Another physician practice benchmark metric – net collection rates

Attaining the highest reimbursement possible is essential to maintaining a healthy revenue stream. But sometimes, due to unforeseen circumstances, you don’t always receive the payment you expect. As a long time consultant and CPA to physician medical practices, I understand the financial frustrations of medical practices. In continuation of my blog metrics series, today’s blog post identifies the percentage of reimbursements you should be receiving after the claims cycle is complete.

Metric – Net Collection Rates

What It Is

The net collection rate is the percentage of total potential reimbursement collected out of the total allowed amount. It is also commonly referred to as the “adjusted collection rate.”

Calculation

(Payments – Credits) ÷ (Charges – Contractual Adjustments)

Benchmark

Your net collection rate should be above 95%.

Why It Matters

This metric lets you assess your practice’s effectiveness when all is said and done (i.e., claims have been submitted, denials processed, patients billed).It tells you objectively the share of the revenue your practice deserved, but left on the table. The lost opportunity reflects factors within your practice’s control (e.g., untimely filing) and others beyond its control (e.g., uncollectable debt).

Weak ongoing net collection rates may compel practices to replace staff, revamp processes, invest in new tools or outsource revenue cycle management to increase profitability.