Net Collection Rate and Financial Performance

The idea behind net collection rate

Charges are not the same as collectible revenue because payer contracts and benefit rules may reduce the amount the organization is entitled to collect. Net collection rate therefore focuses on collections relative to the amount expected after appropriate contractual adjustments.

What can reduce collection performance?

• Denials not corrected or appealed in time.
• Unworked old A/R.
• Incorrect contractual adjustments.
• Patient balances not transferred or followed correctly.
• Enrollment or authorization failures that make claims non-payable.
• Underpayments that are posted but never investigated.

Contractual versus avoidable adjustment

A contractual adjustment reflects the difference between charges and the amount allowed under an applicable payer contract or payment arrangement. An avoidable write-off represents collectible revenue lost because of an operational failure or decision. The exact accounting categories are organization-specific, so billing and finance should reconcile definitions.

Use supporting views

Do not diagnose collection performance from one percentage. Review denial dollars, write-off reason codes, underpayment trends, aging, payer mix and patient balances. A stable overall rate can hide deterioration in one payer or service line.

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