In addition, doctors need to keep track of their case volume, know their physician referrals, and monitor financial health. This is all part of running a business smoothly.
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June 2008To monitor financial health, there are a few benchmarks doctors should use to measure their financial success. One is the gross collection rate. This is the percentage of charge dollars that have been collected-basically, it is collections divided by total charges.
For instance, if Medicare pays 20 cents for every dollar charged, then there is a 20% collection rate from Medicare, she said. This used to be the key way to measure our success, but now it is only part of the picture.
The more important thing to know is the net collection rate. As you’re talking to people and when you’re interviewing, don’t ask them what their gross collection rate is-I want you to ask them what their net collection rate is, Ms. Pollock said.
Essentially, the net collection rate is the percentage of collectable dollars that have been collected. Contracts are mostly on par with Medicare. We know we’re going to give discounts to those payers, so our denominator is going to be reduced by the amount of dollars that we know we’re not going to collect. These are also called uncollectable adjustments, she said.
Along with money collected, doctors need to have an idea of how much money is owed to the practice (accounts receivable), as well as how much of the revenue is spent for operating overhead (excluding physician salaries)-which is called the overhead expense ratio.
Keep Your Eye on the Ball
Finally, doctors need to keep an eye on the ball. Review the financial reports the administrator brings in. It shouldn’t be a big stack of papers, but rather a snapshot summary that includes all the key financial indicators. It should include data such as charges, and the financial benchmarks such as net collections rate, accounts receivable for more than 90 days, and more.
Be aware of the internal controls established in the practice and how they are monitored, including cash handling and check writing policies. More details with tips for otolaryngologists can be found at Ms. Pollock’s firm’s Web site, www.karenzupko.com .
©2008 The Triological Society