Oct 27, 2026
Written By Elizabeth Cifers
The practice had a great month for collections. Revenue came in, the bank balance increased, and everyone felt better about the numbers. Then the drug invoices came due.
In a retina practice, total collections can give an incomplete picture of the cash available to run the business. Some of that money pays for services the practice provided, and some is needed to cover drugs the practice already purchased. Those dollars may land in the same bank account, but they serve different purposes.
Prefer to watch? In the video below, I walk through the two revenue buckets and what a $1 million collection month can hide.
I like to divide collections into two basic buckets.
The first is service fee revenue: payment for the services the practice provides to the patient, including office visits, diagnostic testing, injections, laser treatments, and surgery. These collections fund the practice’s day-to-day operations.
The second is drug revenue: payment for the product itself, typically billed under the applicable J, Q, or C code. Because the practice purchased the product, drug revenue must cover its acquisition cost.
If the practice purchased the drug on credit and has not paid the supplier, an outstanding invoice remains. Payment terms, typically 30–120 days depending on the drug purchased, may give the practice time to collect reimbursement before payment is due, but the obligation remains.
Both buckets are revenue. They are not equally available to spend.
An intravitreal injection involves both a service and a drug. Payment for administering the injection belongs in the service fee bucket. Payment for the drug belongs in the drug fee bucket. Looking only at the combined revenue can make it easy to overlook how much of that revenue is already obligated to cover the drug purchase.
Separating the revenue into the two buckets, whether in your accounting system or by running practice management reports (or both), makes it easier to recognize what is already obligated vs what can be used to run the practice, preventing decisions based on the total collection amount.
Consider a simplified, hypothetical example. A practice collects $1 million in a month: $250,000 for services and $750,000 for drugs.
Assume the practice has collected the full drug payment from insurance and the patient, and the outstanding drug invoices associated with those collections total $740,000.
| Item | Amount |
|---|---|
| Service Fee Collections | $250,000 |
| Drug Fee Collections | $750,000 |
| Total Collections | $1,000,000 |
| Drug Invoices Due | ($740,000) |
| Collections remaining after paying invoices, before other obligations | $260,000 |
Of the $260,000, $250,000 came from services, and $10,000 remains after paying the associated invoices from the drug collections. This is a different picture from having $1 million available to spend. It is also not a profit calculation or a complete measure of available cash. Other obligations still need to be considered.
Real-world timing is less tidy. Payments can arrive across months, and patient balances can remain unpaid. The goal is to identify obligations still tied to drug revenue to ensure timely invoice payment.
Extended payment terms can help the practice collect reimbursement before the supplier invoice comes due, which is why they exist. But that interval can also make the bank balance look better than it is since the payment has arrived, but the invoice isn’t due yet. The money sits in the account, waiting to pay the invoices.
If the practice uses that cash elsewhere without accounting for the upcoming obligation, it will need to find the funds when the invoice comes due. Credit terms give the practice time to pay. They do not turn drug reimbursement into free cash.
More drug volume generally means more drug purchases. As payments arrive, total collections can rise while the practice’s supplier obligations rise as well. A change in the drug mix can also increase the dollars moving through the account without producing a comparable increase in cash available for operations.
That is why total collections alone cannot tell management whether the practice has more money available to use. The practice needs to know which bucket grew and what purchasing obligations came with it.
Start with practice management payment reports that separate service fee collections from drug collections. Keep those categories visible in accounting reports as well. Then use accounting, purchasing, and supplier records to identify drug acquisition costs, unpaid invoice balances, and due dates.
Management should be able to answer four questions:
The bank balance is part of the answer. It is not the whole answer. When someone says, “We collected a million dollars this month,” my next question is: “How much was service revenue and how much is to pay the drug invoices?”
Collecting the money is one thing. Knowing how much you can use is another.
If your retina practice’s collection reports and bank balance tell different stories, I can help you connect the numbers to what is happening in the revenue cycle. Book a free consultation. Let’s talk.
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