How is the net collection ratio calculated?

The net collection ratio is calculated by dividing total payments by total charges, excluding write-offs. This method focuses on the effectiveness of a healthcare provider in collecting payment for the services provided. By excluding write-offs, which are amounts that will not be collected due to contractual adjustments or any other reason, the ratio provides a clearer picture of the actual revenue received compared to what has been billed to patients or insurers.

Calculating the ratio this way helps medical administrative assistants evaluate the practice's financial health and efficiency in collections, ultimately impacting budgeting and financial planning. It demonstrates the ability of the practice to convert billed services into actual income, making it a crucial metric for understanding the financial performance of a healthcare facility.