For physician practices and their medical billing firms, net collection rate has always been a metric with huge implications for financial success. But in today’s healthcare environment, it’s more important than ever before.
With patients paying more for their own care and insurers looking for practically any reason to deny claims (and save themselves money), monitoring collections closely is the only way to spot troubling trends and minimize undue losses.
But practices must do more than just check the net collections rate once per quarter and circulate the information it to the organization’s higher-ups; they need to watch regularly for fluctuations and investigate where and why any problematic changes take place.
It starts with understanding how to assess your net collection rate, which involves several important steps:
- Identify the time period that you want to monitor (e.g., 90 or 120 days). Assess data from an earlier period in which the majority of claims would be closed and cleared; ~6 months back is advisable.
- Calculate total payments (from payers and patients) for the designated time period.
- Calculate total charges minus approved write-offs (e.g., due to contractual reasons, bad debt, professional courtesy discounts, etc.) for the designated time period.
- Divide your calculation in step 2 by your calculation in step 3. Then multiply by 100.
- Do this consistently (e.g., every 90 days) for a period of at least one year to get the most accurate average rate.
A 96% net collection rate is considered ideal across the industry. Once you know how your baseline collection rate stacks up to that goal, use information from your medical association or HHS to compare it to industry averages. From there, set an objective: How much would you like to see it go up? How significantly would that affect your revenue stream?
If there’s a major gap between the score you have and the score you want, investigate why. Is there a particular insurer dragging you down with denials? A strong proportion of non-paying patients in a given specialty? An overlong delay in claims submission and reimbursement? Pinpoint the source of your problems, and set an attack plan.
That plan will differ depending on your issues and your goals for improvement (options include contracting with a collections agency, dropping non-paying patients or payers, switching to a new medical billing service, and so on). Once you have the basics of improvement covered – by ensuring your front desk staff is on top of co-pays and that your patients understand your payment policies – you can take a more tactical approach. Auditing claims, coordinating more closely with payer reps, and tasking staff with follow-ups can help ensure you collect every single dollar owed and that your net collection rate gets as close to 100% as possible.
...and if you need help from a medical billing company...