2026 Medical Billing Industry Report
The 2026 billing benchmark report: margins, performance, and what top billing companies do differently
Three years of Tebra research show a clear pattern: small and mid-sized billing companies are working harder but not seeing proportional growth. This report shows where revenue and margins are under pressure and how higher-performing companies are adapting. This benchmark report reveals:
- Why 46% of billing companies are seeing rising denial rates
- How margin pressure is increasing, with nearly half at 10% margins or less
- The cost of fragmented systems, with 77% operating across client-owned or mixed environments
- Where automation gaps exist and why most companies remain manual
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The state of the medical billing industry in 2026
The state of the medical billing industry in 2026 is defined by a clear operational mandate: billing companies must process more complexity with fewer manual touchpoints to remain profitable. Based on our latest survey data completed in 2025, small and mid-sized billing companies serving independent practices are experiencing a structural shift. While claim volumes remain steady, the effort required to collect on those claims has increased significantly. This comprehensive medical billing industry report reveals that many firms are increasing their technology and staffing spend without seeing proportional top-line growth.
In late 2025, Tebra surveyed 190 professionals across medical billing companies and medical practices in the United States. This third annual report shows how small and mid-sized medical billing companies are performing on revenue, margins, denials, technology adoption, and growth strategy.
2026 medical billing industry: Key benchmarks at a glance
| Metric | 2023 Benchmark | 2025 Benchmark | Change |
| Revenue under $250K | 28% of firms | 48% of firms | +20 pts |
| Revenue under $500K | 42% of firms | 68% of firms | +26 pts |
| Expect margins ≤10% | — | 54% of firms | — |
| Denial rates increasing | 28% reported | 46% reported | +18 pts |
| Median first-pass acceptance | — | 85% | — |
| No AI adoption | — | 59% of firms | — |
| Client-owned or mixed systems | — | 77% of firms | — |
| Offer add-on services | 80% of firms | 98% of firms | +18 pts |
| Highly specialty-focused | 43% of firms | 57% of firms | +14 pts |
The data suggests that billing companies are working harder than ever, investing in technology and expanding operations, yet many are facing flat revenue and shrinking margins. One pattern stands out: 77% of firms still operate on client-owned systems or mixed environments, creating workflow fragmentation and reporting limitations that undercut tactical improvements.
This is not just a snapshot, but a trendline indicating that the gap between projections and reality is widening. To remain competitive, billing companies must shift from manual, fragmented operations to a platform-driven model. Utilizing dedicated revenue cycle management software allows firms to standardize workflows, improve first-pass claim rates, and reduce the days in A/R that currently plague the industry.
Medical billing revenue trends: Why growth is slowing
Understanding current medical billing revenue trends requires looking beyond top-line volume. For many billing companies, revenue growth is structurally slowing down.
One-third of medical billing companies reported that their 2024 revenue either declined or stayed flat. Furthermore, the industry is skewing smaller with 48% of billing companies surveyed now generating under $250,000 in annual revenue, compared to 28% in 2023.
34% of billing companies saw flat or declining revenue last year.
Revenue distribution shift (2023–2025)
The following table shows how medical billing company revenue distribution has shifted over three survey waves:
| Annual revenue bracket | 2023 | 2025 | Change |
| Under $250K | 28% | 48% | +20 pts |
| $250K–$500K | 14% | 20% | +6 pts |
| Under $500K (total) | 42% | 68% | +26 pts |
| $500K–$750K | — | 9% | — |
| $750K–$1M | — | 14% | — |
| $1M–$2M+ | 32% | 9% | −23 pts |
The concentration of billing companies at the lower end of the revenue spectrum has accelerated. Firms generating $1 million or more annually dropped from 32% of the market in 2023 to just 9% in 2025.
Why projections outpaced reality
For the past two years, revenue projections have outpaced results, leading to a reality check in 2025 where 60% of companies expect gross revenue growth below 5%.
| Year | Projected 6%+ growth | Actual result (5% or less) |
| 2023 | 68% anticipated 6%+ | 52% saw 5% or less |
| 2024 | 69% projected 6%+ | 54% saw 5% or less |
| 2025 | Only 40% project 6%+ | — |
Optimism hasn’t translated to revenue gains, and billing companies have adjusted expectations downward in response.
This slowdown is often tied to operating inefficiencies. When client onboarding takes too long and rework absorbs staff capacity, taking on new business becomes a bottleneck. Flat revenue paired with rising labor and software costs makes efficiency gains more important than volume growth alone.
