Percent of collections, flat fee or per claim: which billing fee model fits?

What does each fee model pay the billing company to do?

A fee model is an incentive. It tells the company what to spend its effort on, which is why two quotes with the same annual cost can behave very differently once the contract starts. The table sets out the logic of each model; it describes how the structure works, not how any given company prices.

Pure per-claim pricing pays for volume, so ask what the company earns on a claim that is denied and never paid. A flat fee pays the same whether your collections rise or fall, so it fits best when your claim mix is steady and you can write the scope tightly. A percentage fee is tied to your results, which is its strength and also the point the OIG has raised.

What do the rules say about percentage fees?

Two federal sources matter. The first is the Office of Inspector General's compliance guidance for third-party billing companies, which says in a footnote that the OIG has a longstanding concern that percentage billing arrangements may increase the risk of upcoding and similar abusive billing practices. The same guidance says the compensation for billing department coders and billing consultants should not provide any financial incentive to improperly upcode claims.

The second is the Medicare rule on agents. Under 42 CFR 424.73(b)(3), Medicare may pay an agent who furnishes billing and collection services to a provider only if all of these conditions are met:

• The agent receives the payment under an agency agreement with the provider.
• The agent's compensation is not related in any way to the dollar amounts billed or collected.
• The agent's compensation is not dependent upon the actual collection of payment.
• The agent acts under payment disposition instructions that the provider may modify or revoke at any time.
• The agent, in receiving the payment, acts only on behalf of the provider.

The regulation adds that payment to an agent will always be made in the name of the provider. Read together, the second and third conditions are why you should ask counsel how any percentage or per-claim fee is structured for your Medicare business. A practical safeguard is the one the switching guide recommends: keep Medicare deposits in a bank account in your own name. That is how we work: payers pay you directly into your own bank account, we then invoice our agreed percentage of what was collected, and we never receive payer money. Our pricing page has the range.

Pricing for Nucleus Align is on the pricing page. Every company, including us, should be asked in writing how its fee works for Medicare.

How do you compare quotes on equal terms?

Convert each quote to a total annual cost using your own last 12 months of claims and collections, then change the volume and the collections to see how each moves. The example uses made-up figures chosen only for the arithmetic: each quote costs $120,000 a year at today's volume. They are not market prices.

The last row is the useful one. With a flat or per-claim fee, extra collections from better work are yours to keep. With a percentage, the company shares in them, and in return its pay rises only when your cash does. Neither is wrong; the question is which behavior you want to pay for.

Run the same exercise against doing the work yourself. The Healthcare Financial Management Association defines cost to collect as total revenue cycle cost divided by total patient service cash collected, and its list of costs includes salaries and fringe benefits, vendors, outsourced arrangements, subscription fees, transaction fees and contingency fees, which it describes as fees tied to actual cash collected or recovered. The in-house versus outsourcing cost post walks through that comparison.

What should every quote spell out?

A cheap quote with a narrow scope is not cheap. Ask each company to answer these in writing so the quotes can be laid next to each other.

1. How is the fee base defined: payments received, payments posted, or charges billed? Does it include patient payments you collect yourself?
2. Are resubmissions, corrected claims, appeals and write-offs inside the fee?
3. Is there a minimum monthly charge, and what happens in a slow month?
4. What is charged for setup, clearinghouse use, patient statements, credentialing and other add-on work?
5. Is a fee charged on money collected from claims that were open before the start date?
6. Is a fee charged on payments that arrive after the contract ends? The exit post covers that clause.
7. Which reports will you receive, and how often?

Put the answers beside the contract terms in the contract checklist post before you sign.

Which model fits which practice?

• A growing group with messy A/R and many denials often prefers a model where the company's pay rises with collections, because the work to fix it is open-ended.
• A stable practice with predictable volume and a clean claim mix can price a tight scope as a flat fee and keep the upside of improvements.
• A practice with simple, high-volume claims can use a per-claim fee, if resubmissions and denials do not trigger new charges.
• A hybrid suits a practice that wants a predictable base and some alignment with collections.

These are tendencies from how the incentives work, not rules. Test whichever you favor with the volume changes in the example above, and with a bad month.

How Nucleus Align handles it

Our billing and credentialing fees are on the pricing page, not in this post. Whatever you choose, we send claims within 24 hours of charge entry and work denials within 48 hours, and we sign a Business Associate Agreement with every client. Book a call to walk through your last 12 months for a practice like family medicine and our medical billing service.