Articles | Patient Account Services

How do I know if I have a billing problem?

You cannot manage what you cannot measure and it’s very important to measure where a practice stands financially so that you can be more effective at collecting insurance money. If you don’t know how to measure your success, then you can never determine what’s happening with the money nor implement goals to improve productivity.

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How do I know if I have a billing problem?


You cannot manage what you cannot measure and it’s very important to measure where a practice stands financially so that you can be more effective at collecting insurance money. If you don’t know how to measure your success, then you can never determine what’s happening with the money nor implement goals to improve productivity.


You can’t make changes and improve performance until you have accurate, relevant measures to analyze.


The financial ratios below will allow you to analyze your practice(s). We give a brief description of each and describe how the ratio may be useful to a practice.


Quick Analysis


Look at:


  • The percentage of claims submitted within the last 30 days that were delayed
  • The percentage of claims submitted within the last 30 days that were denied on the first submission
  • The reasons most frequently given by payers for the delays and denials


A quick review can alert you to new trends or changes in your A/R.


Is the total A/R within normal limits? (<2 months total gross monthly charges)


Possible causes include inadequate financial policies and collection procedures, inadequate Staffing, poor training or a lack of accountability among the collection staff or billing service


  • Do your payers consistently account for about the same percentage of your aged A/R?


If A/R by payer classification changes markedly, this may indicate that an insurer hasn't been receiving your claims or is delaying payment because of internal problems or other reasons


  • Is your contractual adjustments ratio stable?


If insurance contracts generally pay 75% of Doctor Charges, you should expect contractual adjustments to be about 25% each month. Examine the write-offs staff members make. Don’t assume carriers paid claims correctly. Look for inappropriate write-offs of what patients owe.


  • Is Net Cash Flow at least 95%?
  • Is less than 10 percent of your total A/R aged 120 days or more?


If not, you should be setting new collection goals and working harder to collect insurance money


  • Is your aged A/R distributed evenly among the physicians in your group?


If not, this could be indicative of a collection problem or a productivity problem. If one physician has an especially large increase in his or her A/R, you should determine which insurance plans are represented and take immediate action.


  • Is more than 10% of the A/R over 120 days old?


If so, this is a good indication that billing staff is not working as hard as they should be or could be, OR carriers are delaying your claims. Either way, you have to figure out what the problem is.


When A/R analysis uncovers problems, you should set new monthly goals for improvement. Keep establishing new goals, always setting your sights a little higher, until your A/R performance is stellar. With managed care reducing reimbursements, the burden is on you to ensure that you get paid what is due you in a timely manner.




It’s important to establish benchmarks so that you can set reasonable goals and then analyze and compare new data against old data. It’s important to benchmark monthly, quarterly, annually and as needed.


Gross Collections Ratio


This basic ratio shows what is actually collected v. what is billed.


Total Collections divided by Total Charges


Compare this ratio to Net Collections to get an idea if fees are too high or too low


Net Collections Ratio


Total Collected divided by Adjusted Charges


Adjusted Charges = Total Charges minus write-offs and adjustments


Know your payment rights well enough to post only acknowledge disallowances and dispute all others


Percent of Total A/R Over 120 Days


Total A/R over 120 days divided by Total A/R


Total A/R over 120 days should be less than 2 months of Gross Charges and less than 10%. *Median was 17.7% in 2002 according to MGMA Survey


Net Cash Flow


Another way to more accurately determine cash flow, which removes write offs from the equation:


Total Payments divided by Adjusted Charges multiplied by 100%)


Try to achieve 90% or higher. While 80% might sound good, that means you’re adding 20% of potential income to total outstanding A/R each month. If that 20% represents only $10K, you would add $120,000 to A/R in one year.


Turn Around Time (or Accounts Receivable Ratio)


Total A/R divided by Adjusted Charges, multiplied by 30 days


Average turn-around time is 60 days or less for most practices. If turn-around time is more than 60 days, look at denials and reasons for denials, internal billing errors, and other key factors that affect turn around time.


Another way to get a quick analysis of Days in A/R:


Outstanding A/R divided by Average Adjusted Charges per day


Adjusted Revenue per Day


Total Charges (last 3 month) minus Total Adjustments (last 3 months) divided by Number of Business Days (last 3 months)


Compare to your daily charges to see if your revenue is above or below average. It shows how busy a practice is. Investigate reasons behind significant variance.


Average Revenue per Patient


Total Monthly Collections divided by Total Monthly Patient Visits


This is a quick figure to use in forecasting future income. Obviously, revenue is tied to average costs per patient.


Percent of Aging by Days Benchmark



Payer Mix Ratio


Compare each plan to show how each individual plan contributes to the overall income to the practice. Knowing this ratio will help you work better on plans that make you the most money and it could help you determine which plans to weed out.


Individual Payer Receipts divided by Total Receipts


You can also calculate a similar payer ratio using this method:


Individual Payer Adjusted Charges divided by Total Receipts


This ratio will tell you what you should receive from the payer. Notice that we replaced receipts with adjusted charges. If what you collect differs greatly from what you should collect, this could be indicative of a problem with collections or the payer.


Contractual Adjustment Ratio


Total Contractual Adjustments divided by Total Charges


This ratio demonstrates how much the insurance plan is discounting the practice fees by. Figure this for all plans.


Voluntary Adjustment Ratio


Total Voluntary Adjustments divided by Total Charges


This ratio shows how much a practice is voluntarily discounting fees by. This is an important number for medical billers because your income is being discounted by voluntary write offs, too.


Bad Debt Adjustment Ratio 


Total Bad Debt Adjustments divided by Total Charges


This ratio demonstrates how much of what patients and plans owe is being written off as uncollectible.


Overhead Ratio


Total Overhead (operating expenses minus provider compensation and benefits) divided by Total Collections


Unless practice costs are reduced, volume increased accordingly or costs shifted to someone else, revenue will come out of the doctor's pocket.


Accounts Receivable per FTE (Full Time Equivalent) Physician


Outstanding A/R divided by Number of FTE Physicians in the Practice


This ratio the average amount owed for each physician’s work. Totaling receivables for each physician and comparing that amount with the Group’s average could be indicative of potential coding problems or a problem in keeping up with everyday paperwork within the practice.


Staff Ratio


Calculate non-physician practitioner consistently when using the ratio. You can consider them as employees, making them part of the equation:


Total FTE Employees divided by Total FTE Providers


A practice should look at:


  • gross practice income, expenses and doctor compensation
  • performance compared to previous years
  • charges to collections
  • collections as a percentage of charges
  • charges, collections and contractual or write-off adjustments
  • analysis of net revenue received compared to previous years in order to stay lean.


Typically if physician compensation is below average, it is attributable to too low practice income or high overhead. You need to ask one question. Are all the collections flowing through the pipeline? There are a couple of reasons why they may not be. First, cash gets stuck in the conduit. Remember, the practice is a conduit. Get the cash through the pipeline and into the doctor’s pocket as soon as possible. The other reason may be employee theft.


Establishing benchmarks and analyzing where the practice stands financially is crucial to collecting more money! 

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