Bill Sample / December 10, 2018 / Lessie Larson
Net collection rate is defined as a ratio of Total Collections and Total Charges less Adjustments. Gross collection rate is defined as a ratio of Total Collections to Total Charges only.) According to Medical Group Management Association (MGMA) 1998 Cost Survey adjusted fee-for-service collections (net collections) for family practices in 1997 averaged 98.65 percent. A declining net collection ratio may be symptomatic of increased contractual write-offs or insufficient number of denial appeals. This metric is especially useful in the absence of modern computer technology when comparison of every payment to allowed amount is impossible or when appeal process of denials is too expensive. Otherwise the use of charges in defining gross and net collection metrics precludes them from productive discovery of process improvement opportunities.
It is a good idea to try to think of everything that can go wrong in the relationship and write down your feelings about how those situations should be handled. You should be able to come up with a long list. In the circumstances of a new biller it can be difficult to know what can go wrong. It has been sixteen years since we started our medical billing business and we are still learning about new things that can go wrong. Most providers expect to sign some form of contract when using a third party service and generally expect the billing service to produce it. They want to make sure they are covered as well as the medical billing service. Going over the contract with a provider starting out with you can set the stage for a successful relationship. You can go over the terms carefully making sure the provider understands what you need to make it a beneficial partnership. Most of us when we are starting our businesses do not realize how much a good contract can affect their business.
Useful metrics must be comprehensive and simple. They must combine both complete end-to-end processes and their individual components. Metrics must be used consistently over time and compared to standards. Obviously different standards apply to different medical specialties patient demographics payers and samples of CPT codes. Medical billing metrics typically include compliance cash balances charges accounts receivable and collection ratios to help monitor cash flow. This article focuses on performance metrics. For discussion of compliance program see companion article on Medical Billing Compliance. Collection Ratios Traditional metrics include gross and net collection ratios. Both metrics are subjective to individual practice because they compare (often arbitrary) charges to (allowed) payments.