In simple terms, it tells you what you collect for every dollar billed.

So, how do you calculate your net collections rate:

Start by picking your time period – we recommend using a 12-month timeframe.
Calculate the number of payments from your payers AND patients during that timeframe. Subtract any credits.
Calculate your charges for the same timeframe. Subtract contractual adjustments.
Divide the result from step 2 by the result in step 3.
Multiply by 100

Here’s is what the calculation looks like -

## (payments – credits)/(charges-contractual adjustments) * 100

The Medical Group Management Association (MGMA) recommends a net collection of 95% or higher. That means you are getting .95 cents for every dollar billed. Anything below 95% generally means you have room for improvement and can be an indicator of poor revenue cycle performance.