The cost model
In-house
Plus the risks that don’t appear in a spreadsheet: turnover, vacation coverage, and single-person dependency.
Outsourced
Typically a percentage of collections, commonly quoted somewhere in the 4–9% range depending on specialty, volume, and scope. Verify what “collections” includes.
The crossover in this illustration sits somewhere around 1.5M in net collections, roughly two to three full-time clinicians in many specialties. Run it with your own numbers rather than adopting these.
Percentage pricing scales your cost with your success, for a service whose cost to serve does not scale proportionally. It is the right structure early, when you want variable cost, and a worse one at scale. Renegotiate the rate as volume grows — vendors expect it.
The tradeoffs
The denial prevention gap is the underrated one. Most denials originate in the front end — eligibility, authorization, registration. An in-house biller can walk to the front desk and change the workflow. An outsourced vendor reports the problem and waits for you to fix it. If your denial rate is driven by front-end failures, outsourcing the back end treats the symptom.
The hybrid
Frequently the best answer at mid-scale:- In-house: eligibility verification, prior authorization, charge entry, point-of-care collection — the prevention side
- Outsourced: denial management, appeals, AR follow-up, patient collections — the recovery side
Contract terms to demand from an RCM vendor
1
Define 'collections' precisely
Does the percentage apply to all cash received, or only to what the vendor collected? Does it include patient payments collected at your front desk? Copays? Payments on claims submitted before the engagement started?This single definition can swing the effective rate by several points.
2
Demand data rights on termination
On termination you get: all claim data, all remittance data, all AR detail, all correspondence, in a usable format, within a stated number of days, at no additional charge.Without this clause, leaving means abandoning your AR.
3
Set performance SLAs with teeth
- Days from charge receipt to claim submission
- Days from denial receipt to first action
- Clean claim rate
- Days in AR
- AR over 90 days
- Reporting cadence and content
4
Set the termination terms
Notice period, transition assistance obligations, and no penalty for termination on a missed SLA.
5
Require a BAA and confirm offshore handling
The vendor is a business associate. Ask directly whether PHI is accessed offshore, by whom, and under what controls. See Put a BAA in place.
6
Retain coding responsibility in the PC
An RCM vendor providing coding services must not be deciding codes independent of the PC. Coding is a clinical judgment and, in an MSO-PC structure, it is the PC’s responsibility — California’s SB 351 and Oregon’s SB 951 both name coding among the functions a management entity may not control. Document that clinicians may reject a coding change. See What an MSO can and can’t do.
7
Clarify who owns payer relationships
Enrollment, credentialing, and contract negotiation should remain yours, or you become dependent on the vendor to change vendors.
Verify it worked
- Cost modeled both ways at current and projected volume
- “Collections” defined precisely in the contract
- Data rights on termination specified
- SLAs with remedies
- Termination terms acceptable
- BAA executed; offshore access disclosed
- Coding responsibility retained by the PC
- Payer relationships retained by you
- A reporting pack you’ll actually receive and read