CALIFORNIA MEDICAL BILLING | INSIGHT BRIEF
Most physicians assume that keeping billing in-house saves money, but the numbers tell a different story.
According to the American Medical Association, only 35%-50% of formally denied claims are followed up due to lack of administrative staff and time. And to make matters worse, general claims that are followed up upon only 54% are overturned.
What this means is that many in-house medical billing team net collection rates are likely far below the benchmark of 95-97% for best-in-class. In fact, some studies have shown that the collection rates are closer to 88-92%.
On paper, that gap looks small. In practice, it represents tens of thousands of dollars in lost revenue that you will never recover.
One reason is because consistently following up on denied and unpaid insurance claims requires time and focus that most in-house staff simply don’t have.
In fact, industry data shows that only 40% of physician-submitted claims are paid on the first submission; the remainder require active follow-up. For many in-house teams, those claims quietly age out.
You’re Paying Full-Time Salaries for Part-Time Output
That’s where idle costs come in. Industry benchmarks show that high-performing in-house billing teams operate at 80% utilization — meaning 80% of their paid hours are spent on actual billing and collections activity.
The reality for most physician practices is that utilization is closer to 60%. The remaining 20% is absorbed by paid leave, internal meetings, and administrative drift. In practice with three billers and a billing manager, that gap translates directly into payroll you’re funding without a corresponding return in collections.
The Hidden Costs of Running a Billing Team
The visible cost of in-house billing is salary. The true cost is considerably higher. California employers carry an average benefits and overhead burden of 40% on top of base wages — encompassing payroll taxes, health insurance, SDI, and CalSavers obligations.
Add to that a 33% annual turnover rate for medical billing professionals (MGMA DataDive, 2023), where replacing a single biller costs an estimated 60% of that person’s annual salary.
Then account for the physician or administrator’s time spent managing billing staff, reviewing reports, and resolving claim disputes, which translate into hours that carry a real opportunity cost even when they don’t appear on a payroll report.
Outsourcing reduces the overhead and shifts the entire risk model. That is, you stop paying for downtime, turnover, and underperformance, and start paying only for results.
California Medical Billing and Revenue Management clients average a net collection rate of 95–97% annually. Every percentage point above your current rate is revenue you’ve already earned — recovered.
Individual results vary by practice, specialty, and payer mix. This is not a guarantee.
Use our free In-House Billing Calculator to see what your billing is actually costing you. Contact California Medical Billing and Revenue Management today.
Sources & Methodology
- Claim denials: Cover pre-authorization and general denials: https://www.ama-assn.org/practice-management/prior-authorization/over-80-prior-auth-appeals-succeed-why-aren-t-there-more
https://www.aapc.com/blog/91574-claims-denials-are-on-the-rise/ - Industry NCR Benchmark (95–99%): MGMA DataDive and HFMA industry surveys, 2024–2025. Average NCR across U.S. physician practices: 95.1%. High-performing groups target 96–99%. Medical Billers and Coders, Jan 2026.
- Net Collections: MedCare: https://medcaremso.com/blog/why-net-collections-matter-more-than-gross-collections-in-medical-billing/
- Zero touch collection rate (40% paid on first submission): “Every touch costs you money” https://www.mgma.com/articles/beyond-days-in-ar-building-rcm-reporting-around-human-effort
- Staff Utilization Rate (60% actual vs. 80% benchmark): Healthcare industry administrative staff utilization ranges from 60–80%. Myoverhead Business Software, Dec 2024.
- Benefits & Overhead Burden (40% — California): BLS Employer Costs for Employee Compensation, West Region, December 2025. Total employer burden in CA typically 35–40% when California-specific obligations are included (SDI, CalSavers, higher UI rates). U.S. Bureau of Labor Statistics, March 2026.
- Billing Staff Turnover (33% annually, 60% replacement cost): MGMA DataDive Practice Operations Report 2023: 33.3% annual turnover rate for business operations support staff including billing. Replacement cost estimated at 50–75% of annual salary (SHRM). ReveleRMD / MGMA analysis, 2023.