Researching how to grow a medical billing company in 2026 reveals that success lies in throughput. Standardizing on a unified revenue cycle management software platform reduces onboarding friction and improves claim execution, allowing existing teams to manage more revenue without proportional headcount increases.
Margin compression becomes the new normal
The pressure on medical billing profit margins is a critical operational challenge. This isn’t a temporary dip, but a three-year slide toward single-digit profitability as the new normal.
Medical billing profit margins are shrinking
Over half of medical billing companies (54%) expect gross margins at 10% or below for 2025, while the share projecting margins above 20% has been on a steep decline since 2022.
Gross margin benchmarks
The following table shows medical billing margin expectations for 2025:
| Gross margin range | % of billing companies |
| Negative | 5% |
| 0–10% | 49% |
| 11–20% | 31% |
| 21–30% | 8% |
| 31–40% | 1% |
| 41%+ | 6% |
The share of billing companies expecting gross margins above 20% has declined steadily:
| Year | Expecting margins above 20% |
| 2022 | 34% |
| 2023 | 26% |
| 2024 | 15% |
Where costs are rising
Spending has increased across the board between 2023 and 2025. This is the anatomy of a margin squeeze — more spend and effort without a proportionate lift in revenue.
| Spending category | % reporting increase |
| Technology and software | 60% |
| Operations and staffing | 55% |
| Training and development | 40% |
| Compliance and security | 37% |
Every preventable denial and manual handoff carries a margin penalty. When staff must train across multiple client-owned EHRs and compile reports manually, overhead expands faster than collections. Margin protection increasingly comes from fewer touchpoints and cleaner data flows.
By utilizing multi-client reporting and integrated workflows — such as automated insurance eligibility verification — billing companies can cut report prep time and reduce the manual overhead that drains profitability.
Denial rates are rising and AI is reshaping the battlefield
Rising medical billing denial rates present the clearest case for targeted automation. Nearly half of medical billing companies (46%) report denial rates increased over the last 12 months, up from 28% in 2024.
46% of billing companies report denial rates increased in the last 12 months — up from 28% in 2024.
The median first-pass acceptance rate sits at 85%, with less than half of firms (44%) achieving 90% or higher.
Medical billing denial rate benchmarks (2026)
| Denial metric | Benchmark |
| Firms reporting increased denial rates (2025) | 46% |
| Firms reporting increased denial rates (2024) | 28% |
| Median first-pass acceptance rate | 85% |
| Firms achieving 90%+ first-pass acceptance | 44% |
| Believe payers use AI to increase denials | 67% |
Top denial categories
The following denial categories create the most rework for medical billing companies:
| Denial category | % reporting as top rework driver |
| Eligibility / coverage issues | 46% |
| Documentation requests | 42% |
| Duplicate claims / coordination of benefits | 37% |
The automation gap in medical billing
Two-thirds of billing companies (67%) believe payers are now using AI to increase denials. Yet a massive automation gap exists on the billing side:
The automation asymmetry:
| Factor | Stat |
| Believe payers use AI to drive denials | 67% |
| Not using Robotic Process Automation (RPA) | 73% |
| Have not adopted any AI | 59% |
This means that while payers are increasingly using AI to deny claims, most billing companies are still processing claims, posting payments, and managing denials by hand — contributing to the overall trend of lower revenue and compressed margins.
To reduce medical billing denials, firms must prioritize workflow-specific medical billing workflow automation. High-performing firms focus on automating insurance eligibility verification, ERA auto-posting, and electronic claim submission scrubbing. These specific capabilities allow billing companies to catch errors upfront, reducing the manual rework that delays client cash flow and accelerates staff burnout.
71% of early AI adopters report improved efficiency.
The distinction matters. Results don’t come from betting on “AI” in the abstract, or from piling on new tools that create more toggling and cleanup work. They come from applying automation to specific, repeatable billing tasks that generate rework when they’re missed or handled inconsistently.
Which billing tasks should be automated first?
Among companies that have adopted automation, the most commonly automated billing tasks are:
| Billing task | % successfully automating |
| ERA auto-posting | 60% |
| Automated payment posting | 37% |
| Automated eligibility verification | 30% |
| Denial management workflow automation | 23% |
Across three years, the pattern is clear. Billing companies are moving away from broad automation platforms in favor of narrow, workflow-specific automation that fits how teams already work. The next question is where automation has the highest leverage, and which processes reduce denials and manual touchpoints the fastest.
