Net Collections
Categories: Accounting, Credit
We’re the best of the best when it comes to sorting out a company’s accounting issues, which is why we’ve been hired by Dr. Mal Practo to help raise her office’s net collections ratio.
“Net collections” refers to how much a medical company is paid over a particular period of time, and a “net collections ratio” is how much they get paid versus how much they actually invoice for. The goal is to have a net collections ratio somewhere in the neighborhood of 90% or higher (it’s probably never going to be 100%), and unfortunately, Dr. Practo’s is hovering right around 67%. Looks like we’ve got our work cut out for us.
“But wait,” some might be saying, “why doesn’t the office get paid for everything it charges for?” Good question. Here’s the answer: it’s complicated. One factor might be that the office is charging more for certain services and procedures than a person’s insurance company will pay. For example, if Dr. Practo is charging $10,000 for a mammogram, but a patient’s insurance company will only pay her $1,500, then our net collections ratio on that particular procedure is 15%. That’s pretty darn low.
Another factor is that some people are just never going to pay their medical bills in full. We can take steps to try and get our money, like hiring a collections agency, but the hard truth of the matter is that, in some cases, we’re just not going to get everything we invoiced for. Also, sometimes our net collections might fall because we just don’t have good accounting practices. Maybe we wait too long to bill insurance companies. Maybe we don’t go after people who don’t pay us. Maybe we tend to lose track of invoices altogether.
In other words, long story short (too late?), there are a bunch of things that can impact our net collections and our net collections ratio. But the higher that ratio is, the better our company looks financially, which is why it really behooves medical professionals to charge competitive fees (or at least, fees that most insurance carriers will cover), make sure they stay on top of their accounting processes and procedures, and have a process in place to recover as much as they can from patients who, uh...don’t want to pay their bills.
Related or Semi-related Video
Finance: What are Collection Agencies?12 Views
Finance, a la shmoop. What are collection agencies?
All right so sometimes when a man and a woman have trouble getting pregnant well [A couple kissing]
the guy has to go to one of these places, oh wait that's a different kind of [Stop sign appears]
collection agency, sorry just kidding. All right well a collection agency in the finance world
is seeking a different form of currency that is literal currency, greenbacks [Lots of money being counted]
cashola, whose money are they after exactly? Deadbeats, anyone who made a
promise to remit payments to pay back a mortgage, to pay off a credit card, to pay [Wads of money]
out for a jewelry thing at the mall, to pay for a tattoo down there as well. [Someone getting a tattoo]
You name it and then they defaulted on that promise to pay back the vendor, yeah
because when you sign your name on the dotted line and agree to pay back a
lender for their generous loan or extension of credit or agree to buy [Someone signing a contract]
something and pay someone 30 days later for it, paying them back is really not a
suggestion... Once you fall behind enough in your [Woman who is owed money does not look happy]
payments and you're a real deadbeat well they call a collection agency who then
tracks you down delivers nasty threatening letters to your mailbox and [Letter being posted]
if it's a New Jersey collection agency well they usually send someone to break
your kneecaps with a billy club, yeah they still do that... If the message still [Guy opens his door to find a man in a suit with a bat]
isn't getting through to you well the next step is for the agency to set the [Truck wheels]
wheels in motion that will result in the repossession of your home, your car, your [Repossessed notice being nailed to a house]
treasured signed set of Big Bang Theory trading cards you swore would be buried [Gravestone with the trading cards sticking out of the ground]
with you. So yeah if you choose not to make good on your obligations well you
shouldn't expect the people you owe to forget about you, or to go easy on you
like why should they would you do that for them, because they will stick a
collection agency on you, which is not a good feeling when you're up to your [Guy stood in a pile of bills]
knees in debt, or if you live in New Jersey up to your thighs... [Guy who has had his legs beat off in a pile of bills]