The morning huddle in November was genuinely good. The board said $165,000 in production — the biggest month the practice had ever run. Everyone felt it. Then the bank statement came, and $112,000 had landed. Not a disaster, but not a record either, and nobody in the building could explain where the other $53,000 went.
The short version: production vs collections is the most misread comparison in dentistry. Production is what you did. Collections are what you got paid for doing it. Between them sit three separate leaks, and only one of them is fixable by working harder. In the composite below, $41,000 of that gap is PPO contractual write-offs you agreed to when you signed the contract, $2,500 is courtesy adjustments, and $9,500 is simply sitting in accounts receivable waiting on payers. Strip out the write-offs and this practice collected 92.2% of what it could actually collect — against a commonly cited target of 98%. That 5.8-point gap is worth roughly $85,000 a year. Production is a vanity number. Adjusted collection rate is the one that pays your staff.
Three numbers, and only one of them matters
Most practice management systems will happily show you all three and never explain the difference:
- Gross production — every procedure at your full fee schedule. A number you will never be paid.
- Net production — gross production minus contractual write-offs and adjustments. What you are actually entitled to collect.
- Collections — money that arrived.
The two ratios people confuse:
- Gross collection rate = collections ÷ total production. In the month below that is 67.9%, which looks alarming and means almost nothing — for a PPO-heavy practice it mostly measures how deep your contractual discounts are.
- Adjusted (net) collection rate = collections ÷ net production. This is the one that measures whether your front desk and billing are actually working. In the month below, 92.2%.
If anyone in your practice reports a single “collection rate” without saying which one, the number is not usable. This distinction is exactly the sort of thing that should be built into bookkeeping set up for a healthcare practice rather than reverse-engineered every quarter.
Production vs collections: where the $53,000 went
Illustrative composite: a general dental practice in Cranston running roughly $1.45 million in annual net production, PPO-heavy. Constructed planning figures — not a real client and not a benchmark.
| Line | Amount | Can you do anything about it? |
|---|---|---|
| Gross production | $165,000 | The number on the board |
| PPO contractual write-offs | −$41,000 | Only at contract renegotiation |
| Courtesy and other adjustments | −$2,500 | Yes — policy decision |
| Net production | $121,500 | What you may actually collect |
| Collected in the month | $112,000 | |
| Added to accounts receivable | −$9,500 | Yes — timing and follow-up |
| Adjusted collection rate | 92.2% | Target commonly cited at 98% |
Leak 1: PPO write-offs — the largest and the least discussed
$41,000 of the gap was never yours. You agreed to it when you signed the participating provider agreement, and no amount of front-desk diligence recovers a contractual adjustment. It is a strategic decision disguised as an accounting line.
What it should trigger is a fee-schedule review, not a collections push. Which plans are producing the deepest discounts? What volume does each actually deliver? A plan taking 35% off your fees while sending eleven patients a year is a plan you are subsidizing. Write-offs belong on the agenda with your growth strategy, not your billing meeting. That analysis is squarely CFO advisory work — it needs unit economics, not data entry.
Leak 2: courtesy adjustments — small, discretionary, and unmanaged
$2,500 in a month is $30,000 a year of fees somebody decided to waive. Some of that is right: a goodwill gesture that keeps a family in the practice pays for itself. But in most practices nobody has ever set a policy, nobody reviews the total, and the authority to grant one is undefined. Pull twelve months of adjustments by team member and by reason code. The conversation writes itself.
Leak 3: the A/R lag — the one you can actually fix this quarter
$9,500 was earned, billed, and not yet collected. Some of that is normal float. The question is what happens to it after 30 days.
Published A/R targets do not fully agree with each other, which is worth knowing before anyone quotes one at you. A commonly cited goal is total A/R roughly equal to one month of average net production. On aging distribution, one source targets about 75% inside 30 days with almost nothing past 90; another allows meaningfully more in the 31–60 bucket. Where sources do converge: no more than about 10% of A/R should be more than 60 days past due. Treat all of these as reference bands rather than precise statistics — the sources publishing them openly say they are compiled industry ranges with no government or peer-reviewed dataset behind them.
Rhode Island practices have one lever their Massachusetts neighbors do not: R.I. Gen. Laws § 27-18-61 puts a statutory clock on clean claims, with interest owed after it runs. Practices in Franklin and elsewhere in eastern Massachusetts should work from their payer contracts instead. Either way the mechanism is the same: a claim nobody is chasing does not age into payment, it ages into a write-off.
The fourth leak nobody counts: claims that were never worked
The three leaks above all show up somewhere in a report. This one does not, which is why it survives for years. A claim gets submitted with a missing attachment and rejects. The rejection lands in a queue. Nobody opens the queue. Ninety days later the claim is past timely filing and quietly becomes an adjustment — recorded, if anyone asks, as a write-off rather than as the operational failure it was.
