Percentage of Collections vs Flat Fee Billing
Should a billing company charge a percentage of collections or a flat fee?
Short answer
The distinction that matters is not price. It is what the vendor is paid for.
Under percentage pricing, a denied claim that is never appealed costs the vendor money. Under flat-fee pricing, a denied claim that is never appealed costs the vendor nothing — the fee was earned on submission. Roughly 70% of appealed denials are overturned, so the appeals backlog is exactly where the incentive difference shows up in your bank account.
That is an argument about alignment, not honesty. Good vendors work denials under either model. But contracts should be read on the assumption that incentives eventually win, because they usually do.
Side by side
Percentage of collections vs Flat fee per claim
| Dimension | Percentage of collections | Flat fee per claim |
|---|---|---|
| How it is charged | A share of net collections, commonly 4–8% | A fixed amount per claim submitted |
| Vendor paid when a claim is denied and abandoned | No | Yes |
| Incentive to appeal | Direct and proportional | None built in |
| Cost predictability | Varies with collections | Predictable per claim |
| Cheaper at high volume, low value per claim | No | Yes |
| Cheaper at low volume, high value per claim | Yes | No |
| Cost during a slow month | Falls with collections | Unchanged if claim count holds |
| Risk of vendor cherry-picking easy claims | Low | Higher |
| Suits high-deductible, patient-heavy revenue | Watch how patient payments are treated | Neutral |
| Transparency of what you are buying | Requires a clear definition of net collections | Simple to audit |
Percentage of collections suits you when
- Your average claim value is moderate to high and volume is not extreme.
- You have an aged AR or denial backlog you want actually worked, not just submitted.
- You want billing cost to fall automatically when volume falls — a seasonal or growing practice.
- You would rather pay more on a recovered claim than pay anything on an abandoned one.
Flat fee suits you when
- You bill very high volumes of low-value claims, where a percentage would exceed reasonable per-claim economics.
- Your denial rate is already low and appeals volume is minimal.
- You need a fixed, budgetable line item and can accept the incentive trade-off.
- You retain denial and appeal work in-house and are buying submission capacity only.
When this is not the right answer
Under either model, read the definition of what is billable before the rate. A percentage applied to gross charges rather than net collections is a materially different deal at the same headline number. Ask specifically whether patient payments, capitation, refunds, and payments on claims submitted before the contract started are included — that is where the surprises live. Vizora charges a percentage of net collections starting at 3%, and does not bill separately for denial appeals.
Questions
Between 4% and 8% of net collections for most physician practices, with larger practices and higher claim volumes at the lower end. Rates below roughly 3% usually indicate submission-only service with denial work excluded, and rates above 9% warrant asking what is included that others charge separately.
Not always, and this is the single most important thing to confirm in writing. Some vendors bill appeals separately or exclude them entirely, which reintroduces the incentive problem percentage pricing is meant to solve. Ask for the answer in the contract, not the sales conversation.
Percentage-of-collections billing is standard practice and permitted for commercial and most government claims, but several states regulate percentage-based arrangements and some payer contracts restrict them. It is worth a check with counsel in your state rather than an assumption either way.
Last reviewed August 20, 2026
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