When you outsource billing, the vendor’s competence gets most of your attention — and the pricing model gets almost none, even though it quietly decides what you will pay every month for years and what the vendor is motivated to do with your claims. There are two dominant models, plus a couple of variants, and neither is universally cheaper. This post lays out how each works, the incentive trade-offs nobody puts in the proposal, and the simple math that tells you which side of the crossover your operation sits on.
How does percentage-of-collections pricing work?
You pay the vendor a fixed percentage of what they actually collect on your behalf. Typical industry ranges run about 4–10% of collections for general medical practices and roughly 3–8% for transportation-focused billing such as NEMT — with the exact rate driven by claim volume, average claim size, payer mix, and how much of the revenue cycle the vendor owns. These are industry ranges, not quotes; any specific rate depends on your numbers.
The model’s great virtue is alignment: the vendor earns nothing on a denied claim, so they are structurally motivated to submit clean claims and work denials. It also scales down gracefully — in a slow month you pay less — which makes it forgiving for startups and seasonal operations with unpredictable volume.
Two contract details matter more than the headline rate. First, insist the percentage applies to collections, not to billed charges — a percentage of billed charges makes you pay for claims that never turn into cash. Second, get in writing exactly what the percentage includes: denial appeals, payment posting, patient statements, and reporting are sometimes carved out as extras that quietly raise the effective rate.
How does hourly or dedicated-team pricing work?
Instead of a share of collections, you pay for people’s time — an hourly rate, or more commonly a flat monthly fee for a dedicated biller or team working your account. Your cost is now decoupled from your revenue: it stays the same whether collections spike or dip.
That predictability is the first advantage. The second is scope: a dedicated biller is a person, not a transaction processor, so the same seat can also handle eligibility verification, prior authorizations, AR follow-up calls, and reporting — work a percentage vendor either excludes or upcharges. The third is economics at scale, which the math below makes concrete.
The honest downsides: you pay the fee even in a weak month, the alignment incentive is weaker (the team is paid whether or not a given claim collects, so quality depends on management and reporting rather than on the fee structure), and you take on more oversight — a dedicated team is managed, not just measured.
What does the crossover math look like?
Illustrative example only — sample figures to show the method; substitute your own collections, quoted rate, and quoted team cost.
| Monthly collections | Percentage model at 6% | Dedicated biller at $3,500/mo (illustrative) |
|---|---|---|
| $30,000 | $1,800 | $3,500 |
| $60,000 | $3,600 | $3,500 |
| $100,000 | $6,000 | $3,500 |
| $150,000 | $9,000 | $3,500 |
In this example the crossover sits near $58,000 in monthly collections — below it, percentage is cheaper; above it, the dedicated team is, and the gap widens every month you grow. Your crossover will differ with the quoted rate and team cost, but the shape of the curve never changes: percentage fees grow with your revenue forever, while a team cost steps up only when you genuinely need more people. Growing operations that stay on percentage pricing past their crossover are, in effect, paying a success tax on their own growth.
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Get My Free AuditWhich model fits which situation?
- Choose percentage when: you are new or small, volume is variable or seasonal, you cannot yet predict collections, or you want the vendor carrying collection risk while you prove the operation. Our deep dive on percentage-based billing fees covers what the ranges include and where they hide costs.
- Choose hourly or dedicated when: collections are high and steady, the percentage line in your budget has crossed what a person costs, or you want the billing seat to also cover verification, authorizations, and AR calls as one role.
- Consider per-claim flat fees when: your claims are uniform and high-volume — common in NEMT, where per-trip pricing maps naturally onto the work.
- Hybrids exist too: a modest base fee plus a reduced percentage, splitting predictability and alignment. Reasonable, but price both halves against the pure models before agreeing.
One compliance note worth a call to your attorney: a few states have fee-splitting rules that can restrict percentage-based arrangements for certain provider types, and some payers discourage them. Most operations are unaffected, but it is a cheap question to ask before signing.
What should you ask under either model?
The pricing model matters less than what the price buys. Under either structure, get written answers on: what exactly is included (appeals, posting, statements, reporting); whether there are minimum monthly fees, setup fees, or termination fees; who owns your data and your payer logins when you leave; and what reporting you will see monthly. A low percentage with a high minimum, or a cheap team with everything billed as an extra, converges on the same expensive surprise. Our medical billing service page shows how we scope the work, and our pricing page is public so you can run both models against real numbers instead of a sales call.
Can you switch models later?
Yes — and planning for it is cheaper than negotiating it. Many operations rightly start on percentage pricing and outgrow it; the friction comes when the contract makes leaving expensive or the vendor holds the payer logins. Protect the future switch at signing: your data and credentials remain yours, notice periods are measured in weeks rather than quarters, and there is no termination fee tied to your collections. Then revisit the crossover math twice a year as volume grows. Vendors who offer both models — as we do — can move you from one to the other without a migration, which is worth asking about even if you never use it.
The honest bottom line
Neither model is a trick and neither is a bargain by nature. Percentage pricing buys alignment and forgiveness at low volume, and gets expensive with success. Dedicated pricing buys predictability and breadth, and demands enough volume to justify the seat. Price both against your last six months of collections, add the crossover point to the comparison sheet, and pick the model your next year of volume — not your last one — will make cheapest.
Frequently asked questions
Percentage-of-collections billing charges a share of what the vendor actually collects, so cost scales with revenue and suits lower or variable volume. Hourly or dedicated-team billing charges a flat rate regardless of collections and usually wins once volume is high and steady. Neither is universally cheaper; the crossover differs for every operation.
Percentage-of-collections rates commonly run about 4-10% of collections for general medical practices and roughly 3-8% for transportation-focused billing such as NEMT, with the exact rate driven by claim volume, average claim size, payer mix, and how much of the revenue cycle the vendor owns. These are industry ranges, not quotes.
Insist the percentage applies to collections, not billed charges, because a percentage of billed charges makes you pay for claims that never turn into cash. Also get in writing exactly what the rate includes, since denial appeals, payment posting, patient statements, and reporting are sometimes carved out as extras that raise the effective rate.
A dedicated team becomes cheaper once your monthly collections rise past the crossover point where a flat team cost undercuts the growing percentage fee. Above it, the gap widens every month you grow, and the same seat can also cover verification, authorizations, and AR calls. Run both models against your last six months of collections.
Yes, and planning for it at signing is cheaper than negotiating it later. Protect the switch by keeping your data and payer logins yours, setting notice periods in weeks rather than quarters, and avoiding termination fees tied to collections. Revisit the crossover math twice a year as volume grows.
