Significance of a Strong Net Collection Ratio_ An Important Metric For Your Healthcare Business

When did you last examine your net collection rate as an element of your business’s financial health? Tracking this rate has always been paramount; besides, it is definitely crucial in the latest healthcare scenario. There are two reasons. Firstly, high deductibles have shifted the financial burden to the patients who can’t pay. Secondly, in terms of documentation specificity insurers have become more demanding. Uncollected revenue skyrockets when all this is happening.

Physicians are under financial turmoil and sunk in unique circumstances due to ever-shifting regulatory guidelines. It is difficult to remain financially healthy for a physician practice due to insulting potential changes in the regulatory environment. Here the question is if you are not monitoring your collections how would you know you are paid correctly or not?

What Is Net Collection Rate?

Basically, it is a performance metric that measures how efficient your business is at collecting. After ensuring all-payer contractual arrangements you get payments for all authorized types of reimbursement for services. A physician practice can have a low net collection rate if it struggles to collect revenue due to claim underpayments, coding errors, late filing, etc.

The most important performance metric to monitor is the net collection. It directly ties to the revenue stream of a healthcare organization. The rate signifies a picture of economical efficiency and well-being. You can treat a low rate with an urgent priority. As it comes to collecting revenue if it shows a low net collection rate it becomes a persistent issue for a physician practice. This exhibits a healthcare business inefficiency with patient communication and relation.

What Should Be The Rate Of Your Net Collection?

The ideal industry rate of net collection is 96%. Your business will lose revenue if a stat below 95% clean claim ratio shows up. This means you have to rework the rejected claim and your business has to spend more money. In fact, many physician facilities have a rate from 76%-86% which indicates that at minimum each month you have to rework the submitted claims of 16%-24%. When you reach your goal of baseline collection rate utilize data from HHS & your healthcare organization to compare it to the averages of the market. At this point, you become able to set a collections metric objective according to how this will impact your physician revenue cycle management and how much you would like to view it goes up. Following are some culprits to decrease net collection rates:

  • Claim Denials.
  • Non-Paying Patients.
  • Unbilled Patients/Unsubmitted Claims.

Significance Of Strong Net Collection Ratio

The most significant collections metric, the net collection ratio provides visibility to see what your physician practice is allowed to collect and what is actually being collected after figuring out any write-offs, refunds, non-contractual & contractual amounts. Consequently, it is the most important performance metric as it provides a clear snapshot of the benchmark performance of your medical practice.

You can identify where the healthcare organization is losing its revenue once your net collection rate is optimized. It is particularly significant as many insurance payers have become more demanding in documentation terms and increasing their denial rates. Your physician practice must investigate what procedures are required to streamline for success when the net collection ratio indicates your facility is underperforming.

The causes for a leap gap between the level you want and the level you have can have a variety of reasons, yet have identical results: a drastic impact on the financial stability of your facility. To identify the true potential revenue of your practice, examine what is the reason behind the decrease in your net collections rate?

For example, are a specific payer hauling down your claim rejections? A huge delay in reimbursement and claims submission? High numbers of non-paying patients in a specific specialty? Investigate the reasons behind the issues, and implement efficient strategies to fix them on time.

Calculating Net Collection Rate

You gain a complete view of your revenue cycle management when you understand your net collection rate. You should circulate the data to the higher-ups of your organization and check the rate once per quarter. You must keep a follow-up to view or evaluate the rate over a period of time to figure out loopholes and see why problematic changes occur.

How to calculate your net collection rate? Following are the significant ways:

  • Calculate entire payments (from patients & payers) for the selected time span.
  • Determine the time interval that you need to observe (i.e, ninety or one twenty days). Evaluate information from a previous time span by which the several numbers of claims would be cleared or closed; for example, it is advisable to see the 6 months back claims.
  • Calculate whole charges minus authorized write-offs for the designated time period (for instance, due to bad debt, contractual reasons, professional courtesy discounts, etc).
  • Divide step 2 calculations/step 3 calculations. Next, multiply this by 100.
  • Repeat this procedure for at least one year after approximately every 90 days consistently to get the most precise average rate.

Strategies For Improving Your Net Collection

Spending on your objectives to make improvements and issues is key to success. You can take a more tactical approach when you have the fundamentals covered. For example, your patients comprehend your payment policies, your front-end staff stays at peak of co-pays, etc. Besides, while auditing claims, the staff keeps up with the follow-ups and helps them coordinate with payer reps more closely. This assures that your net collection rate gets as close to a hundred percent and you collect every single dollar you owe. Some strategies for improving your net collection rate are following:

Educate Your Patients

Many patients while consuming physician medical services may not have a clear sense of their financial responsibility and have a vague understanding of how healthcare organizations collect the reimbursements from the payers. You must educate your patients about the payment choices and selections so they can understand their roles as well as responsibilities in the processes of payments. This way their confusion would be further cleared up. Moreover, your staff must be efficient enough to solve the patients’ queries regarding how the payment process and claims processing works.

Implement Point-of-service Collections

Initial point-of-service collection at the front-end office is the best way to collect the deductibles and copays. This helps you avoid the afterward hassle of collecting payments and ensures that no one leaves the room having an outstanding bill- this is just inconvenient for both practice and patients as well. It is necessary to make this approach effective so you can set appointment reminders that would remind the patients about upfronts. From there, you can discuss other payment options with your patients or their appointments can be rescheduled which would be also beneficial when the patient is unable to pay the cost at that time.

Provide Patients Payment Options

It requires some investment on the front-end when you expand payment options but it can have a huge effect over time on net collections. About thirty years ago, it was an efficient way to ask the patients to write a cheque and mail out a billing statement but nowadays it is not effective. Patients as consumers commonly pay for the rendered administrations in several ways whether using an online portal, credit/debit card, or use a mobile app. An installment plan is the only way for other patients to pay their medical bills. When they have multiple payment options they become able to pay their bills quickly and can pick the best options that fit their needs.

Different Medical Billing Rates Tracking

To get the best understanding of your overall success and efficiency tracking different medical billing rates is one of the most excellent collections metrics for your practice other than net collection rate. You will stay ahead of any challenge of revenue cycle management and prepare your medical practice once you track the other metrics.

Calculate Consistently

Your healthcare organization needs to calculate your net collection ratio consistently. This rate can be analyzed quarterly, monthly, annually, semi-annually. So the greater the time you take the more information you will capture to get a complete assessment of your practice’s performance. You will get the most precise approximate rate when you calculate net collection for a period of at least one year after every 90 days.


Collaborating with a reliable billing company is the fastest way to implement a revenue metric around. Professional physician medical billing services help you maximize revenue by submitting claims to payers and overhaul the way your staff codes services. Physician billing experts free up the time of office staff to concentrate on giving the best care and service possible. They help you improve the healthcare experience of your medical business to completely retain the patients you already have. A billing agency can focus on expanding the patient base of practice rather than spending hours on the telephones trying to collect outstanding payments.

Physician billing company has vast experience with handling medical billing & coding issues for a variety of facilities. We work closely with our clients and provide them with advanced physical billing solutions that allow them to deliver the best care possible and meet their specific needs. Contact our team today for a consultation & find out what we can do for your practice!


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