What questions should I ask a medical billing company before signing?

What questions should you ask a medical billing company before you sign?

Ask the questions that map to clauses in the contract, not the ones a sales deck is built to answer. What separates vendors is what the medical billing contract says about the fee base, denial ownership, data, liability and exit. Ask each question below in writing and keep the written answer with the contract.

The reason to be this specific: most practices do not know what they signed last time. In our Luxen Practice Manager Survey 2026, 63% could not name their top three denial reasons, 44% could not name the fee basis in their current billing contract, 42% of practice managers said nobody owns denial follow-up full time, and 34% of practice managers replaced a biller in the past two years.

Fee questions for the medical billing services contract

1. What exactly is your percentage calculated on: all collections, insurance payments only, or net of refunds?
2. Do you take a fee on copays collected at our front desk, on aged AR you did not bill, or on incentive payments?
3. What costs sit outside the percentage: setup, clearinghouse, statements, credentialing, minimum monthly fee?
4. Will Medicare and other payers deposit into an account in our name, or into yours?

Denials and AR

5. Who works a denial, how many days after the remit, and what happens to it on day 30?
6. Who pays when a claim misses a timely filing limit because of your team?
7. Will you chase underpayments against our contracted rates, and how do you find them?

Compliance and data

8. Will you sign our business associate agreement before you touch patient data, and how fast do you report a breach?
9. Do you or your subcontractors handle PHI offshore, and are they bound by the same BAA?
10. Do you screen your staff against the OIG exclusion list, and how often?
11. Who identifies and refunds overpayments and credit balances?

Exit

12. What notice ends the contract, and is there an auto renewal or exit fee?
13. What do you charge on claims you submitted that pay after we leave?
14. In what format, and within how many days, do we get our data back?

If you are still deciding what kind of partner you need, our guide on how to choose a medical billing company for a small clinic covers shortlisting. This page assumes you have a finalist and a draft contract on the table.

What exactly is the fee calculated on?

The fee base matters more than the rate. A 4.5% fee on every dollar collected can cost more than a 5.5% fee on insurance payments only, as the worked example below shows. Vendors publish rates, rarely bases, which is why 44% could not name the fee basis in the survey above.

Which collections count toward the percentage?

Ask the vendor to list, in the medical billing services contract, every payment type the percentage applies to. The usual traps are copays and self-pay collected at your front desk, which the billing company did no work to collect; payments on aged AR that another biller submitted; lump sums such as MIPS adjustments or settlement payments; and refunds, where the practice returns money but the vendor keeps its fee. A fair base is insurance payments on claims the vendor submitted or reworked, net of refunds.

Is a percentage-of-collections fee allowed on Medicare claims?

It depends on who receives the money. Under 42 CFR 424.73(b)(3) and 424.80(b)(5), Medicare will pay a billing agent directly only if the agent’s compensation is not related in any way to the dollar amounts billed or collected and does not depend on actual collection. So ask whose name is on the account Medicare deposits into. If payments go to an account in the practice’s name, which you control and can redirect at any time, the agent payment rules are not triggered in the same way, but confirm the structure with your healthcare attorney. The OIG’s compliance guidance for third-party billing companies also notes that percentage arrangements may increase the risk of upcoding, so ask how the vendor audits its own coding.

What add-on fees should the contract list?

Get every fee in one schedule: setup, clearinghouse, patient statements, credentialing per provider, minimum monthly fees, and charges for reports or extra users.

Who owns denials, timely filing losses and aged AR?

The contract should name who works each denial, by when, and who absorbs a loss the vendor caused. In the billing reviews we run, 19% of denied claims were never reworked or appealed, and the top three denial reasons accounted for 58% of denied dollars in the average practice.

Ask the vendor how it would handle the causes that dominate most practices. In our claim audit, eligibility and coverage errors caused 24% of denials, coding and modifier errors caused 21%, and missing or invalid prior authorization caused 17%. Duplicate claim denials made up 9%, mostly from resubmitting instead of correcting. Timely filing caused 6% of denials, and only 4% of those were recovered.

