Start by dividing payments (net of credits) by charges (net of approved contractual adjustments) for the time period that you want to monitor. Then multiply by 100 to get the percentage value. Payments need to match with their originating charges for the most accurate calculations, so you might want to number these by “date of service” instead of “date of post.” If your practice management system can’t match payments with their originating charges, the practice should calculate this using aged data, typically from six months back, to ensure a majority of the claims used for the calculation have had enough time to clear.
Measure Your Performance
Keep your reporting consistent by basing your calculation on a time period of at least 1 year—in other words, consider using a rolling 12-month schedule to calculate these figures. As with all billing indicators, performance as measured by the adjusted collection rate will be influenced by the payer mix and specialty of your practice, as well as the level of automation in your practice’s billing and collection cycles.
The Medical Group Management Association (MGMA) recommends a net collection ratio of 95% or higher; anything below that figure generally means you have room for improvement and can be an indicator of poor performance. Many practices are able to perform higher than this with expert management of their medical billing. Charge value can be calculated as charges minus your contractual adjustments. This really tells you how much of the charge value you collected. This figure reveals how much revenue is lost due to factors such as uncollectible bad debt, untimely filing and other non-contractual adjustments.