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Should You Pay a Flat Rate or Percentage for Medical Billing?

When I first started my medical billing company over a decade ago, one of the most common questions I got from new clients was: “Should I go with a flat-rate billing service or one that charges a percentage?”

Twelve years later, I still get that question—because the answer isn’t always straightforward. Both pricing models can be fair and effective, but the right choice depends heavily on your practice’s size, specialty, claim volume, and financial goals.

Let’s break down how each model works, the pros and cons of each, and which type of practice benefits most from flat-rate vs. percentage-based medical billing.

What Is a Percentage-Based Billing Model?

This is the most common pricing structure in the industry. With a percentage-based model, your billing service charges a set percentage of the revenue they collect for you—usually between 4% and 9% depending on your specialty, claim volume, and service complexity.

For example:

If your practice collects $100,000 in insurance reimbursements for the month and your billing company charges 6%, you’ll pay them $6,000 for their services.

This model is performance-driven. The more your billing company collects for you, the more they earn. That naturally aligns incentives, which can be a good thing—assuming your billing partner is experienced and efficient.

What Is a Flat-Rate Billing Model?

With a flat-rate model, you pay a consistent, predetermined fee—either monthly or per claim—regardless of how much is collected.

For example:

A small mental health practice might pay $2,500 per month, regardless of whether collections were $30,000 or $45,000. Or they might pay $5 per claim, regardless of reimbursement size.

Flat-rate billing can provide cost predictability, which some providers love. But it also removes the collection-based incentive that percentage-based models offer, which can become a problem if claims aren’t being followed up on diligently.

Pros and Cons of Percentage-Based Billing

Pros:

• Incentive-aligned: The billing company only gets paid when you do.

• Scalable: Costs adjust naturally as your collections grow or shrink.

• Great for startups or practices with inconsistent cash flow.

Cons:

• Can be more expensive long term, especially as your practice grows.

• Fees increase automatically even if your billing volume doesn’t require more effort.

• Not always transparent—some providers find themselves unclear on what’s included in the fee.

Pros and Cons of Flat-Rate Billing

Pros:

• Budget predictability: You know exactly what you’re paying each month.

• May save you money if your collections are high and steady.

• Easier to budget for administrative or grant-funded practices.

Cons:

• Less performance-driven: The billing partner gets paid regardless of results.

• Harder to scale: If your practice suddenly grows, a flat-rate provider may need to renegotiate.

• Can be risky for low-volume practices if the rate is based on inflated estimates.

Which Model Is Best for Your Practice?

Here’s how I generally guide my clients:

Go with a percentage-based model if…

• You’re a startup or solo provider just getting started.

• Your monthly collections vary or are still growing.

• You want your billing partner to be motivated to chase every dollar.

• You’re unsure how many claims you’ll process monthly.

Consider a flat-rate model if…

• You have a high, stable volume of claims every month.

• You want to lock in costs and plan your budget with precision.

• You have multiple funding sources and need consistent billing expenses.

• You already have strong systems in place and just need backend support.

A Hybrid Model May Be the Best of Both Worlds

Some billing companies (including mine) now offer hybrid pricing models—a small base monthly fee paired with a lower percentage on collections. This offers stability for the provider, while keeping the billing team motivated to perform.

If you’re unsure what will work best for your practice, I often recommend starting with a percentage model to test the relationship and volume. Once things are predictable, a flat-rate agreement may become more advantageous.

What’s Included in the Fee?

This is critical—not all billing fees include the same level of service.

Before you sign anything, make sure to ask whether your fee (flat or percentage) includes:

• Insurance claim submissions and follow-ups

• Denial management and appeals

• Patient billing and collections

• Payment posting and reporting

• Credentialing support (sometimes included, often not)

A low percentage or flat rate might sound great—until you realize you’re paying extra for things you assumed were included. Always request a detailed service breakdown before agreeing to a pricing structure.

Final Thoughts

There’s no one-size-fits-all answer when it comes to medical billing fees. What matters most is choosing a pricing model that aligns with your goals, your claim volume, and the type of support you need.

In my experience, newer practices or those with fluctuating revenue tend to benefit from percentage-based pricing. Larger, established practices often lean toward flat-rate models to reduce overhead over time.

The best approach? Get quotes from a few billing companies, compare the models side by side, and ask detailed questions about what’s included. When you find a transparent partner who fits your style and needs—you’ll know.

About the Author
My name is Amanda Anderson. I’m a Stanford University graduate with a Bachelor of Corporate Communications and the owner of a successful medical billing company in Connecticut. With 12 years of experience in revenue cycle management and billing compliance, I help providers get paid faster and more efficiently through modern billing strategies and smarter technology. I’m also a writer and editor for Medical Billing Service Review, where I share insights to help healthcare professionals navigate billing with confidence.

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