Medical Billing: In-House vs. Outsourcing
Updated July 21, 2025
Originally Published October 25, 2023
The medical billing outsourcing market continues to grow steadily, projected to expand from around $13 billion to $40.3 billion by 2032. Also known as revenue cycle management(RCM), medical billing is one of the healthcare industry’s most essential and challenging aspects.
In this post, we’ll break down the pros and cons of outsourcing medical billing versus keeping it in-house. We’ll explore costs, control, compliance, scalability, and more to help you make the best decision for your organization.
Defining the terms: Billing Company vs. In-House Billing
Before we begin, let’s quickly define a couple of terms..
Medical Billing Service Companies
Medical billing service companies (or RCM companies) are third-party organizations that handle the medical billing process for healthcare providers. They specialize in managing the end-to-end process of the billing cycle, from patient registration to collection, so service providers can focus on what they do best.
By outsourcing billing needs to a third party, the practice can rest assured that its billing process is handled by an efficient team with specialized knowledge that’s consistently updated with the latest changes in healthcare regulations.
In-House Billing
In-house billing refers to hiring an internal team to handle the medical billing processes. The healthcare facility or practice is responsible for hiring staff and supplying resources, giving them direct control over the billing process.
Offering in-house billing often allows for better integration with other internal systems (such as electronic health records) and the ability to tailor the billing process to the specific needs and preferences of both the business and the customer.
Feature-By-Feature Comparison
While either option offers the same primary function of medical billing, they differ in specific instances:
Costs
Outsourcing can reduce costs tied to hiring, training, software, and IT infrastructure. However, medical billing service companies generate revenue by charging based on a fee or a percentage of the total amount, and this fee is generally higher per claim for small clinics because of lower volume requirements.
Conversely, in-house billing teams have upfront costs: labor, software licenses, training, and ongoing system maintenance.
Advantage: Billing Company
Control
Outsourcing your medical billing process means giving up some control over the billing process. This aspect of “control” with in-house billing is multifaceted and can be broken down into the following points:
Decision-making authorities
Workflow customization
Integration with any other systems
Patient Communication
Advantage: In-House Billing
Customer Service
Patients may occasionally see discrepancies in their statements with the service provided. An in-house billing team allows immediate and direct communication between the provider and patient to resolve any issues, including payment inquiries or other concerns. This level of customer service can often only be achieved with an in-house billing team, as they can understand each patient’s needs and concerns much better than a third-party service. On top of this, in-house billing teams create faster communication between staff and patients, often resulting in improved patient satisfaction and loyalty.
Advantage: In-House Billing
Experience
Medical billing companies have specialized knowledge of complex systems, insurance requirements, and regulations. This technical knowledge helps providers maximize their claim submissions and avoid costly mistakes related to regulations and forms. While in-house teams do have the potential to accumulate the same knowledge base, it takes a significant amount of time and money from the provider to achieve this level of expertise.
Advantage: Billing Company
Compliance
This is an important consideration when comparing outsourced billing companies to an in-house team. Maintaining accurate billing and coding protocol protects your practice from reimbursement denials, fines, penalties, litigation, and possible license loss. Medical billing companies are often more updated with the latest changes in healthcare regulations than in-house billing teams. Many vendors also provide ongoing training and monitoring to ensure regulatory compliance.
Although we are confident that your in-house billing team has the necessary qualifications and experience, the ability to stay up-to-date is bottlenecked by time and capacity more than anything else. Outsourced companies often have a dedicated team to provide regular legalese training and maintain compliance.
Advantage: Billing Company
Project Scaling
As your business grows, so will your billing needs. An in-house billing team would be easier to customize and integrate with your current systems, such as EHR and practice management software. However, infrastructure, software, and staff training require significant investments of time and money.
A third-party billing company may be better equipped to handle your billing needs as you grow early on. They are also often more cost-efficient because you pay based on the volume of your billing. However, there may be limitations, penalties, or unforeseen expenses when rapidly scaling your business, as changes in contract requirements often come with added costs. Once volume gets high enough, it may be more cost-effective to keep your billing in-house.
Advantage: Billing Company
Implementing Risk Measures
In-house and third-party billing each come with their own set of risks. Here’s some to consider:
Hiring in-house comes with the risk of:
Operational error
Compliance gaps from limited bandwidth
Higher overhead costs
Staff turnover disrupting workflows
Ongoing training and development
Of these risks, we want to highlight the compliance and staffing risks for in-house billing teams. Compliance risks stem from ever-changing healthcare regulations. In contrast, staffing risks come from the possibility of critical members leaving the practice, which disrupts the billing process and leads to delays and revenue loss. Continuous training is essential to keep the team updated with the latest billing practices and ensure that contingencies are in place should key members leave the organization.
On the other hand, hiring a third-party billing service opens you up to:
Communication barriers
Contract limitations
Data security concerns about sharing PHI externally
Potential hidden costs
Dependency on a third party for revenue processes
From this list, we want to highlight data security and dependency risks for third-party services. Data security is an issue because sharing sensitive patient data with a third party can pose security risks if the third party fails to set up robust data protection measures. Dependency is another risk that providers face when they over-rely on a third party to run their entire billing process.
While outsourcing may reduce some operational and compliance risks, in-house billing gives you more control over how risks are handled.
Advantage: In-House Billing
Hiring In-House Vs. Third-Party Medical Billing Service
Choosing between in-house and outsourced medical billing can significantly impact your cash flow, compliance, and patient satisfaction.
Still unsure which option fits your practice? We’re here to help. Contact Open Practice. If outsourcing makes the most sense for you, we can connect you with a reputable billing partner in your specialty and state.
