December 2018 Dallas Medical Journal 7
Gross collections percentage: Money the practice collects,
compared to what is billed.
Example: The practice collects $60 when it expected to collect
$60 of a $100 charge; the gross collection percentage is 60 percent.
Formula: collections/charges
Adjusted collections percentage: Money the practice can
collect after contractual adjustments are made to the amount billed.
Example: The practice collects $60 when it expected to collect
$60 of a $100 charge; the adjusted collection percentage is 100
percent. Ideally, a practice’s net collections percentage should be 95
percent or more.
Formula: (collections – credits) / (charges – adjustments)
The formula is what you charge versus what you expect to lose. This
benchmark shows exactly what the practice is bringing in through
your contract discounts with the insurance companies and should
not vary by specialty.
This also shows you whether the plans itemize their adjustments
the same way — do they itemize contract adjustments versus
write-offs (past timely filings, prior authorizations or services that
were one-time payables)? One-time payables are coded differently
from contract payables. The percentage shows whether you are
appropriately billing and collecting. This percentage should be
obtained from your billing company or should be reviewed if you
are billing in house.
PRACTICE EXAMPLE 1
Would you want to join a practice whose adjusted
collections percentage looks like this?
In 2015 — it had a low adjusted collections percentage which
included a rise in accounts receivable (not receiving payment),
incorrect posting of payments and adjustments, and failure to write
off uncollectible amounts.
In 2016 — it had an adjusted collections percentage of
more than 100 percent, mainly a result of a large write-off of
uncollectible balances.
So, staff isn’t collecting or following best billing practices, and is
simply writing off those dollars.
What if your compensation were tied to collections? That
wouldn’t be good for your checking account.
Aged AR percentages: Accounts receivable is money owed to the
practice. An aged AR tells a practice how long that money has been
outstanding. Ideally, a practice will have less money outstanding
than the median benchmark.
Aging categories:
• Current (0 – 30 days)
• 31 – 60 days
• 61 – 90 days
• 91 – 120 days
• 121+ days
In general, claims that are more than 90 days old will have only an
11 percent collection rate. A well-operating practice will have fewer
than 10 percent of collections past 90 days.
PRACTICE EXAMPLE 2
Would you want to join this organization?
Look at the cells highlighted in yellow. These are the percentages
of a practice’s outstanding AR that are patient-responsible
balances — balances that patients owe the practice that are 4 or
more months old.
That percentage grew 20 percent in one year! This tells us that
billing processes are broken. The billing company wasn’t doing its
job of collecting money post-insurance payment, and check-in/
check-out staff weren’t collecting office payments at time of service.
Again, what if your compensation were tied to collections? Not
good, right?
Payer mix: Your payer mix is a percentage of revenue from all of
your payers — private insurance, government insurance and selfpaying
individuals. A shift in your practice’s payer mix can critically
impact your practice’s revenue potential. Ideally, a practice should
have an equal mix of payers from which payment is received. Each
plan should be 20 percent or less of collections. A loss of any single
payer should not jeopardize the financial health of your practice.