What is the formula for the Net Monthly Collection Ratio?

The Net Monthly Collection Ratio is a critical metric used in financial management, especially in healthcare practices, to evaluate how effectively a medical practice is collecting its revenues. The correct formula represents the relationship between total collections and the total charges adjusted for any adjustments.

Using total collections divided by total charges minus adjustments aligns perfectly with the definition of the Net Monthly Collection Ratio. This formula provides a clear view of how much of the billed services (charges) are actually collected after accounting for any adjustments (such as write-offs or discounts). By focusing on the collections in the context of adjusted charges, it helps practitioners understand their revenue cycle performance, revealing efficiency in the billing process.

This metric allows practices to assess their effectiveness in collecting expected revenues from the services they provide, guiding financial decision-making, and operational improvements.