Here is how to collect and report that number:
1. Use a 6-month or 12-month database. Except for a very large medical group, a monthly report does not provide an accurate picture.
2. Next, show data on charges, payments and contractual adjustments.
Note: Contractual Adjustments describe write-offs that were agreed to when signing with the plans.
For example:
Practice Fee for a service is $100.
Plan ABC agrees to pay $80.
This leaves $20 that will not be paid by the plan. That $20 has to be “written off” to zero, as a Contractual Adjustment to your accounts.
3. Calculate the following:
Net Collection % = Payments / (Charges – Contractual Adjustments)
A Net Collection percentage for a well-run practice, as reported by MGMA data, and our consultants, is 97.5 percent.
Example:
$1 million practice:
$750,000 in payments / ($1,000,000 – $200,000)= 93.75%
For this practice, 6.25% of the $1,000,000 — $62,500 — was not collected, after contractual adjustments. Therefore, the practice’s net collection percent falls outside an acceptable range. This practice has “lost” an extra $37,500 ($62,500 minus $25,000), which is approximately equivalent to the salary of one employee.
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