Timely filing is where ownership matters most. Medicare requires claims within one calendar year of the date of service under 42 CFR 424.44, and commercial payers are often shorter. Ask for a clause that makes the vendor absorb the lost revenue, or waive its fee and credit the practice, when a claim misses a filing limit while it sat in the vendor’s queue.

Two more questions belong here. First, underpayments: in our audit, underpayments against contracted rates appeared on 7.8% of paid claims, and the average underpaid claim was short by $38. Ask whether the vendor loads your payer fee schedules and flags short pays. Second, aged AR: the median practice had $118,000 in AR older than 120 days when we started. Ask whether the vendor will work old AR, at what rate, and whether that rate is separate from the ongoing fee. See how we run denial management and AR recovery for what a working denial queue looks like.

What should a medical billing contract say about HIPAA, data and offshore staff?

It should include a signed business associate agreement that meets 45 CFR 164.504(e), a breach notice deadline, offshore disclosure and data return terms. A billing company that sees PHI is a business associate. The BAA must limit how it uses PHI, require safeguards, require it to report improper uses, bind its subcontractors to the same terms, and require return or destruction of PHI when the contract ends.

• Breach notice. Under 45 CFR 164.410, a business associate must notify the practice without unreasonable delay and no later than 60 calendar days after discovering a breach. Ask for a shorter contractual deadline, such as 5 business days.
• Offshore work. Ask which tasks, if any, are done outside the US, by whom, and whether those staff sign the same BAA terms.
• Exclusion screening. The OIG says anyone who hires an excluded person or entity may face civil monetary penalties. Ask the vendor to check the LEIE monthly for its staff.
• Overpayments. Under 42 CFR 401.305, identified overpayments must be reported and returned within 60 days, with the clock paused for a maximum of 180 days during a good faith investigation. The contract should say who finds credit balances and who prepares refunds.
• Insurance. Ask for errors and omissions and cyber coverage certificates.

Also confirm the technical basics. Medicare generally requires electronic claims under ASCA, sent in the X12 837 format, with payments reported on the X12 835 remittance. Ask whose name the clearinghouse and ERA and EFT enrollments sit under. They should be the practice’s, so you keep them when you leave.

How do you get out of a medical billing service agreement?

Look for no-cause termination on 30 to 90 days’ notice, no exit fee, a capped tail fee, and data returned in a usable format on a set deadline. The medical billing service agreement should answer four things.

1. Notice and renewal. Month to month or a short term, with no auto renewal into a new multi-year term.
2. Tail collections. If the vendor keeps a fee on claims it submitted that pay after termination, cap the period, for example 60 to 90 days.
3. Run-out work. Who works open denials and AR during the notice period, and at what fee.
4. Data return. Claims history, remits, AR aging, payer correspondence and credentials, delivered electronically within a fixed number of days, at no charge.

A switch also touches credentialing. In our billing reviews, credentialing lapses delayed payment for 1 in 12 providers added in the prior year, and a lapsed re-credentialing held payments for a median of 47 days. Ask the new vendor to confirm provider enrollments before cutover, or use a dedicated credentialing service to check them.

How much does the fee base change the price? A worked example

Take a practice with 3 providers collecting $90,000 a month, or $1,080,000 a year. Of that, $72,000 a month is insurance payments and $18,000 is patient payments, half collected at the front desk.

• Quote A: 4.5% of all collections. $90,000 x 4.5% = $4,050 a month, or $48,600 a year. Add a $1,500 setup fee and a $150 monthly clearinghouse fee ($1,800 a year), and year one costs $51,900, an effective 4.8% of collections.
• Quote B: 5.5% of insurance payments only, no add-ons. $72,000 x 5.5% = $3,960 a month, or $47,520 a year, an effective 4.4%.

The lower headline rate costs $4,380 more in year one. For comparison, in our billing reviews fully loaded in-house billing cost 7.9% of collections for practices under $2M, which is $85,320 a year for this practice.

