Before you build a business case for anything, a new hire, a second location, a new service line, three numbers have to be right. Payer mix. Net collection rate. AR days. Most owners have all three. Almost nobody has calculated them correctly in the last two years. This episode is how to fix that, in about twenty minutes, using your own system. [Payer mix] The payer mix on your billing dashboard is almost always built on charges, meaning what you billed. What you need is payer mix by collections, meaning what you actually got paid. Those two numbers are often meaningfully different. Pull payments received by payer over the last 12 months, divide each payer by total net collections, and that percentage is your real mix. Twelve months and not three, because open enrollment shifts and Medicaid redeterminations distort any shorter window. [Net collection rate] Gross collection rate compares you to your billed charges, a number nobody ever pays. Net collection rate compares what you collected to what you were contractually owed. Net collections divided by gross charges minus contractual adjustments. Discretionary write-offs, bad debt and charity, do not belong in that adjustment figure, because including them overstates the rate. Most well-run practices land between 95% and 98%. Under 90% is a red flag. Above 99% usually means contractual adjustments are being under-written. [AR days] AR balance divided by average daily charges over the last 90 days. Lower is generally better, but the blended number hides the story. Split insurance from patient, then look payer by payer. Under 35 days total is healthy. Medicare should sit at 20 to 28. Medicaid at 35 to 60. Patient AR above 40 days means balances are not being collected at the point of service. Any payer trending up for three consecutive months is worth a conversation. [Why this matters for a business plan] A 10% shift toward Medicaid lowers your blended rate per visit by $8 to $15 depending on specialty. In a 30,000-visit-per-year practice that is $240,000 to $450,000 of annual revenue difference, and it is completely invisible if you are using charge-based payer mix. A practice modeling at 96% when the verified rate is 92% overstates revenue by four cents on every dollar. On $300,000 a month that is $12,000 a month that does not exist. And a plan built on 30-day AR while the practice actually runs at 52 days has a cash flow gap in the first 60 to 90 days that the plan never accounts for. That gap shows up as a cash crisis, not a revenue problem. [Three actions this week] Pull payer mix by collections: 12 months, by payer, as a percentage of net payments Pull your net collection rate: net collections divided by gross charges minus contractual adjustments, 12 months, run 90 days in arrears Pull AR days for your top four payers, insurance and patient separately, with a 3-month trend direction on each If you cannot pull any of these cleanly from your system, that is the first thing to fix, not the business plan. A plan built on numbers you cannot verify is not a plan. It is a guess with formatting. And if you can pull them and the numbers surprise you, that surprise is worth more than any plan you would have built without looking. Take them to your accountant and your billing manager before you build anything else. [Episode breakdown] 00:00 The three numbers 00:40 Why this matters before you build anything 02:30 Payer mix: what it actually is 05:10 The calculation that matters 06:40 Why 12 months and not 3 or 6 08:20 Net collection rate: the formula 11:00 How to pull it correctly 13:10 What a healthy number looks like 15:00 The number most practices are using is not this 17:00 AR days: insurance versus patient 19:20 What AR days does to a cash flow plan 21:30 What to do before you build anything 23:00 Next week on EP207