Tracking your production vs collections ratio is a great way to optimize your revenue! To learn more, listen to the podcast or read a transcript of the audio.
Welcome back to another edition of the Sikka Software podcast. Today, we’ll be taking a look at an important metric for your practice: production vs. collections. We’ll help you understand what this statistic is, why it’s important, and what an optimal ratio should look like for your practice.
So before we get into looking at the metric, let’s first look at both of the components individually: Production and collections. Both are straightforward. Production is how much services in dollar terms your company produced. Collections refers to how much money your company actually receives for its performed service. Discrepancies between production and collections mean that services are being performed but are not being properly compensated.
Now, having an optimal production vs collections ratio will maximize the amount of revenue that your practice receives and makes sure that every provider is being compensated for the services they provide. It also ensures that patients are not unnecessarily burdened by debt.
Unfortunately, failure to pay is very common in the medical field. A recent study by the Consumer Financial Protection Bureau found that the most common reason that collectors were called on consumers was for medical debt. Failure to collect is a widespread problem in the industry as a whole.
Ideally, a practice should have a production to collections ratio of 100%. That’s the “perfect world” efficiency ratio, where every service performed is fully compensated. Most practices are below the optimal number. Sikka Software’s data shows that the average number for U.S. dental practices is 96% for September 2018. Though still close to the optimal ratio, 4% is a significant amount of potential revenue being left on the table.
When ratios are too low, efforts should be made to implement changes. In many cases, practices with a low production to collection ratio require a re-evaluation of front office procedures. Providers should take a deep look at the practice’s communications with their patients and contemplate the steps that should be taken to encourage collection.
There are two Sikka Software products that help practices achieve desirable production to collections ratios. The first is our Practice Optimizer, which simplifies the tracking of production to collection. The application works with around 96% of Practice Management Systems, providing measurement and prediction based on several important KPIs, production vs collections being one of them.
Through Practice Optimizer you can look at your actual production and collections, versus the national average and against the goals you can set for yourself within the application. Providers can see where different strategies may be needed in order to improve profitability.
The second product is Patient Mobilizer. Our Patient Mobilizer application recently introduced HIPAA compliant payment with Worldpay. Providers can encourage patients with Patient Mobilizer to pay before their scheduled appointment, simplifying the collections process.
Thanks for tuning into the Sikka Software podcast where we give you tips and strategies to optimize your practice’s performance. Until next time.