Net Collections

Reviewed by Apoorva | Updated on Sep 28, 2020

What Does Net Collections Mean?

In medical accounting, net collections refer to the money collected from the fees charged. It is usually lower than net charges and mostly lower than gross charges. Here, net charges are the total amount the provider agrees to accept as payment, while gross charges are the provider's total invoice amount before adjustments, such as the insurance.

The net collection is also known as adjusted collection; the net collection rate is the measure of the effectiveness of medical practice in collecting reimbursement dollars. It is considered as an effective standard of financial health and states the reimbursement received from reimbursement based on payers' contractual obligations.

Calculating Net Collections Rate

The payment received from insurers is divided by payments agreed-upon with patients, and insurers determine the net collections rate. To find out the percentage value of this, you must multiply the result by 100.

Advantages of Net Collections

Collecting the money owed by insurers and patients is a hardship for medical practices; it has become increasingly common lately. The sector has to put up with patients who pay more for their care, which raises the high-deductible plans. On the other hand, insurers become all the pickier and deny claims to save more money for themselves.

Medical companies are instructed to limit losses for themselves and stay precautious about such incidents. Monitoring net collections are the best way to spot troubles and keep them away.

Applications

Disintegrating the net collections from payers can throw light on the performance of medical companies. The typical delineations, in this case, include Medicaid, Medicare, private health insurance, and individual patients.

If there are unacceptably low net collections for one of these categories, the medical practice may decide to stop accepting patients from that category or even ask to pay the charges upfront before consulting the doctor or undergoing any diagnostic tests.

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