Net collection rate — the percentage of what you’re owed that actually gets collected — should be 95% or higher. Below 90% means one or more systematic billing problems are actively draining revenue every month. Below 85% is a crisis.
The cause is almost always one of six things. Identify which ones are present in your practice and fix them in priority order.
Cause 1: Denials Not Being Worked (The Most Common)
How to identify it: Pull your denial log for the last 90 days. Add up the dollar value of denials received vs. denials resolved. If more than 40% of denied dollar value is unworked — still in the queue, never appealed, never corrected — this is your primary collection problem.
Why it happens: The billing operation is submitting claims but not managing the back end. Claims go out, some pay, some deny, and the denial queue grows without anyone systematically working through it. Collections look okay because new claims keep paying — until the denial backlog becomes large enough to affect the visible numbers.
Fix: Every denial worked within 5 business days of receipt. Denials over $500 get a personal appeal — not just a resubmission. Denial root causes analyzed monthly — same codes repeating means the upstream error hasn’t been fixed.
Cause 2: Timely Filing Write-Offs Accumulating Silently
How to identify it: Search your billing system for all write-offs coded as “timely filing” or “CO-29” in the last 12 months. Add them up. Most practices are surprised by the total.
Why it happens: AR isn’t reviewed daily. Claims denied early in their life get lost in the queue. By the time someone gets to them, the timely filing window has closed. The write-off is automatic — no decision made, just a deadline passed.
Fix: AR must be reviewed by aging bucket daily. Any claim over 25 days with no response triggers a payer follow-up. Any claim approaching 60% of its timely filing window gets priority regardless of dollar amount.
Cause 3: Under-Coding — Revenue Never Captured
How to identify it: Compare your E/M level distribution (ratio of 99213 to 99214 to 99215) against national benchmarks for your specialty. If your practice bills significantly more 99213s and fewer 99215s than specialty benchmarks, you’re likely under-coding.
Why it happens: Billers default to conservative coding to avoid perceived audit risk. The 2021 E/M revisions made higher-level coding more defensible based on MDM — but many billing operations didn’t update their leveling approach when the guidelines changed.
Fix: E/M level audit against current 2021 guidelines. Coding education for both clinical staff (documentation) and billing staff (leveling). Compare pre- and post-audit reimbursement per visit to quantify the impact.
Cause 4: Patient Balance Abandonment
How to identify it: Segment your outstanding AR between insurance AR and patient AR. If patient AR is growing as a percentage of total AR month over month, patient collections are failing.
Why it happens: Patient balances are harder to collect than insurance claims. The patient gets one statement, sometimes two, and then the balance sits. The practice writes it off after 120 days rather than pursuing it — because the collection cost seems to exceed the balance.
Fix: Collect patient portions at time of service using eligibility-verified estimates. First statement within 7 days of claim adjudication. Second statement plus phone call at 30 days. Payment plan offer at 45 days. Collection protocol at 60 days. Most patient collections problems are a process gap, not an uncollectable balance.
Cause 5: Eligibility Verification Gaps
How to identify it: Review CO-270 and CO-271 denial volume (eligibility and coverage denials). Any meaningful volume of these — more than 2–3% of claims — indicates systematic eligibility failures.
Why it happens: Eligibility checked at scheduling, not day-of. Insurance changes between scheduling and visit. Patient gives outdated insurance information. The biller submits to the plan in the system rather than verifying current coverage.
Fix: Real-time eligibility verification within 24–48 hours of every appointment. Front desk hard stop — patient confirmed eligible before check-in, not at scheduling. Eligibility failures flagged same day for patient contact.
Cause 6: Charge Capture Gaps
How to identify it: Compare billable encounter volume (from clinical documentation) to billed claim volume. If you’re seeing 400 patients per month but only billing 380 encounters, you have 20 encounters/month going unbilled. At $200 average reimbursement, that’s $4,000/month, $48,000/year.
Why it happens: Providers sign documentation late, delaying charge capture. Some encounter types (phone visits, care coordination, CCM) are systematically missed because the billing workflow doesn’t capture them. Procedures performed during visits don’t make it to the claim.
Fix: Reconcile clinical encounters to billed claims weekly, not monthly. Any gap in the reconciliation gets investigated before the billing cycle closes. Provider signature policy: all notes signed within 48 hours of encounter.
Frequently Asked Questions
What is a good net collection rate for a medical practice?
95% or higher is the benchmark. Best-in-class operations run 97–98%. Below 90% indicates systematic billing problems. Below 85% is a revenue crisis requiring immediate root cause analysis — at that level, a mid-size practice is losing $60,000–$150,000 annually in collectible revenue.
How do I improve my medical billing collections rate?
Start with identifying which of the six causes above is most prevalent. For most practices, the highest-impact fix is working the denial backlog systematically — denials worked within 5 days, root causes fixed in billing templates, same denial codes not repeating month over month. The second-highest impact is eliminating timely filing write-offs through daily AR review.
What is the difference between gross collection rate and net collection rate?
Gross collection rate is collections divided by total charges — meaningless for measuring billing performance because charges include contractual adjustments that will never be collected. Net collection rate is collections divided by net collectible charges (after contractual adjustments) — the accurate measure of what percentage of what you’re legitimately owed is actually collected. Only net collection rate matters for evaluating billing performance.
Collections rate below 93%? Book a free call — we’ll identify which of these six causes is driving the gap before you commit to anything.
Related Resources
How to reduce your denial rate | How to reduce days in AR | The 7 billing KPIs to track monthly