Net collection rate
The percentage of contractually allowed revenue that a practice actually collects. Unlike gross collection rate (which compares collections to billed charges), net collection rate accounts for contracted write-offs and measures only the money you were actually entitled to receive. It is the most accurate measure of collection performance in an insurance-based practice.
Why this matters for your clinic
Net collection rate is the number that tells you whether you are getting paid what your contracts guarantee. Gross collection rate is misleading because it depends on how high you set your fee schedule. Two practices can have the same net collection rate but dramatically different gross collection rates simply because one bills at a higher multiple of Medicare. Net collection rate strips that distortion away.
A 3-percentage-point gap in net collection rate on a $5M practice means $150,000 per year in revenue that was contractually owed but not collected. That money was earned. Services were delivered. The contracts were in place. It was lost somewhere in denials, underpayments, and premature write-offs. Improving net collection rate is one of the highest-return activities in revenue cycle management.
How to calculate
Net collection rate = (Total payments received) / (Total charges - Contractual adjustments) x 100. Use a trailing 90-day or 6-month period to capture claims that take time to fully adjudicate.
What good looks like
HFMA MAP Keys set the industry benchmark for net collection rate at or above 95%. Anything below roughly 88% represents meaningful revenue leakage from a combination of unworked denials, patient balance write-offs, and underpayments that were not appealed. Track net collection rate separately from gross collection rate and separately from each major payer to identify where collections break down.
From Sorso
In the practices we onboard, the gap between reported gross collection rate and true net collection rate is often where the owner first understands how much is being quietly written off. Rebuilding the net collection rate calculation correctly is usually the first deliverable in a new engagement.
Founder of Sorso. 19 years in corporate finance. Managed a $450M loan portfolio before building a fractional CFO firm exclusively for healthcare clinics.
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