Two medical billing companies bill the same amount of revenue. Both are profitable. Both have long-tenured staff and clients who say good things about them. One receives an offer with most of the money at closing. The other receives an offer with a third of the money tied to whether specific clients are still there in two years.

The difference is almost never the quality of the work. It is how much of the revenue depends on a small number of clients, and what the contracts with those clients actually say.

Client concentration is the first thing a buyer calculates in a revenue cycle management deal and the last thing most owners think about. This article explains why, what the buyer is actually protecting against, and what an owner can realistically change in the twelve to twenty-four months before a sale. Every figure below comes from a federal primary source and is linked.

What you are actually selling

Owners describe their company in terms of what it does: claims submitted, denials worked, days in accounts receivable improved, a coding team that knows the specialty. All of that is real and all of it matters to operations.

It is not what is being bought. A buyer is acquiring a contracted stream of collections from a set of provider clients, and the entire question is how likely that stream is to still be there after the owner who won those clients has left. Everything else in diligence is downstream of that one question.

This is why an RCM company and a physician practice of identical size are underwritten so differently. A practice has patients who are attached to a location and a clinician. A billing company has clients who can give notice in writing and be gone at the end of a quarter.

The first number a buyer computes

Before anyone looks at your margin, someone builds a simple table: revenue by client, largest to smallest, for the trailing thirty-six months. From that table come the two figures that shape the offer.

• The largest client as a percentage of revenue. This is the single point of failure. If one client can take a quarter of the business out the door with a ninety day notice letter, the buyer is not buying your company, they are buying a bet on that client.
• The top five clients as a percentage of revenue. This is the shape of the risk. Five clients at ten percent each is a very different business from one client at forty percent and four at two percent, even when the top five total is similar.

There is no published federal statistic that tells you what concentration level is acceptable, and we are not going to invent one. What is reliably true is the direction: the more concentrated the revenue, the more of the purchase price moves out of cash at closing and into an earnout, an escrow, or a holdback tied to client retention. Concentration rarely kills a deal outright. It changes who carries the risk, and the answer is usually the seller.

What your contracts actually say, which is not what you remember

In most small and mid-sized RCM companies, the client agreements were signed years apart, on at least two different templates, and some of the largest relationships are running on an expired agreement or on nothing at all. Diligence finds this every time.

Four clauses do the work:

1. Term and renewal. Is the agreement in an initial term, in an automatic renewal, or expired and operating on habit? An expired agreement with your largest client is the most expensive single document problem in this sector.
2. Termination and notice. Thirty days for convenience is very different from a twelve month term with ninety days notice. This clause is the buyer’s actual protection, and it is the one they read first.
3. Assignment and change of control. Whether the agreement can move to a new owner without the client’s written consent. If consent is required across your top clients, you have just added a consent campaign to your closing checklist, and every one of those conversations is a chance for a client to reconsider.
4. Pricing basis. A percentage of collections tracks the client’s growth. A flat monthly fee or a per-provider fee does not. Buyers generally prefer percentage of collections because it participates in upside, but they will look hard at whether the percentage has been eroded by side agreements.

An owner who can hand over a clean contract schedule, with term, notice, assignment and pricing for every client above a threshold, has removed weeks from the process and a large amount of perceived risk. This is unglamorous work and it is the highest return preparation available in an RCM sale.

The market your clients live in is growing

Concentration is a risk story, so it is worth balancing it with the demand story, which is good.

According to the National Health Expenditure Accounts published by the Centers for Medicare and Medicaid Services, spending on physician and clinical services reached 1.11 trillion dollars in 2024, up from 1.027 trillion dollars in 2023. That is growth of 8.1 percent in one year, against 7.2 percent growth for total national health expenditures, which reached 5.279 trillion dollars.

That is the base your fee is calculated on. When a buyer models an RCM company on a percentage of collections, this is the tailwind they are allowed to assume, and it is the reason the sector attracts acquisition interest even when individual companies look small.

