Percentage-of-collections billing is simple to describe and easy to sign. Then the first invoice arrives and the practice discovers that the vendor and the practice have been using the same word for two different amounts.
This is the single largest source of dispute in billing relationships, and it is almost always preventable with one paragraph.
The questions that need answers
Gross or net? Is the percentage applied to money received, or to money received after refunds and payer takebacks? A recoupment three months later reverses revenue you already paid a fee on. Does the fee reverse too?
Are front-desk collections included? Copays and patient payments collected by your own staff, at your own counter, with no involvement from the billing company. Many contracts include them by silence.
Capitation? Per-member-per-month payments arrive whether or not anyone submits a claim. Charging a percentage of a capitated payment charges for work that was not done.
Quality and incentive payments? Value-based bonuses and shared savings are collections in the plain sense of the word, and they are not the product of claim work.
Legacy A/R? Money collected on claims submitted before the engagement started. Someone else did that work.
Why vendors leave it vague
Not always cynically. "Percentage of collections" sounds self-explanatory, and a vendor whose systems report one number naturally uses that number. But the ambiguity runs in one direction, and the practice is the party that discovers it later.
What to insist on
A written definition naming each category explicitly, and a monthly statement that reconciles the fee to a claim list you can check against your own practice management system. Not a total — a list. If a fee cannot be traced back to specific claims, the definition is not doing any work.
The other term worth settling at the same time: what happens to outstanding A/R after termination, who works it, for how long, and at what rate. Those two paragraphs prevent most of the arguments that end billing relationships badly.
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.