Key takeaways
- Repeat denials, growing aged A/R and billing that stalls when one person is out are signs your billing needs more support.
- In-house, outsourced and hybrid billing each have real trade-offs in control, cost and coverage.
- A billing partner that handles patient information is a HIPAA business associate and needs a written agreement before access begins.
- Your practice should keep ownership of its data, systems and payer accounts, and give the partner individual logins.
- Measure clean claim rate, denial rate, days in A/R and net collection rate before you switch, using standard definitions.
What does it mean to outsource medical billing?
Outsourcing medical billing means paying an outside company to handle some or all of your billing, such as claim submission, denial follow-up and accounts receivable (A/R) work. The CMS Medicare Program Integrity Manual calls it a billing agency: it is not enrolled in Medicare and bills under your name and billing number. The claims are still yours.
What are the signs in-house billing is struggling?
The clearest signs are denials that keep coming back for the same reasons, a growing share of A/R in the older aging buckets, and billing that stalls when one person is out or leaves. When several appear together, the cause is usually capacity or process, not effort.
- Repeat denials. The same eligibility, registration or coding denials return every month. Our denial prevention checklist covers ten frequent ones.
- Aging A/R. More balances sit past 90 or 120 days, and days in A/R keep rising.
- Missed follow-up. Unpaid claims wait for weeks, and some are written off after a deadline.
- One-person risk. Billing stalls during vacations, sick days or staff turnover.
- No clear numbers. No one knows last month's denial rate or days in A/R.
In-house, outsourced or hybrid: which model fits?
No model fits every practice. In-house billing gives the most direct control, outsourcing adds a team and specialized experience, and a hybrid keeps some tasks inside while a partner handles others. The right choice depends on your volume, payer mix, staff stability and how much day-to-day control you want.
| Model | How it works | Strengths | Trade-offs |
|---|---|---|---|
| In-house team | Your own employees bill in your systems. | Direct control, and billers close to your providers. | Fixed salary, training and software costs, and gaps when someone is out or leaves. |
| Outsourced partner | An outside company handles agreed tasks, often in your systems. | A team instead of one person, specialized experience and room to grow. | Less day-to-day control, an onboarding period, and quality that depends on the contract. |
| Hybrid | Your staff keep some tasks, such as front desk collections, and a partner takes others, such as aged A/R. | Control where you want it, capacity where you need it. | Hand-offs must be clear, or work falls between teams. |
What should you ask a billing partner before you sign?
Ask what the partner will do, which systems they will use, what they will report, who owns your data and payer accounts, how they protect patient information and how they charge. Then make sure every answer is written into the agreement, not only promised on a sales call.
Scope, systems access and reporting
List which tasks move and which stay with you, such as patient statements, coding questions and old A/R, and ask whether the partner works in your own EHR and clearinghouse. Give each partner user their own login, because the HIPAA Security Rule requires unique user identification in systems that hold electronic patient information. For Medicare enrollment work, the CMS Identity & Access system lets you approve a billing company as a surrogate, so its staff use their own accounts in PECOS, the Medicare enrollment system, instead of yours. Agree on which metrics you will see and how often, using the definitions below.
Data and payer accounts
Your practice should own its data, its clearinghouse and payer portal accounts, and the bank account payers deposit into. HIPAA requires a business associate contract to provide for returning or destroying patient information at termination, where feasible. Medicare pays a billing agent directly only if, among other conditions, the agent's pay is not related in any way to the amounts billed or collected. That means Medicare will not send your payments to a partner that is paid a percentage of collections.
HIPAA business associate agreement
HHS lists billing among the functions and activities that make a company a business associate when the work involves protected health information. Before a practice shares that information, HIPAA requires satisfactory assurances, documented in a written contract, that the business associate will appropriately safeguard it. HHS publishes sample business associate agreement provisions that you and your attorney can adapt.
Pricing models
Three models are common. Get every fee in writing, including setup and exit fees.
- Percentage of collections. Ties the partner's income to your collections. Ask which payments count toward the fee. In its 1998 compliance guidance for billing companies, the HHS Office of Inspector General noted a longstanding concern that percentage billing arrangements can raise the risk of upcoding, so ask how coding is checked.
- Flat fee. Predictable. Ask what happens when volume or scope changes.
- Per claim. Easy to check. Ask whether resubmissions and appeals are included.
Which billing metrics should you track?
Track four numbers: clean claim rate, denial rate, days in A/R and net collection rate. Measure each one before you change anything, use the same definitions every month, and ask any partner to report on those definitions, so before and after comparisons are fair.
