What Is The Net Collection Ratio?

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What Is The Net Collection Ratio?

Description:

Shows total collections, as it relates to expected contracted reimbursement rates from payors.

​Why is This KPI Important?

While a practice may charge $300 for a series of CPT codes, the managed care company may have a contract to pay you $210 when you add up the combined allowables for the billed CPT codes. As such, many practices use the Net Collection Ratio to examine the amount of payments compared to the negotiated rates.

​PMI Recommended Frequency to Run This KPI:

Monthly

​Formula:

Total Payments / (Total Charges - Contractual Adjustments)

Show the Math:

$500,000/ ($750,000 - $200,000) = 90.91%

How Should I Track It?

This KPI can be tracked using an Excel spreadsheet by Practice and/or Department.

 

 
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Paul Vanchiere, MBA

For over 15 years, Paul has dedicated himself exclusively to addressing the financial management, strategic planning, and succession planning needs of pediatric practices. His background includes working for a physician-owned health network and participating in physician practice acquisitions for Texas's largest not-for-profit hospital network, giving him a distinctive insight into the healthcare sector. Paul is adept at conducting comprehensive financial analysis, physician compensation issues, and managed care contract negotiations. He established the Pediatric Management Institute to offer a wide range of services tailored to pediatric practices of all sizes and stages of development, with a focus on financial and operational challenges. Additionally, Paul is actively involved in advocacy efforts to ensure healthcare access and educational opportunities for children with special needs.

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