One of the most common questions we get asked is, "Should I track the progress of my practice using gross production or net production?"
It's a good question, with the answer being... it depends on your preference!
Short Answer: At Dental Intel, we recommend that practices track their production using gross production. Read below to find out why!
We always encourage practices to track their progress using gross production. The reason for this is that you can completely control how much gross production you perform in your practice.
Gross production is simply just the amount of completed procedures that you complete in your practice. Meaning that it doesn't matter how much payment you will receive from insurance on that procedure, it just matters that you performed that procedure. This levels how you look at production for each provider because that is truly the one thing they can control.
The problem with net production is that there are several different ways to track it. So first, we need to clarify the different types of net production that you can look at.
Net production - Adjustment Date
Adjustment will be accounted for on the day of the adjustment
Pros: Net Production based on the adjustment date will give you a timely picture of this period's net production
Cons: If you make an adjustment outside of the period the procedure was performed, the net production can be under or over stated for that period.
Net Production - Procedure Date
The adjustment will be account for on the date of the procedure. In order for this to be accurate you need to ensure that each adjustment is associated with the procedure.
Net Production based on the Procedure Date will give you the most accurate reflection of collectable production performed in the past periods.
Accurate Net Production will not be reflected until several month have passed giving you enough time to ensure that all claims are closed and adjustments are made.
In order for the number to be accurate , all insurance claims need to be processed, received and recorded.
If there are any outstanding insurance claims, the Net Production will likely change when the claims is received and any final adjustments are are.
Net Production - 90 Day Average
Net Production will be calculated using a rolling 90-Day Average. This is calculated by taking the total adjustments over a rolling 90-Days divided into the total production over the rolling 90-Day, multiplied by the period's gross production, giving you the average adjustment used to reduce Gross Production.
90-days Gross Production: $300,000
90-days Adjustments: $25,000
Current Period's Production: $100,000
(25,000 / 300,000) x 100,000 = 8,333.33 90-Day Average Adjustment
Current Period's Average Net Production = $91,666.67 (100,000 - 8,333.33)
Net Production based on the 90 day average will give you a timely and consistent view of your estimate Net Production, and in most cases with less than a 2.5% variance from Actual Net Production without needing to ensure all adjustments are associated with the procedure or that the adjustment are made in the same period (day, week, month, quarter or year)
This is an estimated number and can have a variance larger than 2.5% if large adjustments are made in a period affecting the 90-Day Average.