If you suspect your revenue cycle expenses are higher than what your financial reports suggest, you are likely right.
Most home medical equipment (HME), durable medical equipment (DME), and infusion leaders evaluate the cost to collect using only biller salaries and basic software fees. However, the true costs account for every dollar you spend across your entire revenue cycle. Once you factor in claim rework, complex documentation tracking, clearinghouse fees, and delayed collections, your actual cost often doubles.
Understanding this true expense is the first step toward building a scalable revenue cycle management model that helps avoid profit loss from preventable billing errors.
What Is The Cost to Collect, and How Do You Calculate It?
The cost to collect in healthcare is the total expense required to convert rendered services into collected revenue. It includes all resources in your revenue cycle, such as billing staff, administrative staff, and IT systems. In simple terms, it shows how much your organization spends across the revenue cycle to collect the revenue it is owed.
This measures your revenue cycle efficiency and shows where you can cut costs and collect more. That trend line is what turns it from a static number into a tool for data-driven decisions.
The cost-to-collect formula
The cost-to-collect formula is straightforward: total revenue cycle cost divided by total payments collected, expressed as a percentage or cents per dollar.
Cost to Collect = (Total Revenue Cycle Costs / Total Collections) x 100
It means that if you spend $100,000 on revenue cycle activities to collect $1,000,000, your cost to collect is 10%. Spend two cents to bring in every dollar, and that’s 2%. Just make sure both figures cover the same period, whether that is a month or a full year.
What Goes Into Your True Cost to Collect?
The formula is simple. The inputs are where most organizations go wrong. According to the Healthcare Financial Management Association’s (HFMA) cost-to-collect guide, a complete count covers:
- Intake and eligibility/benefit verification, authorization, and documentation
- Claim submission
- Denial management
- A/R follow-up and collections
- Cash posting
- Technology and clearinghouse costs
- Management/administrative overhead
- Outsourced RCM resources
Organizations must also account for indirect overhead—such as statement printing, postage, allocated office space, off-site record storage, and IT support. Leave those out, and the number looks better than reality, which hides the very costs worth fixing.
To gain complete visibility, evaluate the overall cost to collect alongside the cost per claim to identify operational bottlenecks.
What Is a Good Cost to Collect (and Where Do Most Providers Land)?
There isn’t one percentage that defines an efficient revenue cycle across every healthcare sector. HFMA benchmarks can provide useful context, but hospital and health-system benchmarks should not automatically be applied to HME, DME, home infusion, or specialty pharmacy operations.
These organizations face different reimbursement models, documentation requirements, claim volumes, payer complexities, and average claim values.
For post-acute providers, the more meaningful question may be: Is your cost to collect improving over time, and what is driving it?
Tracking cost to collect alongside denial trends, aging A/R, first-pass performance, productivity, and payer-specific issues provides a much clearer picture of revenue cycle efficiency.
What Actually Drives Your Cost to Collect Up?
If your number is climbing, the cause is rarely a single line item. It is usually the same handful of process gaps, repeating quietly across thousands of claims.
Rework, the hidden multiplier
Rework can be one of the biggest drivers of higher collection costs. Every claim that needs reworking or appealing takes up staff time at least twice, which raises your costs per claim without bringing in any extra money. That’s why just adding more staff doesn’t solve the problem: you are paying people to redo work that should have been done correctly the first time.
Manual work and aging A/R
Re-entering patient data across different software systems and checking eligibility portals takes up a lot of billing time. When claims remain unpaid for 60 or 90 days, resolving them requires repeated follow-up calls, formal appeals, and special collection services. The longer an account sits in A/R, the more effort it requires, which quickly increases your cost per claim.
Staffing the symptom
When claim backlogs grow, many leaders respond by hiring more billers to clear the queue. However, adding more staff to a broken workflow often increases costs faster than it improves collections. When rising costs are being driven by repeated rework, additional staffing may address the backlog without addressing the underlying process.
Why Do HME, DME, and Infusion Providers Look Different Here?
Remember the earlier caveat. General benchmarks do not fit HME, DME, and infusion providers. They assume a physician or hospital claim, which is why your cost to collect can look high even when your team runs well. Three structural factors drive most of the gap:
- Documentation-heavy requirements: Claims need physician orders, Certificates of Medical Necessity, and signed proof of delivery before billing. One missing signature triggers a denial and an expensive hunt for the file.
