Like any business, a dental practice needs a continuous stream of revenue that helps to manage expenses and stay profitable. While collection and revenue can be a continuous flow for a dental practice, how one measures income flow can be tricky.
Dental billing is a complex and evolving process. Measuring revenue accruals can get a bit confusing in terms of dental billing. Understanding these terms can help the dental team to better comprehend profitability and revenue accruals for a practice.
While a dental collection rate measures the actual volume of receivables collected, it remains a critical financial KPI as it affects the practice’s bottom line. A dental practice with a high inflow of patients can have working capital issues when collections are not commensurate with the number of patients treated. Sometimes, even a small percentage point in collection rates can make a difference in terms of revenue generated.
For a dental practice, the net collection rate can be influenced by multiple elements. They include reimbursement from insurance plans, insurance verification, accuracy in coding, and handling of accounts receivable by the dental team.
Before getting into collection rates, one needs to understand what is meant by gross and net charge. Gross charge is the final invoice amount before any additions, such as insurance or other adjustments. Net charge is the amount that the dental practice agrees to accept from the insurance company.
Gross collection refers to the gross income of the dental practice. It is a simple and basic measure of profitability. Gross income only takes into consideration the direct costs incurred by the practice for providing services to customers. Other factors, such as taxes, administrative expenses, and other costs, are not included when determining gross collections.
Net collections can be referred to as the net adjusted collection. This refers to the amount of dues collected based on fees charged by the practice.
Net collections will always be lower than net charges, and gross collections will always be lower than gross charges.
Net collection rate (NCR) is a measure of how effectively the practice recovers dues from insurance companies and patients.
When the dental team analyzes the net collection rate at periodic intervals, one can gauge the amount of revenue that was lost due to various factors that include bad debt, delayed claim submissions, claim denial rates, and any other adjustments.
Among various metrics or KPIs for measuring collections or profitability, the net collection rate is deemed to be the ideal indicator of income for a dental practice. NCR looks at the actual status of RCM or revenue cycle management, and hence, net income can be calculated from various sources/payers.
While the gross collection rate does matter for any dental practice, the dental team does not need to spend much time worrying about it. The main reason is that a practice never gets fully paid for what it charges. It only shows what a practice is permitted to collect.
Reimbursement rates generally vary among insurance companies. The dental team needs to charge patients above the highest-paying reimbursement from the insurance companies. This helps the practice to maximize collections and lowers the amount lost due to adjustments, deductibles, etc.
The gross collection rate does not have a direct correlation to actual payments received by the practice. The team will not get an accurate judgment of the amount collected compared to actual receivables. This is because deductions, write-offs, refunds and contractual/noncontractual adjustments are not considered.
Gross collection
A few causes for a downslide in collection rates are listed below.
If the dental team does not collect the dues owed directly by the patient at the time of completion of service, collection rates can be lowered. Getting payments when a patient leaves the practice is not an easy task.
If the dental team does not accurately verify the policy details of a patient before treatment, there could be a possibility of a claim denial. The balance due by the patient could also go uncollected.
The process of claim submissions should be streamlined, and submissions should be completed within two or three working days.
The dental team needs to periodically monitor reimbursements made by insurance companies. Dues that are over that over three months old have a slim chance of collection. The team needs to follow up at frequent intervals.
Inadequate documentation or the use of wrong codes leads to a rejection of claims, thereby causing a delay in the revenue cycle.
If a practice receives patients who have a large billing outlay, there could delay or default in payments. The practice needs to provide financing options or other attractive payment plans that can help to boost collections.
Without clear protocols and accountability for collections, money falls through the cracks. Every team member should understand their role.
As mentioned above, on why collection rates can get impacted, the dental team needs to take adequate measures to ensure that collection rates are enhanced.
Apart from collecting estimated patient dues before they leave the practice, the team must verify insurance eligibility and benefits before a patient visits the practice for treatment. Automating the verification process saves time while improving accuracy. Faster submissions result in a quicker payout.
More importantly, the dental team needs to be trained in handling financial conversations with patients. Claims that are denied must not be accepted without a thorough review by the team. Claims that are rejected can be successfully appealed if the team provides the insurance company with additional narratives and documentation.
What gets monitored and measured results in improved productivity and returns. Weekly reviews, performance improvement sessions, etc., can help to boost collection rates.
The dental team needs to monitor contractual write-offs as per the patient's insurance plan. If the write-off of an individual plan exceeds 30% of the practice fee, the practice might need to consider whether associating with the insurance firm as in-network is financially viable. Outsourcing the task of billing and collection to an expert can result in faster and more accurate billing. It will also help to boost collection rates.
The practice needs to devise a plan and implement it to boost net collection rates. A few steps need to be followed by the dental team. This will ensure faster and more accurate submissions while also focusing on quicker recoveries from insurance companies. The objective of every dental practice must be to get the net collection rate as close to 100 per cent. Capline Dental is a leading provider of end-to-end services to dental practices of all sizes in the USA and can be reached at info@caplinedentalservices.com