The chart shows year-one cost at $85,320 in-house, $51,900 for Quote A and $47,520 for Quote B. Outsourcing typically runs 3% to 6% of collections. Whether it beats in-house depends on the fee base and on what the vendor recovers, not the rate alone. Our comparison of medical billing companies covers the vendor types behind these quotes.

How do you verify the answers with a medical billing RFP?

Treat the answers as claims to check. A one-week verification step catches most problems.

1. Send the questions as a medical billing RFP. Ask every finalist to answer the same list in writing, so the answers can be compared and attached to the contract.
2. Ask for a real, redacted monthly report. It should show denial rate by reason, days in AR, AR aging buckets and net collection rate.
3. Get two references in your specialty and size. Ask them how long denials sit and how exit terms worked for anyone who left.
4. Read the BAA and fee schedule before the master agreement. Those two documents hold most of the risk.
5. Check the vendor and its principals on the LEIE.
6. Ask for the onboarding plan with dates. Our median time from signed BAA to first claims worked was 9 business days, and first recovered payments arrived a median of 17 days after work began, so a plan measured in months deserves questions.

Then hold the vendor to measurable results. Across 38 client practices, first-pass denial rate fell from 14.2% to 6.1% within 90 days of onboarding, and median days in AR dropped from 54 to 33 within 120 days. Ask each finalist what it would commit to in writing. A free billing review gives you your own baseline numbers before you negotiate.

What mistakes do practices make when signing a billing contract?

• Comparing rates without bases. The worked example above shows a 1-point lower rate costing more.
• Accepting a report promise instead of a report. 52% of practices that switched billing vendors cited missing denial reporting as the main reason.
• Letting the vendor own the accounts. Clearinghouse, EFT and payer portal logins should stay in the practice’s name.
• Skipping the exit clause. A long term with an exit fee turns a bad fit into a multi-year cost.
• Not reviewing AR after signing. Practices that reviewed AR ageing monthly carried 12 fewer days in AR.

For how these contract terms fit the wider revenue cycle, from eligibility to payment posting, see our guide to revenue cycle management. For what a full scope of work should include, see full-service medical billing.

Which contract terms separate a safe medical billing contract from a risky one?

The same clause can protect the practice or the vendor. Use this table to mark up a draft contract before you sign.

Dental

Ask whether the vendor bills medical plans as well as dental plans, and how it handles narratives and X-rays. Dental practices wrote off a median $23,400 a year in restorative claims denied for missing narratives or X-rays, and medical cross-coding opportunities were missed in 64% of dental practices reviewed. Ask who attaches documentation before submission. Our dental practice case study shows the $86,000 recovered when those claims were reworked.

Physical therapy

Ask how the vendor checks units and Medicare modifiers before a claim leaves. In our claim audit, 8-minute rule unit errors appeared on 9% of therapy claims, and the KX modifier was missing on 21% of Medicare therapy claims past the threshold. Ask who tracks the annual therapy threshold per patient and who confirms plan of care certification is signed. See physical therapy billing for the full checklist.

Behavioral health

Ask whether the vendor verifies behavioral health carve-outs at intake and who handles credentialing for new clinicians. Claims sent to the medical plan instead of the behavioral health carve-out caused 12% of behavioral health denials, and new clinicians waited a median 96 days to go in-network with commercial payers. Ask how the vendor checks session time against 90834 and 90837 and telehealth place-of-service codes. More detail is on our therapist billing page.

Ambulance

Ask who obtains Physician Certification Statements and how mileage and origin and destination modifiers are checked. Physician Certification Statements were missing or unsigned on 18% of non-emergency transports, and ambulance agencies carried 37% of AR past 90 days. Ask for aged AR recovery terms in the contract. In our King-American Ambulance case study, days in AR went from 71 to 38.

Primary care

Ask how the vendor captures care management and same-day visits. Chronic care management time went uncaptured for 58% of eligible patients in the practices we reviewed, and problem-oriented visits billed with an annual wellness visit lacked modifier 25 on 12% of claims. Ask whether the fee applies to preventive visits with no cost share and who fields patient balance calls. See primary care billing for common gaps.