Net Collections

We’re the best of the best when it comes to sorting out a company’s accounting issues, which is why we’ve been hired by Dr. Mal Practo to help raise her office’s net collections ratio.

“Net collections” refers to how much a medical company is paid over a particular period of time, and a “net collections ratio” is how much they get paid versus how much they actually invoice for. The goal is to have a net collections ratio somewhere in the neighborhood of 90% or higher (it’s probably never going to be 100%), and unfortunately, Dr. Practo’s is hovering right around 67%. Looks like we’ve got our work cut out for us.

“But wait,” some might be saying, “why doesn’t the office get paid for everything it charges for?” Good question. Here’s the answer: it’s complicated. One factor might be that the office is charging more for certain services and procedures than a person’s insurance company will pay. For example, if Dr. Practo is charging $10,000 for a mammogram, but a patient’s insurance company will only pay her $1,500, then our net collections ratio on that particular procedure is 15%. That’s pretty darn low.

Another factor is that some people are just never going to pay their medical bills in full. We can take steps to try and get our money, like hiring a collections agency, but the hard truth of the matter is that, in some cases, we’re just not going to get everything we invoiced for. Also, sometimes our net collections might fall because we just don’t have good accounting practices. Maybe we wait too long to bill insurance companies. Maybe we don’t go after people who don’t pay us. Maybe we tend to lose track of invoices altogether.

In other words, long story short (too late?), there are a bunch of things that can impact our net collections and our net collections ratio. But the higher that ratio is, the better our company looks financially, which is why it really behooves medical professionals to charge competitive fees (or at least, fees that most insurance carriers will cover), make sure they stay on top of their accounting processes and procedures, and have a process in place to recover as much as they can from patients who, uh...don’t want to pay their bills.