Cost to Collect is a key metric in healthcare revenue cycle management that measures the total cost incurred by a healthcare organization to collect payments from patients and insurance companies. This metric takes into account all the expenses associated with the revenue cycle process, including staffing costs, technology expenses, and other overhead costs. The Cost to Collect metric is calculated by dividing the total expenses incurred during the revenue cycle process by the total amount of revenue collected. This metric is important because it helps healthcare organizations understand the efficiency of their revenue cycle process and identify areas where they can reduce costs and improve revenue collection. By tracking the Cost to Collect metric over time, healthcare organizations can monitor the effectiveness of their revenue cycle management strategies and make data-driven decisions to optimize their revenue cycle process. Ultimately, a lower Cost to Collect metric indicates that a healthcare organization is operating more efficiently and effectively, which can lead to improved financial performance and better patient outcomes.
Cost to Collect is calculated by dividing the total cost of collecting payments by the total amount of payments collected.
The formula for calculating Cost to Collect is: Cost to Collect = Total Cost of Collecting Payments / Total Amount of Payments Collected
The total cost of collecting payments includes all expenses related to the revenue cycle management process, such as salaries and benefits for staff, software and technology costs, and overhead expenses. The total amount of payments collected includes all payments received from patients, insurance companies, and other payers. To calculate Cost to Collect, healthcare organizations must track and analyze their revenue cycle management expenses and payments collected over a specific period of time, such as a month or a year. This metric can help organizations identify areas where they can reduce costs and improve efficiency in their revenue cycle management process.
Best practices to improve Cost to Collect are:
1. Streamline the Revenue Cycle Process: One of the best ways to improve Cost to Collect is to streamline the revenue cycle process. This can be achieved by automating manual processes, reducing the number of handoffs between departments, and implementing best practices for billing and collections.
2. Optimize Staffing Levels: Another way to improve Cost to Collect is to optimize staffing levels. This involves ensuring that the right number of staff is available to handle the volume of work, and that staff are trained and equipped to perform their roles effectively.
3. Implement Technology Solutions: Technology solutions such as revenue cycle management software can help improve Cost to Collect by automating processes, reducing errors, and providing real-time data and analytics to help identify areas for improvement.
4. Monitor Key Performance Indicators (KPIs): Monitoring KPIs such as days in accounts receivable, denial rates, and collection rates can help identify areas for improvement and track progress over time.
5. Improve Patient Communication: Improving patient communication can also help improve Cost to Collect. This can be achieved by providing clear and concise billing statements, offering payment plans, and providing education on insurance coverage and billing processes.By implementing these best practices, healthcare organizations can improve their Cost to Collect and achieve greater financial stability and success.
The industry standard benchmark for Cost to Collect is typically around 2-4% of net patient revenue. This means that for every dollar collected, the healthcare organization should spend no more than 2-4 cents on revenue cycle operations. However, it is important to note that this benchmark can vary depending on the size and complexity of the organization, as well as the types of services provided. To improve their Cost to Collect metric, healthcare organizations can focus on streamlining their revenue cycle operations, reducing denials and rejections, and improving patient collections. This can be achieved through the implementation of technology solutions, such as revenue cycle management software, as well as staff training and process improvement initiatives. Overall, the Cost to Collect benchmark is a critical metric for healthcare organizations to monitor and improve upon in order to ensure financial sustainability and success.
Revenue cycle software can significantly improve the Cost to Collect metric by automating and streamlining various revenue cycle processes. With the help of advanced analytics and reporting tools, revenue cycle software can identify inefficiencies in the revenue cycle process and provide actionable insights to improve them. For instance, revenue cycle software can automate the patient registration process, which can reduce the number of errors and rework required. It can also automate the claims submission process, which can reduce the number of denied claims and the time taken to resubmit them. Additionally, revenue cycle software can automate the payment posting process, which can reduce the time taken to post payments and reconcile accounts. By automating these processes, revenue cycle software can significantly reduce the cost to collect metric, which is a critical metric for healthcare organizations. A lower cost to collect metric means that healthcare organizations can collect more revenue with fewer resources, which can improve their bottom line. If you're interested in seeing firsthand how MD Clarity's revenue cycle software can improve the cost to collect metric for your healthcare organization, we invite you to book a demo with us. Our team of experts will walk you through our software and show you how it can help you streamline your revenue cycle processes and improve your bottom line. Book your demo today!