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Why the Net Collection Rate is the Key to a Healthy Dental or Practice

Healthy collections mean a healthy practice. If you’re writing off too many balances or writing off the wrong balances, you and your staff aren’t getting paid for your hard worth.  Your office needs a clear picture of what’s being paid, who’s paying it, and why some balances are unpaid. To really dig into this information, you first have to start tracking one essential statistic: your net collection rate.

Finding and Using Your Net Collection Rate

To find your net collection rate, you need to look at what you actually bill for each case, not your charge sheet. Since you may have different allowable charges for each payer, the master charge sheet may not give you an accurate idea of how much you can collect for a given procedure.  Instead, the total charges should be the sum of the patient payment and contracted third party payer amount for all procedures.

 Step 1: Find your total charges for a 12 month period.

Step 2: Calculate payments received for services performed during that period. If your practice management software does not allow you to match payments to the date of service, use aged data (for instance, 6 months old) to calculate the payments.  This ensures that the majority of the charges used in the calculation have cleared. 

For example, if your practice management software matches payments and services for you, and it is December 2017, you can calculate your net collection rate for December 2016-December 2017. If your software does not allow you to match payments, you’ll have to calculate for June 2016-June 2017.

Step 3: Divide your payments by your total charges and multiply by 100.  This gives your net collection rate in the form of a percentage.  A net collection of 78%, for instance, would mean that you were only collecting on 78% of the money owed to your practice.

Step 4: Analyze your net collection rate.  A healthy medical or dental practice should have a collections rate of 95% or better.  If your billing staff is especially skilled or you’re in certain specialties, it may be even higher.   If your net collection rate is lower than 95%, it’s time to take a hard look at the expenses you’re writing off.

Step 5: Make the Easy Fixes First.  If your net collections are below 95%, there may be some easy solutions to your problem.

  • Are you frequently writing off the patient portion of a procedure because you didn’t collect the copay up front? Change your collection procedures so that you can receive the copay at the time of service. 
  • Are your claims being denied by third party payers because of untimely filing? It’s time to train, expand, or outsource your billing staff so you can get those claims filed on time and paid. 
  • Are you receiving less than you expected from third party payers? Take the time to update all your fee schedules – you may be calculating expected payment based on outdated or incorrect information.

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