Get started with clear automation wins: View the denial-proof your claims checklist.
Client-owned systems versus standardized billing platforms
Beyond denials and automation, there’s another factor driving up costs and limiting growth: system fragmentation. The choice between a billing platform versus client-owned systems is a core operating model decision.
Currently, 77% of billing companies operate on client-owned systems or a mix of platforms. This creates structural drag that slows operations, limits visibility, and makes it nearly impossible to scale efficiently.
The cost of multi-system operations
| System ownership model | % of billing companies |
| Purchase own billing software | 23% |
| Use clients’ systems | 39% |
| Use a mix of both | 38% |
Many billing companies also juggle multiple different systems simultaneously:
| Number of billing systems used | % of companies |
| 1 | 28% |
| 2 | 22% |
| 3 | 28% |
| 4 | 10% |
| 5 or more | 12% |
Reporting and workflow fragmentation
Navigating different setups for each client leaves companies with no consistency in workflows, reporting, or system access. The top challenges reported with client-owned systems include:
| Challenge | % reporting |
| Lack of control over system updates and changes | 37% |
| Limited reporting and analytics access | 32% |
| Inconsistent workflows across clients | 32% |
| Training staff on multiple different systems | 28% |
These are major issues, not minor inconveniences. Staff training becomes perpetual as teams switch between systems. Reporting requires manual consolidation across platforms. When a client changes EHRs, the billing company just has to adapt.
Three-quarters of billing companies (75%) recommend an integrated EHR with their billing software. But client adoption remains low.
| EHR adoption among clients | % of billing companies |
| 0% adoption | 13% (up from 2% in 2023) |
| 1–25% adoption | 32% |
| 26–75% adoption | 30% |
| 76–100% adoption | 25% |
The gap is widening. In 2023, only 2% of billing companies reported zero client adoption, compared to 13% in 2025.
Why platform standardization drives margin relief
When asked what they would gain if all clients were on one platform, billing companies reported:
| Benefit of platform standardization | % citing |
| Unified workflows across all clients | 48% |
| Better reporting and analytics capabilities | 43% |
| Easier and faster staff training | 40% |
| Cost savings on integrations | 30% |
| Better control over system functionality | 30% |
The best-case scenario is when all practices adopt the same billing platform. But billing companies can’t force that, which is where HL7 integrations come in to connect billing companies’ platforms to their practices’ EHRs. This is how platform control delivers margin relief — less manual work, better visibility into performance, and room to scale without adding headcount.
For clients who keep external EHRs, robust HL7 integrations are the practical path. Utilizing a comprehensive revenue cycle management software platform allows billing companies to maintain centralized control. Programs like Tebra’s billing partner program support this scalability, providing the infrastructure needed to grow without proportional operational chaos.
Know your baseline: Calculate the true cost of billing work with Tebra’s manual work cost calculator.
Pricing pressure and increased competition in medical billing
When prices compress, margin recovery gets harder. Pricing pressure makes measurable operational performance more valuable than rate increases. With competition coming from every direction, billing companies can’t rely on rate increases. That’s why growth has shifted toward new revenue streams and provable outcomes.
Current medical billing pricing benchmarks
In 2025, more than half of billing companies (63%) charge 7.99% or less on percentage-based pricing:
| Percentage-based pricing tier | % of companies* |
| 4.99% or less | 12% |
| 5–5.99% | 19% |
| 6–6.99% | 16% |
| 7–7.99% | 16% |
| 8–8.99% | 5% |
| 10%+ | 4% |
*28% use a different, non-percentage payment model.
Who billing companies compete against
More than half (54%) report increased competition in winning new business. The pressure comes from multiple directions:
| Competitor type | % citing |
| Offshore / international BPOs | 50% |
| In-house billing | 46% |
| Healthcare IT vendors expanding into billing | 31% |
| Practice management companies | 27% |
| Private equity-backed consolidators | 27% |
Why add-on services are becoming standard
As price competition intensifies, billing companies are responding in two ways — charging setup fees and expanding service offerings.
Setup fee trends:
- In 2025, 39% of billing companies always or often charge setup fees, roughly the same as 2023 (38%).
- The share that never charges setup fees dropped from 36% in 2023 to 19% in 2025.
Service expansion between 2023 and 2025:
| Add-on service | 2023 | 2025 | Change |
| Credentialing | 57% | 72% | +15 pts |
| Benefit verification | — | 56% | — |
| Payer contract negotiations | 36% | 49% | +13 pts |
| Prior authorization management | — | 40% | — |
| Offering no additional services | 20% | 2% | −18 pts |
98% of billing companies now offer add-on services beyond core claims processing.
