Compensation that rises with what is collected is restricted in some states, and it creates an incentive question wherever the same party also assigns the codes. That combination — coding authority plus percentage compensation — is the arrangement worth examining.
Percentage of collections is how most billing companies charge, including us in most states. It is worth being direct about what it raises.
The state layer
Several states restrict or prohibit compensating a billing company as a percentage of collections, under fee-splitting provisions. A few attach criminal penalties. Others permit it subject to conditions. And some address Medicaid dollars specifically.
This is why a national billing company quoting one rate everywhere has either not looked or is relying on you not to.
The incentive question
The sharper issue is what happens when the same party assigns the codes and is paid a share of what those codes collect. The incentive to lean toward the better-paying interpretation is structural rather than hypothetical, and it does not depend on anyone behaving badly.
The honest responses are procedural rather than reassuring:
- A documented query process, so ambiguous documentation goes back to the provider rather than being resolved by the coder.
- Coding priced separately from the percentage, which removes the link entirely.
- No copy anywhere promising a revenue outcome — because a promise like that is the incentive stated out loud.
- Coding distribution reviewed against peers, by the practice, periodically.
What to ask any vendor
Does your fee change with what you collect, and do you also assign the codes? If both are yes, what stops the second from serving the first? A vendor without a concrete answer has not thought about it, and the absence of an answer is itself informative.
We take the questions seriously because we are on the wrong side of them by default — we code, and we are usually paid a percentage. The safeguards are the point.
Separate coding from collection incentive
The cleanest structure keeps code assignment with the practice or an independent coder while the vendor handles submission and follow-up. The incentive then attaches to collecting what was coded rather than to how it was coded.
Where a vendor does both, ask how they manage that and what oversight exists.
State law varies more than people expect
Fee-splitting and corporate practice rules differ substantially by state, and an arrangement that is routine in one may be restricted in another.
This is a question for your own counsel, because the obligation sits with the practice regardless of what the vendor believes.
Document the reasoning
Whatever structure you choose, record why it was chosen and what controls exist. An arrangement that was considered and documented is a different position from one that was simply signed.
Common questions
- Is percentage-based medical billing allowed?
- Generally yes, with state variation. Some states restrict arrangements that resemble fee splitting, particularly where the biller also influences coding.
- Why is percentage compensation a compliance question?
- Because a vendor paid more when collections rise has an incentive in coding decisions, if they also assign the codes. Separating those roles removes the tension.
- Does this apply to government payer dollars?
- Government program dollars carry additional restrictions on how third parties may be compensated, which is why many vendors price them differently.
- How do I structure this safely?
- Keep coding authority with the practice or an independent coder, document the arrangement, and confirm your state’s position rather than assuming.
- Is a flat fee safer?
- It avoids the incentive question entirely, which is part of why some vendors prefer it. It also shifts volume risk to you rather than the vendor.
Denials Piling Up?
We handle the revenue cycle end to end — coding by certified coders, claim submission, denial management and appeals, and A/R follow-up, with six reported numbers every month.