To have a successful healthcare business, one of the most important areas you need to focus on is collections. The net collection rate has long been a standard healthcare providers use to measure their organization’s financial success.
It can be tough, however, to understand how to calculate your facility’s net collection rate and to know whether it fits within the average. Learn more about how to calculate your net collection rate in medical billing and what you can do to improve it.
At its core, a net collection rate is a performance metric. It allows you to see how efficient your business is at collecting reimbursement for the services you’ve provided. The net collection rate deals with the amounts owed once payer contract adjustments have been made.
If your practice or facility is struggling with revenue cycle collections because of late filings, claim underpayments, or coding errors, it will usually have a low collection rate. Conversely, if you’re able to send timely bills, adjudicate claims, and collect patient balances, you will notice a high collection rate.
The net collection rate in medical billing is very closely tied to your revenue streams. As such, it’s perhaps one of the most crucial metrics, giving you a snapshot of what is working and what isn’t.
To start making the necessary changes to improve your net collection rate, you first have to understand how to calculate it. A basic net collection rate formula begins with identifying the period you want to monitor. Most often, people choose 60, 90, or 120-day stretches.
Take a look at the data from that period and calculate total payments, both from patients and payers. Calculate the net charges for that same time. You can do this by taking your total or gross charges and subtracting third-party and government adjustments.
The next step is to divide your cash collection dividend by your net charges and then multiply the results by 100. You will need to do this every 90 days or so for about a year to get an accurate net collection rate.
So what is a good collection percentage? Although the highest-performing providers achieve a net collection rate of 99%, anything at 95% and up is a good rate. A percentage below that number is a sign your business is losing revenue.
To monitor your collection rate, one of the most crucial steps you can take is measuring how long it takes to collect payments. Accounts receivable tells you how many payments you’ve not yet collected.
You want to go for an average of 30 to 40 days. If your accounts receivable is longer than that, you should look for ways to streamline the payment process.
It’s also a good idea to take a look at payments that are overdue. The longer the payment remains unpaid, the more likely it is to become impossible to collect at all. If you see a significant number of overdue payments, it can point to inefficiencies in your collection processes.
If your collection rate falls below the 95% rate, there are steps you can take to improve it.
You want to make it easier for patients to pay, and one of the best ways of achieving this aim is by implementing point-of-service collections. These can ensure that no one leaves the office without paying an outstanding bill while also helping you avoid the hassle of chasing after these payments later on.
You should also seek to improve coding accuracy. Doing so will assist with billing errors and claim rejections. At the same time, standardize billing processes across your organization to help minimize mistakes.
You want to make sure your patients know their financial responsibilities. A good time to do so is pre-appointment. Set up appointment reminders for patients to inform them of what they have to pay up front for services.
Educate patients on insurance coverage, co-pays, and deductibles so that they know what the process involves. Additionally, make sure that patients understand exactly what their payment options are, and set clear expectations for due dates and late fees.
Giving patients the chance to pay in ways that are convenient for them makes it more likely that they will do so on time. You may want to consider installment plans with automatic payments. Make sure you can accept credit and debit cards and offer secure online payment portals.
Working with third-party financing can also be an important option. This allows patients to apply for loans, especially for medical expenses. To encourage upfront payment, you may also want to offer incentives like discounted rates for those who settle their bills in full.
Significant recent software advancements have made keeping track of your revenue cycles significantly easier. By relying on Rivet Health, you can get access to payer performance metrics, manage claim denials and underpayments, and even easily reference fee schedules. Being able to see this information quickly and easily affords you more control over your collections.
Our software can provide crucial benefits. Not only will you be better able to notice your company’s problems in the collection process, but you’ll also get assistance with addressing those challenges.
To have a vibrant healthcare business, you need to ensure that your net collection rates reach at least 95%. This can seem impossible to achieve if your processes aren’t efficient, but there are solutions. One of them is Rivet Health.
Rivet Health offers tools to help your business improve its financial health by demystifying fee schedules. With our revenue diagnostic, patient pricing, and contract management tools, we can help you understand the problem and then find the solution.
Schedule a demo with Rivet Health to see what we have to offer.