Dermatology Net Collection Rate. What should I expect?

[Cosmo]

Hello all.  10+ years in medical practice here.

I am employed by a private dermatology practice with an in house billing department.

For those with the experience, or in the know, what should I be expecting, approximately, for a collection rate for a procedure based dermatology practice, not taking in to account contractual agreements.  Is 60-65% collections reasonable on gross charges?  Fair amount of medicare with supplements with some Medicaid.

Is your experience from in house billing or an outside billing company?

 

Thanks in advance.

[Zaphod]

Cosmo wrote:

Hello all. Long time lurker, first time poster.  10+ years in medical practice and also small business owner in an unrelated area.

I am employed by a private dermatology practice in Midwest with an understaffed in house billing department that I believe is affecting my collection rate due to a number of factors, missed deadlines, lack of denial follow up, etc, etc.  Question is, I don’t have a good feel for how much.  Generally my questions to the billing director are answered vaguely, and have been told point blank they are short staffed and have to prioritize things.

For those with the experience, or in the know, what should I be expecting, approximately, for a net collection rate for a procedure based dermatology practice, not taking in to account contractual agreements.  Is 60-65% net collections reasonable on gross charges?  Fair amount of medicare with supplements with some Medicaid.

Is your experience from in house billing or an outside billing company?

 

Thanks in advance.

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It seems really shortsighted, penny wise pound foolish to have any kind of staffing issues with billing. That leads directly to decreased revenue/profit. Many medical practices then start to work harder, which is highly illogical given that is likely not to be paid for either. Go after the money you've already made first. Fight for more billing in house or outsource, makes no sense to let this get worse.

 

[canadianoutlaw]

Ditto Zaphod. My understanding is that an efficient/competent billing department can make a huge difference for a practice. I hear good experiences with outsourcing this service. (disclaimer: i'm a resident so others on here may have better insight)

[Miss Bonnie MD]

wow 60% is crap. I'm at nearly 100%

[MichaelB]

Your wording is a bit confusing. Do you mean 60-65% of gross charges (gross collection rate) or 60-65% of charges after contractual insurance adjustments (net collection rate)? If that is truly your net collection rate, that is horrendous. It should be high 90s. I'm in derm and around 98-99%. The gross collection rate is not as useful, since it's based on your fee schedule and everyone's is different.

Example: you charge $150 for 11100- skin biopsy. Insurance allows $100 let's say. If you collect all of that $100 from insurance and/or patient, your gross collection rate is 67% and your net collection rate is 100%.

If your net collection rate is truly 60-65% that is either due to total incompetence or fraud in your billing department. Please clarify and I can offer some more suggestions if that is truly your net.

[Cosmo]

Yes, I can see that my post was a bit confusing. So much for trying to finish a post between several interruptions.

I am seeing currently 60-65% of gross charges.  Waiting on an answer from billing on my current net collection rate, but I understand upper 90s is pretty typical.  Knowing that it is not as good of a marker of billing performance, given that there are more variables, would you consider 60-65% of gross charges reasonable?

[MichaelB]

I posted a reply, but went back and read your last post again, so it sounds like the 60-65% is gross, You really need the net number, which should be upper 90s. The gross number is not really that helpful in my opinion, but I think those numbers are probably ok.

[brownie73]

You really need to know your net collections. Gross collections are very individual based on what you set initially. You want net collections and they should be 98-100% and timely (w/in a month)

[Cosmo]

Thank you for the input so far.  For those of you getting upper 90s for net adjusted collection rate, you are using payments/(charges - contractual adjustments) correct?

One common mistake I came across, and I suspect may be happening here is that they are including contractual and non contractual adjustments in the denominator, which is artificially inflating the net collection rate report I was given.

Thanks again.

 

 

[Zaphod]

Cosmo wrote:

Thank you for the input so far.  For those of you getting upper 90s for net adjusted collection rate, you are using payments/(charges – contractual adjustments) correct?

One common mistake I came across, and I suspect may be happening here is that they are including contractual and non contractual adjustments in the denominator, which is artificially inflating the net collection rate report I was given.

Thanks again.

 

 

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I think you're still making it a bit confusing. You need to throw out your charges altogether, they simply dont matter and cause things to be incomparable. It only matters if youre collecting a payment from nearly all people for the contracted amounts their insurers agreed. Thats the baseline people are trying to establish. When you bill people, what percentage pay?

