What’s Your Practice’s Net Collection Rate Score?

Do know how well your medical practice is performing? You may have a general idea as to the productivity and health of your business, but if you’re simply deriving an opinion off a “gut-feeling” rather than hard numbers – you might be surprised to learn the truth.

The reality is that many practices are not performing optimally. Additionally, many doctors are very busy with the day-to-day clinical responsibilities that their medical practice demands of them, they don’t have time to sit down and analyze every aspect of their business themselves. As a result, many doctors are relying on their practice manager to provide reports to validate the data. Or, playing the guessing game trying to figure out what’s wrong.

The Importance of Net Collection Rate

One of the most important metrics you can use to gauge the financial health of your medical practice is calculating your Net Collection Rate (NCR) or Adjusted Collections Rate. Net collection rate is a measure of a practice’s ability to collect reimbursement for services rendered. Specifically, it’s the total reimbursement received out of total reimbursement expected when based on contractual obligations. To put it another way, Adjusted Collections = Collectable Revenue (exclusive of contractual and noncontractual adjustments) divided by Net Charges (allowables). Net collection rate lets a practice see how much revenue is lost due to factors like uncollected payments and errors in processing.

How to Calculate Your Own NCR

In order to calculate your own net collection rate, you need to divide the sum of your gross charges apart from your contractual adjustments. For instance, if your practice collected only $60 out of $80 for services rendered, your net collection rate would be calculated as such:

(60 ÷ 80) 100 = 75% ncr

When dividing $60 by $80 and then multiplying by 100, we receive a total net collection rate of 75%. This means that you were only able to collect 75% of the total dollar amount of services rendered. On average, a well-run medical practice should have a net collection rate of 97% or higher. Practices whose net collection rate percentage is lower clearly have some deficiencies that need to be pinpointed and addressed.

Is Your Net Collection Rate below Average?

It could be that your data is being skewed by a small number of payers. However, if you see a trend across the board, it could mean that you need to analyze your billing process to see if you’re collecting copayments and deductibles and submitting claims properly. Your practice manager and you should review this data regularly to ensure the longevity of your practice.

Get a Comprehensive Medical Practice Analysis

Navigating today’s healthcare environment has become increasingly challenging. This reality means it is more difficult than ever to grow and sustain a financially healthy business. We can help take some of the uncertainty out of the process by conducting a comprehensive analysis of your practice. Contact us today to begin the process.

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:Sources:

http://medicaleconomics.modernmedicine.com/medical-economics/news/user-defined-tags/adjusted-collection-rate/use-net-collection-rate-gauge-fina?page=full

http://www.physicianspractice.com/qa/understanding-collection-rates\