Service expansion is now table stakes, not a differentiator. When everyone offers more, growth shifts from what you sell to what you can prove. That proof increasingly comes down to measurable outcomes and specialized expertise that’s hard to replicate.
By offering upstream denial-prevention services like automated insurance eligibility verification, billing companies can justify their rates and prove ROI through client-ready performance reporting. This helps them move beyond core claims processing to full-service revenue cycle support.
Make the case for value-based pricing: Build a quote with Tebra’s calculator.
Specialization and revenue diversification as growth drivers
Increased competition, especially from offshore billers undercutting on price, has fundamentally changed the growth equation. The old playbook — waiting on great customer service to drive referrals — no longer delivers reliable growth. In a more competitive market, billing companies are shifting toward two levers that scale: specialization and performance data.
The rise of specialty-focused billing companies
The top strategies billing companies are using to win new business in 2025:
| Growth strategy | % citing |
| Customer referrals | 55% |
| Specialization in specific practice types | 40% |
| Full-service offerings | 34% |
| Networking and partnerships | 32% |
| Cost of services | 26% |
| Customer and patient experiences | 25% |
Customer referrals remain the top strategy, but they’ve declined steeply from 71% in 2023 — a 16-point drop. Meanwhile, “customer and patient experience” as a differentiator has collapsed by 36 points, from 61% to just 25%.
| Declining traditional strategy | 2023 | 2025 | Change |
| Customer referrals | 71% | 55% | −16 pts |
| Customer and patient experience | 61% | 25% | −36 pts |
Instead, billing companies are leaning into specialization and full-service offerings, backed by platform control and data visibility.
Specialty focus has accelerated as a growth driver:
| Level of specialty focus | 2023 | 2025 | Change |
| Highly focused | 43% | 57% | +14 pts |
| Somewhat focused | 36% | 30% | −6 pts |
| Not focused | 21% | 13% | −8 pts |
By 2025, 40% named specialty focus as a top strategy for winning new business, signaling that deep domain expertise — in specialties like cardiology, orthopedics, or dermatology — is becoming the clearest path to differentiation.
Add-on services benchmark data
Revenue diversification only works when teams can deliver additional services without increasing operational fragmentation. The shift toward full-service billing has become nearly universal, with the share offering no additional services dropping from 20% to just 2%.
Especially when combined with full-service offerings like credentialing and benefits verification, specialization gives billing companies a clearer value proposition and makes it harder for generalist competitors to undercut on price alone.
Data-backed referrals versus word-of-mouth
With referrals softening as a growth strategy, billing companies are using data to take control. Specialization and full-service offerings aren’t just marketing claims. To execute well, billing companies need:
- Standardized workflows across clients in the same specialty
- Integrated service delivery for credentialing, verification, and other services without bolting on different tools
- Performance data to prove outcomes to clients and prospects
Leveraging a unified platform and joining networks like the billing partner program provides the reporting and multi-client management capabilities necessary to support specialty-focused scale and prove value to prospective clients.
Modernize your growth engine: Use Tebra’s referral toolkit to identify advocate clients and track results over time.
What successful medical billing companies do differently
Taken together, the data points to a clear shift: Billing companies can’t outrun margin pressure with pricing changes or add-on services alone. The companies growing more consistently share a handful of operating model choices — how they standardize systems, where they automate, and how they differentiate in the market.
Five operating model shifts that define high-performing billing companies:
| Operating model choice | What it looks like in practice |
| Standardized platform | Run revenue on a platform they control, use HL7 integrations to connect external EHRs |
| Targeted automation | Automate eligibility verification, ERA posting, and payment posting — not broad “AI-powered” solutions |
| Specialization | Deep expertise in specific practice types as a primary competitive differentiator |
| Revenue diversification | Multiple revenue streams through add-on services and value-based pricing |
| Data-backed referrals | Systematic referral processes backed by performance metrics, not just word-of-mouth |
- Standardized platform: Companies using a standardized billing platform report better operational efficiency. They run revenue on a platform they control rather than operating across client-owned systems, using HL7 integrations to connect external EHRs when practices don’t migrate.
- Targeted automation: RPA users report reduced manual data entry and improved revenue cycle management. Among companies using automation, 71% report improved efficiency — but only when automation targets specific tasks like eligibility verification, ERA posting, and payment posting rather than broad “AI-powered” solutions.