Clean claim rate
Clean claim rate is the share of claims that pass your claim edits before submission with no manual intervention. The Healthcare Financial Management Association (HFMA) MAP Keys divide those claims by all claims accepted into your claims processing tool for billing.
Denial rate
Denial rate is the share of submitted claims that payers deny. HFMA guidance defines the initial denial rate as initially denied claims divided by total claims submitted, measured both by count and by dollars. A denied claim was received and processed by the payer, unlike a rejected claim.
Days in A/R
Days in A/R is the number of days of charges still waiting to be paid. The Medical Group Management Association (MGMA) data definitions divide total A/R by average daily adjusted charges, which are a year of fee-for-service charges, less contractual and other adjustments, divided by 365.
Net collection rate
Net collection rate shows how much you actually collected out of what you could expect to collect after contractual adjustments. MGMA calls it the adjusted fee-for-service collection percentage, or net collection percentage: net fee-for-service revenue divided by adjusted fee-for-service charges, times 100.
How do you switch billing without losing revenue?
Treat the switch as a project with a clear cutover date. The biggest risk is claims or follow-up falling between the old and new teams, so give every open claim and denial an owner, and keep a close eye on the first few weeks of claims.
- Measure your baseline. Record the four metrics, and pull an A/R aging report and a list of open denials.
- Sign before access. Sign the business associate agreement and service agreement before anyone sees patient information.
- Set up access. Create a login for each partner user, and add the billing company to the billing agency section of your Medicare enrollment (Section 8 of the CMS-855B or CMS-855I).
- Agree on the cutover. Decide who owns claims before and after the switch, and who works existing A/R. Medicare claims generally must be filed within one calendar year after the date of service, and other payers set their own limits.
- Review and compare. Check early claims together, then compare your metrics with the baseline after a few months.
Should you outsource? A practical checklist
Check these before you decide and before you sign:
- You know your clean claim rate, denial rate, days in A/R and net collection rate
- You have decided which tasks stay in-house and which move
- The scope is in writing, including what is excluded
- A business associate agreement is signed, and every partner user has their own login
- Your practice keeps control of its systems, payer accounts and bank account
- Reports and review dates are agreed
- Every fee is in writing, including what counts toward a percentage fee
- Exit terms cover data return, notice and the remaining A/R
How Masscare can help
Masscare supports primary care, urgent care and wound care practices across the full revenue cycle. You can start with part of it, such as eligibility verification or denial follow-up, and expand as needed.
We work inside the systems your practice already uses, and our team has experience with Athenahealth and Valant. We agree with you on the tasks and reporting before we start, and your practice keeps ownership of its data and payer accounts. Our support includes:
- Eligibility and benefits verification
- Charge capture, claim submission and claim follow-up
- Denial management and A/R follow-up
- Patient information shared with us only under an agreed engagement with your practice
Frequently asked questions
Is it cheaper to outsource medical billing?
It depends on your volume, payer mix and current costs. Compare the full cost of billing in-house, including salaries, benefits, training, software and revenue lost to denials and aged A/R, with the total a partner would charge under its pricing model. Run the comparison on your own numbers, not on averages.
Do we need a business associate agreement with a billing company?
Yes. HHS lists billing as a business associate activity, and HIPAA requires a covered entity to have a written contract with a business associate before sharing protected health information. The contract sets permitted uses, required safeguards, reporting of breaches and what happens to the information when the contract ends.
What is a good clean claim rate or denial rate?
There is no single target that fits every practice, because specialty, payer mix and how you count all change the result. Use standard definitions, such as those from HFMA, measure your own baseline, and track the trend every month. Ask any billing partner to report on the same definitions.
Can we outsource only part of our billing?
Yes. In a hybrid model, your staff keep some tasks, such as front desk collections or coding questions, and a partner takes others, such as denial follow-up and aged A/R. Write down who owns each task and how hand-offs work, so nothing falls between the two teams.
Who owns our data if we outsource billing?
Your practice should. Keep administrator control of your EHR, practice management system, clearinghouse, payer portals and bank account, and give the partner individual logins. HIPAA requires the business associate contract to provide for returning or destroying patient information when the contract ends, where feasible.
This page is general information, not legal, billing or financial advice. HIPAA, Medicare and payer rules change over time and apply differently to each practice, so check current guidance and talk with your compliance advisor or attorney before you sign a billing agreement. Sources last checked in October 2026.