A well-run medical practice should aim for a net collection rate of 95% or higher. Most practices fall somewhere between 90% and 98%, with anything below 90% signaling problems that need attention. But understanding this number requires knowing which collection rate you’re actually measuring.

There are two types of collection rates and they tell very different stories. Gross collection rate compares what you collect to what you originally billed. This number is often 30% to 50% because it doesn’t account for contractual adjustments with insurance companies. You bill $200 for a service, but your contract with the insurer says you’ll accept $120. The gross rate makes your collections look terrible even when you’re collecting everything you’re entitled to.

Net collection rate is the metric that actually matters. It measures what you collect compared to what you’re allowed to collect after contractual adjustments. If your allowable amount is $120 and you collect $114, your net collection rate is 95%. This tells you how effective your billing process really is.

Several factors drag down collection rates. Claim denials that don’t get worked are the biggest culprit. Every denied claim that sits untouched is money left on the table. Patient responsibility that goes uncollected hurts too, especially as high-deductible plans become more common and patients owe larger portions of their bills.

Clean claims submission matters more than most practices realize. Claims that go out with errors get denied or delayed. A practice submitting claims with a high first-pass acceptance rate will consistently outperform one that’s constantly correcting and resubmitting. Working with Macomb County bookkeepers who understand healthcare can help identify where your revenue cycle is breaking down.

Timely filing deadlines create hard cutoffs. Every payer has a window for claim submission, typically 90 days to one year depending on the insurer. Miss it and you’ve lost that revenue permanently. Practices without good tracking systems discover too late that claims aged out before anyone followed up.

To calculate your net collection rate, take total payments received for a period and divide by charges minus contractual adjustments for that same period. Do this monthly and track the trend. A declining rate over several months indicates a process problem that will cost real money if ignored.

If your collection rate is below 90%, the issue is usually somewhere in your revenue cycle. Claims aren’t going out clean, denials aren’t getting worked, or patient collections are falling through the cracks. These are fixable problems, but fixing them requires either dedicated staff time or outside help from professionals who specialize in medical billing and coding. Many practices that struggle with collections find their in-house staff simply doesn’t have the bandwidth to follow up on every denied claim while handling front desk duties and patient care coordination.