper than hiring in-house staff, particularly for smaller or solo practices. The cost of outsourcing medical billing typically comes in below the full cost of an in-house hire, which averages around $72,000 a year per biller once benefits, software, training, and turnover are counted.

What’s usually included in a medical billing outsourcing fee?

The services included in a medical billing outsourcing fee vary by company, so it’s worth asking directly before you sign. Denial management, appeals, patient statement processing, and reporting are sometimes bundled into the base rate and sometimes billed as add-ons. Rates that appear to be low upfront can end up costing more once those extras are factored in. 

How much does in-house medical billing really cost a small practice?

An in-house biller costs around $72,000 a year, which includes the median national $50,250 salary and an additional 43% for benefits and payroll costs. You’ll also need to factor in software, training, and the cost of turnover if that person ever leaves.