Net Collection Rate (NCR Calculator) for Medical Practices

In today’s ever-evolving healthcare landscape, ensuring the financial health of a medical practice is just as critical as providing quality patient care. One of the key performance indicators (KPIs) that should be closely monitored is the Net Collection Rate (NCR). This metric helps gauge how effectively a practice is collecting revenue from the services provided.

Let’s walk through the importance of the Net Collection Rate, strategies to improve it – and give you a free NCR calculator PDF guide to reference whenever you need it! Whether you manage a small independent practice or a large multi-specialty group, understanding the NCR formula is crucial for maintaining a financially sustainable operation.

What is Net Collection Rate?🔗

The Net Collection Rate (NCR) measures the percentage of collectible revenue a medical practice actually receives. Unlike the Gross Collection Rate, which compares total collections to total charges, the NCR provides a more accurate picture of revenue cycle efficiency by factoring in contractual adjustments.

A high NCR indicates that a medical practice is effectively collecting revenue, while a low NCR signals potential issues with billing, payor contracts, and/or patient collections. Medusind clients see an average Net Collection Rate of 98% or higher, surpassing the MGMA benchmark of 95%. At Medusind, we specialize in streamlining revenue by identifying and correcting processes – and we’re sharing our proven NCR calculator with you!

Why is a proven NCR formula important?🔗

Identifies revenue leakage: A low NCR suggests inefficiencies in any of the medical billing processes such as medical coding, medical claim follow up, or patient billing.
Evaluates financial health: Helps determine whether a medical practice is collecting what it’s owed.
Assess revenue cycle management (RCM) effectiveness: Shows how well your medical billing team or medical RCM service is performing.
Improves decision-making: Provides insight into payor contracts, patient payment trends, and areas requiring process improvement.

Here are 3 tips to keeping your NCR formula consistent:

Stay consistent with your reporting time frame.
Include payments from patients and payors.
Subtract contractual adjustments from charges.

Interpreting NCR calculator results🔗

To ensure that your NCR calculator is accurately measuring performance, consider using a rolling 12-month schedule to calculate your Net Collection Rate. As with all medical billing indicators, performance will be influenced by payor mix, specialty, and level of automation in your practice’s billing and collections workflow.

Below 90% – Significant revenue loss; indicates major inefficiencies in medical RCM
90% - 94% – Below benchmark; indicates minor inefficiencies in medical billing or payor reimbursements
95% or higher – Strong financial performance; indicates efficient collections

Strategies to improve your Net Collection Rate🔗

If the NCR formula shows that your NCR is lower than desired, consider implementing the following strategies:

Strengthen your medical RCM processes: Errors in medical billing can lead to claim denials and payment delays, resulting in low NCR. Use the NCR calculator consistently to identify revenue roadblocks and gaps in billing processes. Medusind’s Medical RCM Solutions optimize your revenue cycle and reduce administrative burdens by eliminating time-consuming billing tasks.
Optimize every claim for revenue impact: Use certified coders to enhance claim approval rates and reduce denials and implement coding audits to ensure accuracy and compliance. Learn more about how Medusind employees more than 200 CPC Certified Medical Coders that adhere to strict quality assurance standards.
Enhance patient collections: Implement clear patient payment policies, offer multiple payment options, and collect co-pays and deductibles at the time of service. Training front desk staff on effective collection techniques and scripting can also improve the success rate of upfront collections.
Reduce medical claim denials: Ensure proper documentation to support the claims going out for reimbursement. At Medusind, we provide ongoing education on clinical documentation improvement that empowers providers with the most current and compliant coding methodology to ensure that billing is optimized for each encounter.
Utilize technology and automation: Leveraging technology can greatly improve medical RCM efficiency. Learn more about Medusind’s RCM Solutions, which blend innovation automation with human expertise. Additionally, Medusind’s robust data and analytics can provide actionable insights for high-level decision-making.
Monitor performance regularly: Track your NCR monthly or quarterly and compare it to industry benchmarks. Medusind’s valued clients have an average NCR of 98% or higher. Learn more about how Medusind’s medical RCM solutions can positively impact your NCR calculator.

Proven NCR formula for medical practices🔗

The Net Collection Rate is a critical metric that provides insight into a medical practice’s financial health and medical RCM efficiency. By calculating and monitoring NCR, medical practices can identify areas for improvement and implement strategies to optimize collections.

Step 1: Gather Data🔗

Ensure you have access to accurate financial reports from your practice management or billing system. The required data includes:

Total charges billed for a specific period
Contractual adjustments (i.e., amounts written off per payor agreements)
Total payments received from both insurance and patients

Step 2: Determine Total Collectible Charges🔗

Subtract contractual adjustments from total charges:
Total Collectible Charges = Total Charges - Contractual Adjustments

Step 3: Calculate Net Collection Rate🔗

Divide total payments received by total collectible charges and multiply by 100 to express it as a percentage:
NCR = (Payments Received / Total Collectible Charges) x 100

Example calculation

Total charges: $500,000
Contractual adjustments: $150,000
Payments received: $320,000

First, compute the total collectible charges:
Total Collectible Charges = 500,000 - 150,000 = 350,000

Next, calculate the Net Collection Rate:
NCR = (320,000/350,000) x 100 = 91.4%

This means this hypothetical practice is collecting 91.4% of what it should, indicating room for improvement in medical RCM efficiency and oversight.

NCR calculator guide from Medusind🔗

Use our proven NCR calculator to get your Net Collections Rate. This will help you understand if your practice has revenue roadblocks. As you’ve seen, there are a number of reasons your NCR can be low, so we recommend doing a full audit of your medical RCM processes if your NCR is below 90%.

If you use the NCR formula and your NCR is lower than expected, you aren’t alone. Take proactive steps today and contact Medusind today. Your practice’s profitability depends on it!