Monitor and analyze the gross collection percentage (dividing the practice’s collections by its gross production) on a monthly and year-to- date basis. The gross collection percentage is one of the most important statistics for the practice as it indicates how much of the office’s production is actually going into its bank account. Keep in mind that if the practice increases its gross collection percentage, its cash flow will increase accordingly. Thus, each month, you should determine if the percentage is reasonable, after taking into account the practice’s special characteristics.
Each medical practice has its own special characteristics that affect the gross collection percentage. Some characteristics have a direct impact on meeting the practice’s benchmark ranges. Where the practice will fall within these categories will depend on the practice’s payor mix (i.e., the breakdown of revenues between such payors as Medicare, Medicaid, commercial insurance, and managed care).
Also, the practice’s fee schedule directly impacts the collection percentages. These percentages assume a fee schedule that is at or near what is usual, customary, and reasonable. If the fee schedule is significantly low, the practice’s actual collection percentage may be artificially high when compared to the benchmarks. For example, if a practice has a high gross collection percentage, and the practice’s revenues mainly come from managed-care patients, the practice fee schedule probably is too low.
Another consideration, which impacts the collection percentage, is the payor mix. If the practice derives most of its revenue from treating Medicare Patients, the practice would not be expected to have a gross collection percentage greater than 80%. A practice that has a large number of patients with indemnity Coverage should expect to have a higher gross collection rate.
Bottom Line: As physicians, you have a responsibility to not only practice good medicine but also to have a basic understanding of the business side of our practices. This can only be done if we measure and monitor our practices using benchmark numbers just like we do when you monitor a patient’s blood pressure levels for example.