In this quick little article, I want to share with you something that often frustrates physical therapists running their own practices.

They say to me, “Kevin, just give me one measurement, one statistic, one number that I can use to tell me what is going on with my billing department.”

The number that we use here at Jet PT Billing is what is known as the Collection Ratio. I did not come up with this term, I got it from a friend in the industry a long time ago, but this number is a terrific way to quickly see how your practice is doing in terms of billing and collections.

So, to figure out the Collection Ratio for a practice we need to look at the most recent six weeks of information.

How to Calculate Collection Ratio

Specifically, we need two numbers:

• Collections expressed in dollars for the most recent 6-week period
• Billing or Charges expressed in dollars for the most recent 6-week period

Once we have those two numbers, we can calculate a Collection Ratio.

To do this we simply divide the two.

For example, if we sent out $200 in charges and collected $100 our Collection Ratio would be .5 or 50%.

This allows me to use this information to predict my future activity, knowing that I am collection 50% of what I bill.

That really doesn’t sound too good, but those of us in the health care field we know that is the way the game works.

Now, there is something to keep in mind about all this. We do not want to compare data from one provider’s practice to the next.

Let me give you an example to show you what I mean.

If we have Practice A, and they bill $200 for a service and collect $100 their ratio is 50%.

We cannot effectively compare their performance to Practice B who also collects the same amount, $100 but bills $400 for the same services. Their ratio is only 25%.

These two organizations may be collecting the same amount of revenue but the fee schedule they use has a large variation. That’s why we do not want to get into the scenario of comparing apples and oranges between clients.

This is why when you are looking at using Collection Ratio to assess your practice you only want to look at data that is specific to your practice only. That way you eliminate the variables of differing fee schedules.

The collection ratio provides you with a way to compare how your practice is doing over time and as a means to predict future revenue.

There are many ways to look at collections and billing performance, but this is a nice place to start. If you need help with your specific situation or have other questions, please do not hesitate to reach out.