Why the service exists at all, in one federal number

If you have ever had to explain to a banker why providers pay someone else to bill for them, use this.

CMS estimates the Medicare fee for service improper payment rate each year through the Comprehensive Error Rate Testing program. For fiscal year 2025 the estimated improper payment rate was 6.55 percent, representing 28.83 billion dollars. The rate is not evenly spread:

• Part B providers: 8.44 percent, 9.62 billion dollars.
• Part A providers excluding the inpatient prospective payment system: 6.67 percent, 13.20 billion dollars.
• Hospital inpatient prospective payment system: 3.15 percent, 4.61 billion dollars.
• Durable medical equipment, prosthetics, orthotics and supplies: 24.12 percent, 2.27 billion dollars.

Read the spread rather than the headline. Getting a claim right is roughly eight times harder in durable medical equipment than in hospital inpatient billing. That is the clearest available evidence that specialty expertise in this business is a real asset rather than a marketing claim, and it is an argument a seller in a hard specialty should be making out loud.

One honest caveat, since we are citing it: the improper payment rate measures documentation and coding compliance with Medicare rules, not fraud, and the reporting period behind the fiscal year 2025 figure is July 1, 2023 through June 30, 2024. Use it as a statement about the difficulty of claim accuracy, which is what it is, and not as a claim about anyone’s billing behavior.

The labor mix tells a buyer what kind of company you are

There is a second number buyers read alongside concentration, and it separates two businesses that look identical on a profit and loss statement: the mix of clerical work against clinical documentation work.

The Bureau of Labor Statistics National Employment Matrix projects the two halves of this workforce moving in opposite directions between 2025 and 2035:

• Medical records specialists, the coding and health information side: 200,700 in 2025 rising to 216,300 in 2035. That is growth of 15,600 positions, or 7.8 percent, with about 14,000 openings a year.
• Billing and posting clerks, the clerical side: 418,000 in 2025 falling to 417,700 in 2035. That is a decline of 200 positions, effectively flat at minus 0.1 percent, with about 37,000 openings a year driven almost entirely by replacement rather than growth.

Wages from the BLS Occupational Employment and Wage Statistics for May 2025 put medical records specialists at an annual mean of 56,790 dollars, with a median of 51,140 dollars, and billing and posting clerks at an annual mean of 51,070 dollars.

The federal statistical agency responsible for projecting American employment expects the coding and documentation function to grow and the keying and posting function not to. A buyer reading your staffing plan is reading the same forecast. A company whose value sits in coders, denial specialists and specialty knowledge is buying into the growing line. A company whose value sits in the number of people processing transactions is buying into the flat one, and that is the part of the workforce most exposed to automation.

This is worth saying plainly because owners often present headcount as evidence of scale. In this sector, and in this decade, headcount in the clerical function is closer to a liability than an asset unless it is clearly attached to work that needs judgment.

The offshore question

Many RCM companies run some portion of their work offshore, either directly or through a vendor. Buyers do not treat this as good or bad on its own. They ask three things, and an owner should have the answers ready.

• Does every client know? Client agreements and business associate agreements frequently address offshore processing. A mismatch between what the contract says and what actually happens is a diligence finding that is expensive to unwind.
• Is the arrangement contracted or personal? A vendor relationship that survives a change of ownership is an asset. An informal arrangement that depends on the owner is a transition risk.
• What happens to the margin if it has to come back onshore? The buyer will model that scenario whether or not it is likely, because their own client base may require it.

What a buyer will ask for

1. Revenue by client, monthly, for thirty-six months. Not a summary. The monthly series shows which clients are growing, which are shrinking, and whether anyone has quietly left.
2. A contract schedule covering term, renewal, notice period, assignment or change of control language, and pricing basis for every client above a stated threshold.
3. Client tenure and the churn history. How many clients joined and left in each of the last three years, and why. Owners tend to remember the wins. Buyers want the losses, and they will find them in the revenue file anyway.
4. The staffing map, separating coding and denial work from clerical processing, with location, employment status and cost per function.
5. Specialty mix across the client base. A company concentrated in one difficult specialty has defensible expertise and concentrated exposure at the same time. Show both sides.

