Managed Care - INFO
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Billing and Collections Information
When you start to assess the effectiveness of your collection process in your practice, there are three essential components to review and analyze. They are
1. Collection Ratio
2. Your Collection Time Frame
3. Your Aging Patient Report
1. The Collection Ratio for a medical business is determined by dividing the total dollars collected in the office by the total charges, then taking this figure and multiplying by 100.
..............................................................Total Dollars Charged
The collection ratio for any medical practice should be at least 90% or your practice could be in trouble . If you took and example where your Total Dollars Collected is $95,000 and you Total Dollars Charged to the patient was $100,000, your collection ratio would be 95%.
2. Your Collection Time Frame is the amount of time it takes your medical practice to get paid. The formula for figuring this out is :
Annual Charges...............................................................
An example is this. Lets say that you were able to collect $150,000 on billed charges of $300,000. Your would take the Average Account Receivable amount of $150,000 times 365 days which equals 54,750,000. Divide this number by $300,000. Your final answer is 182.50 days. In other words , it takes your practice an average of 182 days to receive you payment. Pretty bad.
3. Your Aging Patient Report is a report that is generated in your office which tracts overdue balances. Generally, this report is titled Current, 30-60 days old, 60-90 days old, 90-120 days old and over 120. The purpose of this report is to alert you to problem accounts. A general rule of thumb for an office , which should be your goal, would be that at least 50% of your accounts are current, 30% of your accounts are at 30-60 days, 10% of your accounts are 61-90, 5% of your accounts are 90-120 and 5% of your accounts are over 120 days. Realistically, most medical offices have 25% current, 45% 30-60 , 20% 60-90, 5% 90-120 and the remainder is completely written off as bad debt and uncollectible.