Evaluating Your Practice’s Revenue Cycle: Average Reimbursement Rate

Average Reimbursement Rate

Presenter:
Asia Blunt, MBA, CPC
Practice Management Strategist

Take six minutes to better understand and be able to calculate the average amount your practice should be collecting from submitted claims. After watching this presentation, you will know how to:

  • Obtain a better understanding of the average reimbursement rate and find out why it’s important for your practice.
  • Learn how to calculate the average reimbursement rate.
  • Discover problems to avoid, such as calculating the average reimbursement for all payers combined.

The average reimbursement rate represents the average amount your practice collects from the total claims submitted. When tracked over time and compared with historical practice results, it provides an accurate picture of your practice’s financial health. It also helps determine if your practice could realistically bring in more revenue. Claim-specific negotiated discounts, payment bundling, and bad debt can adversely affect average reimbursement rate.

 

Best Practice Tip
The industry average is 35% to 40%.

Calculating the Average Reimbursement Rate

To calculate the average reimbursement rate, divide the sum of total payments by the sum of total submitted charges/claims.

To calculate the average reimbursement rate per encounter, divide the sum of total payments within a given period by the number of encounters within the same period.

Sample Calculation

  • (Sum of Total Payments/Sum of Submitted Charges/Claims)
  • Sum of total payments: $200,000
  • Sum of total charges submitted: $350,000
  • $200,000/$350,000
  • 0.57
  • Average reimbursement: 57%

Other Considerations

Calculating the average reimbursement solely for all payers together. Calculate the average reimbursement rate for each payer to determine how each payer is compensating your practice. If possible, payments should be sorted by payer and procedure to determine the most common procedures submitted to each payer and the paid percentage for those procedures.