Are you working harder, not smarter?

Examining your gross and net collections ratios will tell you.

Have you been in this scenario?

You’ve gone through your financial reports, again and again, trying to figure out why your practice is making less money. The problem is everything looks the same. There is no increase in denials, chargebacks or write-offs. Your patient visits have remained steady. Where do you go to find answers?

According to Alyse Danley, Revenue Account Manager at Virtual Revenue Solutions, a sister company and partne of Virtual OfficeWare Healthcare Solutions, there are two ratios you should check: your gross collections ratio (GCR) and your net collections ratio (NCR). “Understanding these numbers can help you gauge your performance and forecast future earnings,” said Danley. “When you look at these numbers in conjunction with your fee schedule, you can understand adjustments you may need to make to put your practice back on track.”

Understanding your gross collections ratio (GCR)

Total payments/charges

One question this ratio answers is how close you are to your payers’ rates. Monitor your top codes to confirm that you are in line with your practice’s established fee schedule ratio (typically around 150% of Medicare allowable amount or above). If your top code fee ratios are smaller than your set ratio, it may be time to renegotiate your rates with payers. Outdated reimbursement rates are often a problem with older practices because operational costs have gone up, but payment rates are stuck in the year the payment contract was signed.

If your GCR is inching-up every month, then it’s time to review your fee schedule and consider raising your rates. There’s a possibility that your fees may be lower than some of your payers’ allowable amounts. Low fees happen more frequently than many realize. Yearly reviews of your fee schedule against payer reimbursement will help avoid this issue.

According to Danley, your GCR is best used for internal measurement. It’s good to be aware of your number every month, but looking at a rolling six-month analysis allows for variances due to seasonality (such as deductibles at the beginning of the year, holiday slow-downs or times of the year when you get particularly busy).

Understanding your net collections ratio (NCR)

Payments – adjustments/ charges

Your NCR measures how well your practice is collecting the money it is owed. Ideally, NCR ratios should be at 95% or above – meaning you have collected 95% or more of possible revenue. This ratio is dependent on many factors, both operational and payer-related, including your mix of carriers, the types of procedures you perform and how quickly A/R is resolved.

If your NCR needs to be improved, or you are seeing large month-to-month fluctuations, there are several questions you should be asking. The answers will help you pinpoint weaknesses and set goals for improvement. They include:

  • Are you carrying A/R past 60 days?
  • Is there an issue with receiving payments?
  • Are payments posted promptly?
  • Do you have a consistent mix of appointments (new patients, sick visits, follow-ups, etc.)
  • Are you performing more or less of your top procedures?
  • Has reimbursement for your top procedures changed?
  • Is there a problem with sending out secondary claims or patient statements?
  • Are there payers having unusual delays in payments?

A change in payer mix may account for variations in your NCR as well, so Danley recommends performing a payer mix review on at least a yearly basis. Isolate your top payers and pull reports showing charges, payments and adjustments for the last twelve months. It may be that payers that reimburse less are a more substantial part of your patient population than a year before. She also recommends periodic reviews of longer data periods (three to five years) to identify macro trends that are hitting your bottom line.

Another useful aspect of knowing your NCR is that it is an excellent metric to use to compare your practice to others. Resources to find comparable data include the MGMA, HFMA and other medical associations. In many instances, you will pay for the reports, but the value of having realistic benchmarks to work toward and simply knowing how your practice is performing against others can make the cost worthwhile.

Do you have questions about your GCR or NCR ratios, or concerns about your practice’s overall performance? Contact us today at (412) 424-2265 or visit our RCM page. 

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