- High-volume, low-dollar resupply: When the labor required to resolve a low-dollar resupply claim approaches the value of the reimbursement itself, profitability quickly erodes.
- Complex infusion billing: J-code drugs, per-diem coding, unit calculations, and prior authorizations raise the stakes. One authorization error on a specialty drug can lock up thousands in payer appeals.
None of this means your team is underperforming. It means your baseline is different. So what is fair? Benchmark against yourself over time and against operations that look like yours, not against a hospital figure built on different economics.
How Do You Lower the Cost to Collect Without Cutting Corners?
Lowering your cost to collect is not about rushing claims or cutting corners on compliance. You reduce the cost of collecting by removing manual steps that waste time, so your billing team can focus on the work that actually moves cash.
Raise first-pass yield
The fastest way to drop collection costs is by getting claims right the first time. Scrub for valid orders, prior authorizations, and active coverage before submission to prevent errors at the front door. Fixing them at intake, addressing eligibility, authorization, documentation, and other issues upstream can prevent them from becoming denials, rework, and aging A/R downstream. This is the single biggest lever on revenue cycle efficiency.
Automate the exceptions
Your staff should not spend the day checking clean, routine claims. Technology and automation can handle repetitive, rules-based work while helping teams identify the exceptions that require human expertise. This allows experienced revenue cycle professionals to focus their time where intervention can have the greatest impact. They step in only when a claim triggers an audit flag or a rejection, where their expertise actually counts.
The scale of the opportunity is national. The 2025 CAQH Index found that the healthcare industry avoided an estimated $258 billion in administrative costs through different types of automation, including AI and RCM, with roughly $21 billion in savings still on the table from manual and partly manual work.
Use Data to Find the Root Cause
To fix high costs, you need to see where labor is being wasted. Track paid and denial rates by payer and by code, so improvements are targeted rather than generic.
Lowering cost to collect requires understanding where unnecessary work is occurring. Look at denial trends, payer performance, aging A/R, first-pass performance, and recurring workflow issues to identify where resources are being consumed without improving collections.
Visibility is only valuable when it leads to action. The goal is to identify and correct systemic issues so teams aren’t repeatedly working the same problems downstream.
Building a More Efficient Revenue Cycle
Cost to collect is more than a back-office metric. It can reveal where processes, technology, and resources are working and where unnecessary rework is consuming time and margin.
ACU-Serve combines revenue cycle expertise with technology-enabled processes to help HME, DME, home infusion, specialty pharmacy, and other post-acute providers improve visibility across the revenue cycle, identify root causes, and address issues before they continue downstream.
The goal isn’t simply to do the same work for less. It’s to reduce unnecessary work, improve performance, and create a revenue cycle that can scale with the organization.
Results Matter.
Frequently Asked Questions
What does “cost to collect” mean in healthcare?
The cost to collect refers to the total expense of managing your revenue cycle, calculated as a percentage of the payments you receive. It includes costs related to staff, technology, clearinghouse services, and outsourced billing. This number shows the complete cost of converting claims into cash.
What is a good cost to collect?
There is no single cost-to-collect benchmark that applies equally across healthcare. HME, DME, and infusion providers operate under different reimbursement, documentation, and claim-volume dynamics than hospitals and health systems. Organizations should consider relevant industry benchmarks while also tracking their own performance over time and evaluating the operational factors driving changes.
How do you calculate the cost to collect?
Add all costs related to the revenue cycle, including salaries, benefits, technology, clearinghouse fees, and outsourced billing. Then, divide this total by the payments collected. Express the result as a percentage or as cents per dollar. Counting only biller salaries gives an incomplete picture and overlooks any additional work that needs to be done.
Why is our cost to collect so high?
Rework is often a significant contributor. Every denied, reworked, or appealed claim consumes staff time more than once, which multiplies the cost. Manual processes, aging A/R, and low first-pass resolution add to it. These are process problems; adding billers rarely lowers the number on its own.
How can we reduce the cost to collect?
Here are major things that you can do: 1) Improve first-pass yield by addressing claims before they are sent out; 2) Automate the exceptions so staff only focus on problem claims; 3) Shorten accounts receivable by prioritizing the right accounts first; and 4) Measure collector efficiency based on payer and code. Reducing rework is the most significant and lasting improvement you can make.