Net Collection Ratio.
Aim for 95% or better
As a pediatric practice owner, you must keep track of your practice's financial health. One of the key financial metrics that can help you assess your practice's financial performance is the net collection ratio. This post explains the net collection ratio and why it is essential for your pediatric practice.
What is the Net Collection Ratio?
The net collection ratio is a financial metric that measures the effectiveness of a practice's collection efforts. It is calculated by dividing the total payments collected by the charges billed minus insurance adjustments. The net collection ratio provides a measure of the percentage of billed charges that are collected.
Why is the Net Collection Ratio Important?
The net collection ratio is essential for several reasons. Firstly, it indicates how effectively your practice collects payments for your services. A high net collection ratio means that your practice is collecting payments promptly and efficiently, which can improve cash flow and overall financial performance. On the other hand, a low net collection ratio indicates that your practice needs to collect payments effectively, which can lead to cash flow problems and financial difficulties.
Secondly, the net collection ratio can help you identify areas where your practice can improve its collection efforts. For example, if your net collection ratio is low, you may need to review your collection procedures at the time of service.
There are many ways that practices achieve this goal :
Collect The Deductible equal to 99213 for a plan at check-in
At check out, calculate the patient's responsibility and collect it
Hold a credit card on file for auto-pay
Collect an amount equal to your average sick visit collections
Finally, the net collection ratio can help you track changes in your practice's financial performance over time. Monitoring this metric regularly allows you to identify trends and adjust your collection efforts. You aim for 95% or better; here is the math.
Charges $1,000,000
Insurance Adjustments of $600,000
Collections $300,000
Net Collection Ratio $300,000/$400,000 = 75%
You lost $100,000
In conclusion, the net collection ratio is a significant financial metric for pediatric practices. It provides valuable insights into the effectiveness of your collection efforts and can help you identify areas for improvement. By tracking this metric regularly, you can improve your practice's financial performance and ensure that you provide the best possible care to your patients.
In my work, I suggest that anything less than 98-99% is trouble. 95% is too low, imo!
If you think about it...if you're routinely collecting 95% and can pay a billing service 6-7% and they get to 99%, you're really only paying 2-3% for the billing service (which is generally cheaper than running an internal billing department).