Your % collection on billed amount doesnt really matter given insurance contracts etc...Think about it this way:

Dr. A charges 5k for a mole removal, gets 500 as agreed charge with insurer. Gross collection 10%, terrible!

Dr. B charges 550 for same, gets same 500 as agreed. Gross collection 90.9%, pretty great.

Obviously Dr. B is doing no better than Dr. A, and Dr. A shouldnt feel like they are doing worse but using this metric they might.

You have to have proper metrics to compare, otherwise it simply doesnt make any sense.

[Cosmo]

Charges minus contractual adjustments= allowables is what I have above as the denominator.  So, net collection rate is: payments divided by allowables, correct?

I get what you are saying that charges are not relevant.  But from what I understand charges minus contractual adjustments provides the denominator and represents 100% of what theoretically should come in.  the whole purpose to monitor net collections rate is to monitor if billling office is keeping non-contractual adjustments (failure to follow up on denials, collections, etc) to a minimal and reasonable amount.

Say I charge $ 1 million for the year, which I understand is meaningless.  Subtract the contractual adjustments which results in allowables.  Say that number is $700k

so $700,000 is the denominator. This is what contractually should come in the door for the work provided.

Billing Office A ends up collecting $690,000 of that $700,000 for a net adjusted collection rate of $690k/$700k= 98.57%

Billing Office No Good ends up collecting $595,000 of that $700,000 for a net adjusted collection rate of $595/$700k= 85%

- Billing Office No Good has issues with collecting what is owed.

[Zaphod]

Cosmo wrote:

Charges minus contractual adjustments= allowables is what I have above as the denominator.  So, net collection rate is: payments divided by allowables, correct?

I get what you are saying that charges are not relevant.  But from what I understand charges minus contractual adjustments provides the denominator and represents 100% of what theoretically should come in.  the whole purpose to monitor net collections rate is to monitor if billling office is keeping non-contractual adjustments (failure to follow up on denials, collections, etc) to a minimal and reasonable amount.

Say I charge $ 1 million for the year, which I understand is meaningless.  Subtract the contractual adjustments which results in allowables.  Say that number is $700k

so $700,000 is the denominator. This is what contractually should come in the door for the work provided.

Billing Office A ends up collecting $690,000 of that $700,000 for a net adjusted collection rate of $690k/$700k= 98.57%

Billing Office No Good ends up collecting $595,000 of that $700,000 for a net adjusted collection rate of $595/$700k= 85%

– Billing Office No Good has issues with collecting what is owed.

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Thats definitely better, and thats what you want to find out, are you getting what you're owed.

Isnt there a way you can just use allowed/collected and cut out charged altogether? Mind you, I have no idea how this really works, except as a logical math construct as I only take cash.

[Cosmo]

Zaphod wrote:

 Mind you, I have no idea how this really works, except as a logical math construct as I only take cash.

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Ha. That must be nice.

After having experience in a small side business which deals only in cash payment in full at time of service, I have realized a couple things.

1.  How refreshingly honest business transactions can be when everyone enters the relationship from the outset knowing exactly what they are going to pay, and we know exactly what we will be paid for a given service.

2.  How truly convoluted and absurd medical billing has become.

[bottobot]

I am a resident currently looking at work contracts.

What is an average Net Collections amount in General dermatology (no Mohs, little cosmetics) seeing 30-40 pts/day, 5/days ???

I understand it depends on area, procedures, contracts, etc.

Can anyone provide a ballpark?

 

Thanks!

[janettebournes]

bottobot wrote:

I am a resident currently looking at work contracts.

What is an average Net Collections amount in General dermatology (no Mohs, little cosmetics) seeing 30-40 pts/day, 5/days ???

I understand it depends on area, procedures, contracts, etc.

Can anyone provide a ballpark?

 

Thanks!

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Doesn't this also depend on your contract percentage?

I'm not in dermatology but in my specialty, most of the "eat what you kill" contracts in my specialty for employed physicians are a % of the net professional fees received by the Corporation / Hospital / etc (also, does anyone know where you can find this average number? Would this be available via MGMA?)

So you would need the average net collections amount and the contract % to adequately compare multiple offers right?