Should You Buy Another Medical Billing Company to Grow? A Strategic Guide for Revenue Cycle Management Leaders

The medical billing industry is experiencing unprecedented growth, with acquisitions becoming an increasingly popular strategy for companies looking to expand their market share and capabilities. However, the decision to buy another medical billing company to grow requires careful consideration of multiple factors, timelines, and strategic alternatives that many business owners overlook.

The Real Timeline: Why Acquisitions Take Longer Than You Think

When considering whether you should buy another medical billing company to grow, the first reality check involves understanding the actual timeline. Most business owners assume they can complete an acquisition within a few months, but this assumption is fundamentally flawed.

The Acquisition Process Breakdown

The acquisition timeline typically unfolds as follows:Sourcing Phase (3-12 months):

• Finding companies that meet your criteria
• Engaging serious sellers (not ego-driven valuations)
• Initial discussions and preliminary agreements

Due Diligence Phase (2-3 months):

• Financial audits and verification
• Operational assessment
• Legal and compliance reviews
• Technology integration planning

Closing Phase (1-2 months):

• Final negotiations
• Legal documentation
• Regulatory approvals
• Transfer of assets and operations

The reality is that you’re looking at 18-24 months minimum from initial search to completed acquisition. This timeline becomes even more extended when you factor in deal failures, competitive bidding situations, and the need to evaluate multiple targets before finding the right fit.Learn more about growing your medical billing business through strategic planning and implementation.

The Numbers Game: Why Most Deals Don’t Close

One of the most overlooked aspects of medical billing acquisitions is the failure rate. Private equity professionals understand that acquisitions are fundamentally a numbers game where:

• Less than 50% of identified targets result in completed deals
• Competitive bidding often drives prices beyond reasonable multiples
• Due diligence reveals operational issues or misrepresented financials
• Integration challenges emerge that weren’t initially apparent

Case Study: The Quarter Billion Dollar Outbid

A recent example illustrates the competitive nature of healthcare M&A: a large private equity group bidding 17x EBITDA on a target company was outbid by a quarter billion dollars by not one, but six different bidders. This level of competition is increasingly common in the medical billing space, particularly for high-quality targets with strong EBITDA performance.According to Morgan Stanley’s healthcare M&A trends analysis, healthcare consolidation continues to reshape the industry landscape, with increased competition driving up acquisition multiples across all sectors.

Strategic Goals: Defining Your Acquisition Purpose

Before deciding whether you should buy another medical billing company to grow, clearly define your strategic objectives:

Revenue Growth Objectives

Scenario: You’re a $5 million revenue company wanting to double your size.

• Acquisition timeline: 18-24 months (if successful)
• Organic growth timeline: 3-5 years typically
• Risk factors: Integration challenges, client retention, cultural fit

Geographic Expansion Goals

For most markets outside of highly regulated states like New York, geographic expansion rarely justifies acquisition costs. The barriers to entry in new markets are generally manageable through organic expansion strategies.

Specialty Diversification Strategy

Adding new specialties through acquisition can be highly effective if you’re already operating at scale. However, this strategy requires careful consideration of operational complexity.

The Specialty Acquisition Dilemma: Scale Matters

The medical billing industry benefits enormously from economies of scale within a single specialty. Consider these operational realities:

Single Specialty Scale Benefits

At $2-3 million revenue in one specialty:

• Limited specialized staff
• Basic automation capabilities
• Owner heavily involved in daily operations

At $10-20 million revenue in one specialty:

• Dedicated specialty expertise
• Advanced automation and workflows
• Management layer reduces owner involvement
• Enhanced training and development programs

Multi-Specialty Complexity Challenge

Adding a second specialty before achieving significant scale in your primary specialty often creates operational challenges:

• Doubled firefighting: Daily issues now span multiple specialties
• Split resources: Limited ability to achieve economies of scale
• Training complexity: Multiple sets of procedures, coding requirements, and compliance needs
• Management overhead: Need for specialized leadership in each vertical

For companies under $5 million in revenue, adding a second specialty through acquisition may actually increase rather than decrease the operational burden on ownership.Discover strategies for medical billing automation that can help scale operations more effectively within your existing specialty focus.

Market Data: The Medical Billing Outsourcing Landscape

The medical billing outsourcing market is experiencing robust growth, with the global market reaching $17.15 billion in 2024 and projected to reach $54.17 billion by 2034. This growth is driven by:

• Increasing healthcare costs and complexity
• Technology advancement requirements
• Regulatory compliance demands
• Provider focus on core medical services

However, this growth also means increased competition for acquisition targets and higher multiples, as detailed in Precedence Research’s medical billing market analysis.

Alternative Growth Strategies to Consider

Before committing to an acquisition strategy, evaluate these alternatives:

Organic Growth Acceleration

• Digital marketing investment to generate steady lead flow
• Specialty expertise development to command premium pricing
• Technology acquisition rather than company acquisition
• Strategic partnerships for referral generation

Hybrid Approach: Small Specialty Acquisitions

For larger companies ($25+ million revenue), consider acquiring smaller specialty players ($2-3 million revenue) to:

• Enter new specialties at lower cost
• Reduce integration complexity
• Maintain focus on organic growth post-acquisition
• Pay lower multiples for smaller targets

Due Diligence Red Flags for Medical Billing Acquisitions

When evaluating potential targets, watch for these warning signs:

Financial Red Flags

• Declining client retention rates
• Concentration risk (too dependent on few large clients)
• Inconsistent monthly recurring revenue
• Unusual accounts receivable aging

Operational Red Flags

• High staff turnover in key positions
• Outdated technology infrastructure
• Compliance issues or recent audits
• Poor client satisfaction scores

Cultural Red Flags

• Misaligned values between organizations
• Unrealistic seller expectations
• Lack of standard operating procedures
• Resistance to change or integration

Making the Decision: Acquisition vs. Organic Growth

The choice between acquisition and organic growth ultimately depends on your specific situation:

Choose Acquisition When:

• You’re operating at significant scale ($25+ million revenue)
• You need specific technology or expertise quickly
• You have proven integration capabilities
• You can afford 18-24 month timelines with potential failures

Choose Organic Growth When:

• You’re under $10 million revenue
• You haven’t maximized your current specialty potential
• You want to maintain full control over growth pace
• You prefer predictable, sustainable expansion

Conclusion

The question of whether you should buy another medical billing company to grow doesn’t have a universal answer, but it does require honest assessment of your current scale, resources, and strategic objectives. While acquisitions can accelerate growth, they’re not the quick fix many entrepreneurs expect.For most medical billing companies under $10 million in revenue, organic growth strategies often provide better returns with lower risk and more predictable timelines. Focus on maximizing your current specialty expertise, building robust operational systems, and establishing strong market position before considering acquisitions.When you do reach the scale where acquisitions make strategic sense, approach them with realistic timelines, thorough due diligence processes, and clear integration plans. Remember that in the medical billing industry, successful growth is about operational excellence and client satisfaction – qualities that can’t be easily acquired but must be built over time.