- Specialization: Specialized companies shifted from generalist positioning to deep expertise as their primary competitive differentiator. Highly focused companies rose from 43% to 57% between 2023 and 2025, with 40% now citing specialization as a top strategy for winning new business.
- Revenue diversification and value-based pricing: Expanded service offerings create multiple revenue streams rather than relying solely on percentage-based pricing. In 2025, service expansion became nearly universal — 98% now offer add-on services (up from 80% in 2023). Companies use performance data to justify fees and communicate value instead of competing on collections percentage alone.
- Data-backed referrals: With referrals softening as a growth strategy, billing companies are building systematic referral processes, identifying advocates, pursuing networking and partnerships, and backing every conversation with performance metrics.
This winning model reduces rework, shortens time-to-profitability on new clients, and improves first-pass claim rates. Ultimately, software matters most when it supports these model shifts across all clients, providing the control needed to scale profitably in a high-denial environment.
2026 action plan for medical billing companies
Transforming operations requires a practical sequence. Companies adopting these operational shifts are better positioned to weather pricing pressure and offshore competition.
Phase 1: Benchmark your current performance (month 1)
Compare your revenue, margins, denial rates, and system setup against this report’s data. Use a simple cost model (hours, rework, write-offs) to quantify the cost of manual work and system fragmentation.
Phase 2: Automate high-impact billing tasks (months 2–4)
Focus on denial prevention first — eligibility checks, claim scrubbing, documentation completeness. Then automate specific tasks using medical billing workflow automation:
- Eligibility verification
- ERA posting
- Payment posting
- Denial routing
Start small and prove value before expanding.
Phase 3: Consolidate systems (months 3–6)
Decide where to consolidate onto a unified revenue cycle management software platform you control. For clients on external EHRs, assess where HL7 connections make sense to reduce manual entry and improve reporting without forcing migrations.
Phase 4: Revisit pricing and growth strategy (months 6–12)
Use performance data to support pricing conversations. Expand into services peers have adopted, like credentialing, benefits verification, or contract negotiations. Build a referral engine backed by performance dashboards, not just word-of-mouth.
2026 action plan summary:
| Phase | Timeline | Focus area | Key actions |
| 1 | Month 1 | Benchmark | Compare revenue, margins, denial rates against industry data |
| 2 | Months 2–4 | Automate | Target eligibility, ERA posting, payment posting, denial routing |
| 3 | Months 3–6 | Consolidate | Move to unified platform, deploy HL7 integrations for external EHRs |
| 4 | Months 6–12 | Grow | Use data for pricing, expand add-on services, build referral engine |
Where Tebra fits
Tebra is both the source of this research and a platform partner that provides the foundation for billing companies ready to shift from manual, fragmented operations to a platform-driven model with automations that make an impact.
The Tebra platform provides:
- Control with HL7 integrations connecting to external EHRs
- Targeted automation on billing workflows
- Standardized environments for specialty focus
- Performance analytics for outcome-based pricing
- Data visibility that strengthens referrals
For billing companies that recognize their own experience in these trends, the next step is clear: Compare your metrics against the benchmarks in this report and explore what a platform-driven setup could look like.
Ready to take the next step? Discover how Tebra can meet your billing needs.
Medical billing trends FAQs: What billing companies need to know
Conclusion
The 2026 benchmarks make one thing clear: The gap between high-performing billing companies and the rest of the market is defined by operational control. By moving away from fragmented client systems and manual rework, billing companies can protect their margins and scale. Compare your own metrics against the industry standard and see how a platform-driven approach can transform your revenue cycle.
Appendix: About the data
The 2026 billing benchmark report draws on three consecutive survey waves of U.S. medical billing companies conducted by Tebra in 2023, 2024, and 2025.
Survey methodology: Fielded December 1–17, 2025, with 190 respondents from medical billing companies across the United States.
| Respondent role | % |
| Medical biller | 44% |
| C-Level, owner, partner, president | 21% |
| Other | 18% |
| Head of operations | 15% |
| Healthcare provider | 2% |
| Annual gross revenue (2024) | % |
| Under $250K | 48% |
| $251K–$500K | 20% |
| $500K–$750K | 9% |
| $750K–$1M | 14% |
| $1M–$2M | 7% |
| $2M+ | 2% |
| Census area | % |
| South | 37% |
| West | 24% |
| Midwest | 22% |
| Northeast | 17% |
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