The tell is a rising adjustment percentage in a month when your payer mix did not change. If contractual write-offs jump and you did not add a plan or change a fee schedule, you are almost certainly absorbing dead claims into that line. Ask your billing team one question this week: how many claims submitted in the last ninety days have never received a response, and who is chasing them? If nobody can answer inside a day, that is the finding.
What the 5.8 points are worth
Here is the arithmetic that makes this urgent. Net production of $121,500 a month is roughly $1,458,000 a year. Closing a 5.8-point gap on that base is about $84,800 a year — with no new patients, no new chair, no new marketing spend, and no additional clinical hours.
Compare that to what it would take to produce $85,000 of new net production at the same collection rate, and the priority becomes obvious. The cheapest revenue in your practice is the revenue you already earned. Practices in Providence chasing new-patient numbers while leaking six points on collections are solving the expensive problem first. And because A/R growth is one of the six things that separate profit from cash, this is usually the same practice asking why the P&L says one thing and the bank account says another.
The reports to run this week
- Adjusted collection rate, monthly, trailing twelve. Collections ÷ net production. One number, tracked over time. If it is drifting down, find out when it started.
- Adjustments by type and by team member. Separate contractual write-offs from courtesy adjustments. They are different problems with different owners.
- A/R aging with a name on every bucket past 60 days. Not a total — a list, with who is chasing it and by when.
- Unsent and unworked claims. The quietest leak of all. Claims that were never submitted, or submitted and rejected and never resubmitted, sit in a queue nobody opens.
- Write-off percentage by plan. Feed this into your annual participation decision.
- Loaded payroll as a share of collections. When collections slip and payroll does not, the ratio moves against you quietly — the same trap we walk through for chiropractic staff payroll ratios, and the math is identical in a dental practice.
If your practice management software makes these hard to produce, that is a setup problem, not a software problem — the same category as a QuickBooks file nobody configured properly. Fix the reporting first; you cannot manage a number you have to reconstruct by hand.
Frequently asked questions
What is the difference between production and collections in a dental practice?
Production is the value of the dentistry you performed, at your fee schedule. Collections are the money that actually arrived. The gap is made up of contractual PPO write-offs, courtesy adjustments, and the timing lag while claims sit in accounts receivable. A record production month with weak collections usually means write-offs or A/R, not a billing error.
What is a good collection rate for a dental practice?
Commonly cited compiled ranges put a good adjusted collection rate at about 98%, with roughly 95–97% typical and below 95% meaning real money is being left on the table. The sources publishing these ranges disclose that no government or peer-reviewed dataset backs them, so treat them as a reference band and track your own trend rather than chasing a national figure.
Should I measure gross or adjusted collection rate?
Adjusted. Gross collection rate divides collections by total production, so for a PPO-heavy practice it mostly measures the depth of your contractual discounts — a practice can show 68% gross and be running an excellent billing operation. Adjusted collection rate divides collections by net production and measures what your team actually controls.
Why did my collections drop when my production went up?
Usually one of three things: the new production came from plans with deeper write-offs, so net production rose less than gross; the extra volume outran your billing capacity and claims are sitting unworked; or a payer changed something and denials quietly increased. Look at adjusted collection rate and the aging together — the pair will tell you which.
How fast do insurers have to pay a dental claim in Rhode Island?
Rhode Island sets a statutory prompt-payment clock for clean claims, with interest accruing once it runs, under R.I. Gen. Laws § 27-18-61. The practical catch is that the protection only applies to claims that were submitted complete and are being followed up. Massachusetts has no identical day-count equivalent we can point you to — eastern Massachusetts practices should work from their individual payer contracts and the state Division of Insurance.
Bottom line
Your best production month and your best collections month are different months, and only one of them pays for anything. Split the gap into its three parts — contractual write-offs, discretionary adjustments, and A/R lag — because each has a different owner and a different fix. Write-offs are a contract strategy conversation. Adjustments are a policy conversation. A/R is a weekly discipline.
Track adjusted collection rate monthly and nothing else changes overnight. But you will finally know whether a good month was actually good, and roughly $85,000 a year in this composite is sitting in the difference.
Want to know your real number? Send us a production and collections report and an A/R aging and we will calculate your adjusted collection rate, split the gap into its three parts, and tell you which one to attack first. Grab a free 30-minute slot. If you are weighing what level of help you actually need, start with bookkeeper vs. CFO advisor, CFO advisor vs. fractional CFO, what a fractional CFO costs in Rhode Island, and the seven signs it is time. Collections arrive on the payer’s schedule and payroll arrives on yours, so line the two up with our free 13-week cash flow forecast template. Clean books come first either way — see our bookkeeping services and the 16 parts of your business, and coordinate the tax side with tax planning and a CFO advisor in Rhode Island.
General information for Rhode Island and Massachusetts practice owners, not tax or legal advice. Dollar figures are an illustrative composite — not real client results. Benchmark ranges are compiled industry figures, not authoritative datasets, and are labeled as such above.
by