MEDIA
Why Healthcare Practices Outsource Revenue Cycle Management: The Financial and Operational Case Beyond Payroll
For many healthcare practices, the decision to keep billing in-house feels logical.
There is a billing employee or team in the office. Claims are being submitted. Payments are coming in. The practice has direct access to its staff. At first glance, maintaining billing internally may even appear less expensive than paying an outside revenue cycle management company.
But that comparison can be misleading.
The true cost of medical or dental billing is not simply the salary of the employee responsible for submitting claims. Billing is one component of a much larger revenue cycle that begins before the patient is seen and continues until every appropriate payer and patient balance has been resolved.
When practices evaluate whether billing belongs in-house or with a specialized revenue cycle management partner, the more useful question is not:
"How much does my biller cost?"
It is:
"What does it cost my practice to operate, manage and protect the entire process required to turn the services we provide into the revenue we are entitled to collect?"
That is a very different calculation.
Billing Has Become More Than Claim Submission
Revenue cycle management includes insurance verification, authorization and referral requirements, documentation, coding, charge capture, claim preparation, clearinghouse review, payer acceptance, payment posting, adjustment review, denial management, appeals, accounts receivable follow-up, patient responsibility and financial reporting.
A weakness at almost any point in that process can affect how much a practice ultimately collects.
The American Medical Association has described revenue cycle management as a critical business function for physician practices and has specifically warned that small practices often rely heavily on one or two people for billing, coding and insurance follow-up. When one of those employees is absent or leaves the organization, revenue-cycle work can slow or stop. (American Medical Association)
That creates a risk that is easy to underestimate when billing is viewed simply as an employee expense.
The Real Cost of In-House Billing Goes Far Beyond Salary
An internal billing department has direct labor costs, but practices also absorb payroll taxes, benefits, recruitment, onboarding, continuing education, training and employee turnover.
Then there is technology.
Practices may need practice-management software, clearinghouse services, eligibility tools, electronic remittance capabilities, payment processing technology, payer portals, coding resources and other systems necessary to keep the revenue cycle moving.
There is also management time.
Someone must supervise the billing function, review performance, investigate unusual changes in collections, respond to payer issues, coordinate with clinical staff, maintain workflows and ensure outstanding balances are actually being worked.
Every hour a physician, office manager or administrator spends troubleshooting the revenue cycle is an operational cost—even if it never appears on a line labeled "billing expense."
And then there is perhaps the most important cost of all:
Revenue that was earned but never collected.
A claim that is submitted but never followed up, a denial that misses an appeal deadline, an underpayment that is posted without review, an eligibility error, an unbilled service, an aging balance or an incorrect adjustment can quietly reduce revenue without appearing as an obvious billing expense.
That is why evaluating the cost of billing solely through payroll can give practice owners an incomplete picture.
An Internal Team Also Has to Keep Up With Constant Change
Healthcare reimbursement is not static.
Payer requirements change. Coding guidance changes. Prior authorization rules evolve. Coverage policies are updated. Documentation requirements vary. Technology changes. Contracts differ by payer.
Keeping billing aligned with payer and regulatory requirements requires continued attention.
The AMA has noted that physicians and practice staff spend significant time dealing with insurance eligibility, claim filing, payment reconciliation and other administrative processes—time that could otherwise support patient care and practice operations. (American Medical Association)
A specialized revenue cycle organization can spread that infrastructure across multiple professionals, workflows and technology systems rather than requiring one practice to build and maintain the entire capability internally.
That does not automatically mean outsourcing will outperform every internal billing department. A highly experienced, adequately staffed internal revenue cycle team can perform extremely well.
The distinction is capacity.
Does the practice actually have the staffing, expertise, technology, management structure and redundancy required to perform every part of the revenue cycle consistently?
Outsourcing Can Reduce the "Single Point of Failure" Problem
Consider a practice where one employee knows the payer portals, handles claims, works denials, posts payments and follows accounts receivable.
That employee may be excellent.
But what happens when that person takes vacation, becomes ill, resigns or suddenly has more work than one person can reasonably manage?
Claims do not stop aging because an employee is unavailable.
Appeal deadlines do not stop.
Payer follow-up does not stop.
Patient balances do not stop.
Revenue cycle management organizations generally operate with larger teams and defined workflows, allowing work to continue even when an individual employee is unavailable.
This type of operational continuity is one of the less visible benefits of outsourcing.
Outsourcing Can Also Change the Economics of Expertise
Hiring one biller does not necessarily give a practice expertise in every part of the revenue cycle.
A comprehensive operation may require knowledge of coding, payer requirements, clearinghouses, denial management, accounts receivable, payment posting, credentialing, reporting and compliance.
For smaller practices in particular, employing specialists in each area may not be financially practical.
Outsourcing can allow a practice to access broader revenue-cycle expertise without creating an entire department internally.
MGMA reported in a 2024 poll that 36% of responding medical practice leaders expected to outsource or automate some part of revenue cycle management in 2025, with billing, collections and medical coding among the most frequently mentioned functions. (MGMA)
But Outsourcing Is Not the Same as Giving Up Control
One common concern is that outsourcing billing means losing visibility into the practice.
It should not.
The AMA advises practices using third-party billing companies to maintain oversight, establish detailed expectations, review accounts receivable reports, monitor denial trends and regularly evaluate performance. (American Medical Association)
A strong outsourced relationship should actually increase financial visibility.
Practice leaders should know how quickly claims are being created, how quickly they are submitted, whether payers are accepting them, what percentage are being denied, which denials are recurring, how much A/R is aging and whether collection performance is moving in the right direction.
Outsourcing should remove unnecessary administrative work—not remove the practice owner's understanding of the business.
What Should a Practice Compare Before Deciding?
A meaningful in-house-versus-outsourced analysis should include more than payroll.
Practices should calculate their actual billing labor costs, employer expenses, software and clearinghouse expenses, training, recruitment and turnover costs, management time, technology, coverage during staff absences and the financial effect of unresolved denials or aging receivables.
They should then examine performance.
Are claims consistently accepted the first time?
Are denials being categorized, appealed and traced back to their root causes?
Are payer balances aging?
Are underpayments being identified?
Are payments and adjustments being reconciled?
Does leadership receive meaningful reporting?
Is revenue-cycle work interrupted when a particular employee is absent?
If the answers reveal gaps, comparing billing expenses alone is no longer enough.
The Goal Is Not Simply Cheaper Billing
Revenue cycle management should be evaluated according to the financial result it produces and the administrative burden required to produce it.
The cheapest billing arrangement can become very expensive if claims sit unresolved, employees spend hours correcting preventable problems, physicians become involved in routine billing issues, or revenue is quietly written off.
Conversely, paying for specialized revenue cycle support may make financial sense when the result is greater consistency, better visibility, stronger follow-up and less administrative pressure on the practice.
The decision ultimately depends on the size, complexity and capabilities of each organization.
But practices considering the question should compare the true cost of operating the revenue cycle, not simply the paycheck of the person submitting claims.
Because the purpose of billing is not to send claims.
It is to convert the care a practice provides into accurate, timely and complete reimbursement while allowing clinicians and staff to concentrate on running the practice and caring for patients.
Sources consulted: American Medical Association, A Physician's Guide to Effective Revenue Cycle Management; AMA, Keep a Close Watch on Your Private Practice's Third-Party Biller; AMA, Power-Up Your Private Practice's Revenue-Cycle Management; Medical Group Management Association revenue-cycle research and industry reporting.