Correctly Calculating a Practice's Percent Collections

There are several billing and collections componentsin your practice that need reviewing from a statistical standpoint.  One is the percent collections you are able to obtain on a monthly basis.

I had an interesting conversation with someone this past week. It surprised me to learn that other people did not realize that your percent collections is based upon your payer mix and that you have to factor in contracted rates.  Let me explain:

When you are calculating your percent collections, are you basing it strictly from your billed out charges?  If so, you're not seeing the bigger and more important picture.  Sure, "it's been done like that forever and is a benchmark within the industry", but there are some areas that need a better look and review of what is really going on with your A/R. 

Adjustments are made throughout the month and they consist of what is left over from your billed charges, the patients' cost-share, and the payment from the insurance company.  So, let's say you bill out $125, your contracted rate with Blue Cross is $75, and they pay you $60with the patients' cost-share of $15. 

Your adjustment amount is $50, and your percent collections would be 100 percent since you were paid for your services from the insurance company and the patient.  By removing the adjustments out of your collections percent, you have a better idea of how healthy your overall receivables are.  Adjustments can also be what I consider a clinic error (i.e., did not obtain proper authorization, did not collect from the patient, seeing a patient with an insurance you do not take, etc.).  These types of errors should be tallied each month and calculated into your overall percent collections.  It will help you identify where training may be required.

The other factor to consider when calculating your percent collections is your payer mix.  In one example, a healthcare provider organization has six clinics spread throughout San Diego County, and each location has a different payer mix and therefore will have a different percent collections.  If one office primarily sees Medicare patients, their inflow will be greater than the location that sees primarily HMO patients that have a $30less payment per visit.  You have to also consider the economic areas where your patients live and what types of insurance plans they can afford.

In other words, be careful if you are doing to old standby calculation of straight percent collections based upon billed charges and have different locations throughout your area.  The story the numbers tell could be very drastic and contrary.  This is particularly important if you have an incentive program based upon the percent collections for your staff.