What to do in the twelve months before you go to market

1. Paper the expired agreements first. Every client operating without a current signed contract is a discount waiting to be applied. This is the cheapest and fastest item on the list.
2. Fix the assignment clauses on renewal. Where an agreement requires client consent for a change of ownership, negotiate that language at the next natural renewal rather than in the middle of a sale process.
3. Grow the denominator deliberately. The honest way to reduce concentration is to add clients. If your largest client is a large share of revenue, adding mid-sized clients over a year moves the percentage more reliably than anything else available to you.
4. Transfer the relationships. If the owner is the named contact on the top accounts, introduce a second person into those relationships now. Buyers price owner dependence and client concentration as one compounded risk, not two separate ones.
5. Separate the two workforces in your own reporting. If you cannot show what your coding function costs against what your clerical function costs, you cannot make the argument in the previous section, and the buyer will make the less flattering version of it for you.
6. Do not discount to retain a client during a sale. Cutting your percentage to keep a large account right before going to market lowers the revenue the buyer is valuing, and it usually gets discovered.

What concentration does not decide

• It does not make a company unsellable. Concentrated RCM companies trade. The structure changes, not the outcome.
• It does not outweigh clean financials. Accrual-basis statements with the owner’s compensation properly bridged will do more for your price than a year of concentration work.
• It does not produce a multiple. There is no primary source that publishes verified transaction multiples for privately held RCM companies, so this article does not print one. Ranges circulate freely in the market and none of them discloses a transaction set.
• It does not replace compliance. Documented policies, business associate agreements, and a clean security posture are table stakes, and their absence stops deals that concentration alone would not.

Where this fits with the rest of the picture

We wrote earlier about what automation and the prior authorization rules are doing to this sector, in Selling a Medical Billing or RCM Company in 2026: What AI and the New Prior Auth Rules Do to Your Valuation. That piece is about the forces acting on the whole industry.

This one is about the specific structure of your own revenue, which is what a buyer can see in a spreadsheet in an afternoon. Both matter, and the second is the one you can still change.

You can see how we work in this sector on our revenue cycle management advisory page. It may also help to look at the provider side, since those are your clients: our current inventory includes a San Diego home health agency and a Medicare certified hospice in metro Atlanta. Those are provider businesses rather than billing companies, and they are shown as examples of live inventory rather than as comparables.

If you are twelve to twenty-four months from an exit, the prepare for your exit section of our seller learning center covers the wider readiness work. If you would like a confidential read on where your company stands, including a concentration and contract review, contact us. Vallexa Advisors works on a success fee basis, so the first conversation costs you nothing but an hour.

Frequently asked questions

Sources

• Centers for Medicare and Medicaid Services, National Health Expenditure Accounts, historical tables, national health expenditures by type of service and source of funds, calendar years 1960 to 2024. Physician and clinical services and total national health expenditures, 2023 and 2024.
• Centers for Medicare and Medicaid Services, Comprehensive Error Rate Testing program, fiscal year 2025 Medicare fee for service improper payment rate by claim type. Reporting period July 1, 2023 through June 30, 2024.
• U.S. Bureau of Labor Statistics, Employment Projections, National Employment Matrix, 2025 to 2035, occupations 29-2072 medical records specialists and 43-3021 billing and posting clerks.
• U.S. Bureau of Labor Statistics, Occupational Employment and Wage Statistics, May 2025, occupations 29-2072 and 43-3021.

This article is general information about market conditions and is not legal, tax, accounting or investment advice, and it is not a valuation of any specific company. Figures are current as of September 14, 2026. Contract language should be reviewed with your own counsel.