Yes, medical billing companies may charge a fee on money collected from old accounts receivable (A/R), but the answer depends on the billing agreement. Some companies include legacy A/R collections in their standard percentage, while others charge a separate recovery fee or create a customized arrangement for aged balances. Practices should confirm exactly how old A/R is treated before signing a contract.
What Counts as Old or Legacy A/R?
Old A/R generally refers to unpaid balances that existed before a new medical billing company took over the practice’s revenue cycle. These accounts may include unpaid insurance claims, denied claims, underpayments, patient balances, or claims that were never properly followed up.
The important issue is that old A/R does not automatically become free recovery work when a new billing company takes over. Recovering older balances can require additional claim research, payer communication, appeals, documentation review, and repeated follow-up.
How Can a Billing Company Charge for Old A/R?
There are several arrangements a practice may encounter:
1. Standard Percentage of Collections
The billing company may apply its normal percentage to all money it collects, including payments recovered from legacy A/R. For example, if the contract specifies a percentage of collected revenue, the agreement should explicitly state whether that definition includes balances created before the vendor’s start date.
2. Separate A/R Cleanup Fee
A company may treat aged A/R as a separate project and charge an hourly, flat, or negotiated fee. This arrangement can be used when the practice has a large backlog requiring dedicated recovery efforts.
3. Higher or Tiered Recovery Fee
Some contracts may use different pricing for particularly old or difficult accounts. The practice should understand what qualifies an account for the additional fee and whether the fee applies to all recovered money or only designated accounts.
4. Hybrid Arrangement
A practice and billing company can also agree on a combination of a project fee and a percentage of recovered collections. The exact structure should be documented rather than assumed.
What Should a Practice Check Before Signing?
Do not look only at the headline billing percentage. Review the contract for these specific points:
- Legacy A/R definition: What date determines whether an account is considered old A/R?
- Fee basis: Is the vendor paid on insurance collections, patient collections, or both?
- Collection timing: Does the fee apply when money is actually received?
- A/R ownership: Who is responsible for accounts that existed before the transition?
- Denials and appeals: Are old denied claims included in the service?
- Age thresholds: Are accounts over 90, 120, or 180 days handled differently?
- Patient balances: Are patient collections treated differently from insurance payments?
- Adjustments and refunds: How are contractual adjustments, refunds, recoupments, and take-backs handled?
- Reporting: Will the practice receive a separate report showing collections recovered from legacy A/R?
- Termination terms: What happens to unresolved old A/R if the relationship ends?
Why Does This Matter Financially?
Consider a practice that changes billing companies while carrying $150,000 in unresolved A/R. If the new company recovers $40,000, the practice needs to know whether that recovery is subject to the standard billing percentage, a separate cleanup charge, or another agreed fee.
This is why practices should evaluate A/R management services as more than simply “following up on old claims.” Effective A/R management involves identifying collectible balances, prioritizing accounts, researching claim status, addressing denials and underpayments, submitting appropriate appeals, and documenting payer follow-up.
How Can You Compare the Real Cost?
A useful comparison is:
Net value of A/R recovery = money recovered – fees paid for the recovery work – other applicable costs
For example, if $40,000 is recovered and the total cost of recovering it is $4,000, the practice should evaluate the resulting $36,000 against what its internal team could realistically have recovered during the same period.
The same principle applies when evaluating broader medical billing services. A vendor with a lower percentage is not necessarily less expensive if important A/R recovery, denial management, appeals, or follow-up activities are excluded and billed separately.
What Should the Contract Say?
A strong agreement should clearly distinguish current A/R from legacy A/R and explain how each is priced. It should also identify which accounts are included, what services the vendor will perform, how recovered money is calculated, and what happens to unresolved balances.
The Medicator’s approaches revenue-cycle management as an end-to-end process rather than focusing only on claim submission. Practices can also review broader revenue cycle management services when determining whether A/R recovery is included within their overall billing workflow.
Medical billing companies can charge fees on money collected from old A/R, but the fee is contractual, not automatic. Before outsourcing, ask the vendor to show exactly how legacy A/R collections will be priced, reported, and worked. Clear terms can prevent unexpected fees and make it easier to measure the actual financial return from A/R recovery.
