Searching for a medical billing company returns dozens of options, all claiming high collection rates, low denial rates, and seamless integration with every EHR. The problem is not finding options. The problem is knowing which claims to trust and which questions to ask before signing a contract.

Most practices evaluate billing companies on price and personality. The sales call goes well, the percentage seems reasonable, and the practice signs. Six months later, AR is aging, denials are piling up, and the practice cannot tell whether the billing company is underperforming or whether the problems were there all along.

This guide covers what to actually evaluate, what metrics matter, and what the contract should say.

The metrics that matter

Before comparing companies, the practice should understand the metrics that define billing performance. These are the numbers to ask about during evaluation and to monitor after signing.

Net collection rate. This measures how much the practice collects relative to what it is owed after contractual adjustments. A well-run billing operation should produce a net collection rate above 95 percent. If a billing company cannot tell you their average client’s net collection rate, that is a problem.

Clean claim rate. This is the percentage of claims that are accepted by the payer on the first submission without rejection or denial. Industry benchmarks put this above 95 percent. A low clean claim rate means the billing company is submitting claims with errors — wrong codes, missing information, eligibility issues — and then spending time fixing what should have been right the first time.

Days in accounts receivable (AR). This measures how long it takes, on average, to collect payment after a claim is submitted. Lower is better. Most well-run billing operations keep average days in AR below 35 to 40 days. If a company’s clients average 50 or 60 days, the follow-up process is slow.

Denial rate. This is the percentage of claims denied by payers. Some denials are unavoidable, but a billing company should keep the overall denial rate below 5 percent and should be able to show how they track and resolve denial patterns.

First-pass resolution rate. This measures the percentage of claims that are paid on the first submission. A strong billing company achieves 90 percent or higher. This metric captures both coding accuracy and the quality of the eligibility and authorization workflow.

Pricing models and what they mean

Percentage of collections. The most common model. The billing company takes a percentage of what it collects, typically 4 to 10 percent depending on volume and specialty. This aligns incentives: the company earns more when the practice collects more. But it also means the practice should verify that the company is pursuing all collectible revenue, not just the easy claims.

Flat monthly fee. Some companies charge a fixed monthly amount regardless of collections. This provides predictable costs but removes the incentive alignment. If collections drop, the billing company still gets paid the same amount.

Per-claim fee. The practice pays a set amount per claim submitted, typically $4 to $10 per claim. This model favors high-volume practices with relatively simple claims. It can become expensive for practices with complex claims that require multiple follow-ups.

Hybrid models. Some companies combine a small base fee with a lower percentage of collections, or charge different rates for different services (claim submission, denial management, credentialing). Read the full fee schedule before signing.

Whichever model the company uses, ask what is included and what costs extra. Common add-ons that may not be covered in the base rate: credentialing, prior authorizations, patient statement mailing, and payment plan management.

What to ask about their process

The metrics tell you what the company has achieved. The process questions tell you whether those results are repeatable and whether the company will work well with your practice.

How do you handle denials? A billing company that resubmits denied claims without analyzing the root cause is not solving the problem. Ask whether they track denial reasons by category, whether they report patterns back to the practice, and how quickly they work a denied claim after it comes back.

What does your reporting look like? Ask to see a sample report. The practice should receive at minimum: monthly collections, denial rates by category, AR aging breakdown, and claim volume. If the company’s reports are hard to read or do not break down performance by payer, the practice will not be able to evaluate whether the relationship is working.

Who is my point of contact? Some billing companies assign a dedicated account manager. Others route the practice through a call center or ticketing system. The practice should know who to call when there is a billing question, and how quickly that person will respond.

How do you handle coding? Some billing companies employ certified coders who review and assign codes. Others expect the practice to submit encounters already coded. If the practice relies on the billing company for coding, ask about coder qualifications and how coding accuracy is monitored.

What EHR systems do you work with? The billing company should have direct experience with the practice’s EHR. If they do not, ask how they plan to receive encounter data and how long the setup will take. Integration problems are one of the most common sources of friction in the first 90 days. For context on how billing integrates with specific platforms, see EHR-Integrated Medical Billing Services.

Contract terms to watch

Contract length. Some companies require 12- to 24-month commitments. Others are month-to-month after an initial setup period. Longer contracts may come with lower rates, but they also lock the practice in if performance is poor.

Termination clause. Read the termination section carefully. The practice should be able to exit with 30 to 60 days notice. Some contracts include termination fees or require the practice to pay a percentage of projected future collections. Avoid contracts where exiting is financially punitive.

Data ownership and portability. The practice’s billing data belongs to the practice. The contract should state that the billing company will return all data — claim history, patient balances, AR reports, and payer correspondence — within a defined period after termination. If the contract is silent on data portability, add it.

Scope of services. The contract should clearly define what is included: claim submission, denial management, payment posting, patient statements, eligibility verification, prior authorizations, credentialing. If a service is not listed, assume it is not included.

Performance guarantees. Some companies include performance benchmarks in the contract — minimum collection rates, maximum days in AR, or maximum denial rates. These are useful, but only if the contract also defines what happens if the benchmarks are missed.

Red flags

  • No willingness to share performance metrics. If the company cannot or will not tell you their average net collection rate, clean claim rate, or days in AR across their client base, they either do not track them or do not want you to see them.
  • Guaranteed collection percentages in the sales pitch. No billing company can guarantee a specific collection rate without first understanding the practice’s payer mix, coding accuracy, documentation quality, and current denial patterns. A guarantee before the assessment is marketing, not a commitment.
  • Upfront setup fees that are disproportionately high. Some setup fees are reasonable — system configuration, data migration, initial AR review. But a setup fee that exceeds one or two months of expected billing fees should be scrutinized.
  • Lack of HIPAA compliance documentation. The billing company handles PHI. They should have a Business Associate Agreement ready and be able to explain their security practices. Reluctance to discuss HIPAA is a disqualifying red flag.
  • High client turnover. Ask how long their average client has been with them. If the company cannot answer or the average tenure is short, something is driving practices away.
  • No references in your specialty. A billing company that has never worked with your specialty may struggle with payer rules, coding nuances, and prior authorization requirements that are specific to your field.

After you sign

The first 90 days matter more than the sales pitch. During onboarding and the early months:

  • Establish a regular check-in cadence with the account manager. Weekly for the first month, then biweekly or monthly.
  • Review the first month’s reports line by line. Ask about any claim that was denied, any payment that was less than expected, and any AR that is aging past 30 days.
  • Compare the company’s reported metrics to what you see in your EHR or practice management system. The numbers should match.
  • Flag any scope gaps immediately. If something the practice expected to be handled is not being handled, address it before it becomes a pattern.

The goal is not to micromanage the billing company. The goal is to verify, in the first 90 days, that the company delivers what it promised. After that, the check-ins can be less frequent and the reports become the primary monitoring tool.

How Neobill can help

Neobill’s free audit is designed to give practices a clear picture of their current billing performance before they make any decisions about outsourcing or switching providers. The audit reviews denial rates, AR aging, collection trends, and payer-specific patterns — the same metrics a practice should use to evaluate any billing company, including Neobill.