ISSUE 142, Special Section: Cancer Care

Know A Good Doctor? We Do.

What Are the Most Valuable Revenue Cycle Metrics to Measure?

As the bridge between the clinical and business side of healthcare, the RCM process is awash with metrics that can help administrators get the most out of their cycles, including increased revenue stream, improved reputation, and enhanced “start to finish” quality of care.

Insurance denials are a revenue stream killer. Not only do they impact the current bottom line, they can lead to patient frustration that could affect future revenue as well.

Practices that monitor their RCM metrics ensure more effectiveness in planning for future expenses, including potential opportunities to embrace new technologies like telehealth and expanded services. They also put themselves in a position to identify possible weaknesses in their current process to correct — especially when navigating changing regulations in care, payer schedules, and even new COVID protocols.

Revenue Cycle Metrics to Monitor

Like with any business in the private sector, there are massive amounts of data to crunch to help track viability and long-term financial — and other — goals for healthcare organizations. Tracking key performance indicators (KPIs) can assist data-driven decision making and make it possible to benchmark the performance of the revenue cycle to measure success.

While the Healthcare Financial Management Association identifies as many as 29 possible standard metrics, here are a few key metrics to consider measuring consistently to determine how efficiently your RCM is operating.

RATE OF FIRST PASS PAYMENT

Also known as clean claims ratio (CCR), this is the rate billing claims are confirmed and paid without denials on the “first pass.” Claims that need to be submitted a second or even third time are an inefficient waste of resources. Experts suggest that organizations should be aiming to experience 80% CCR in order to ensure healthy billing practices.

By monitoring this KPI, healthcare providers can determine the quality of data being collected in the process as well as the amount of time it takes to resolve issues. This can help drive down the cost required to generate payments, adding up to millions or even billions in savings a year.

DAYS IN ACCOUNTS RECEIVABLE

One of the most important metrics for any practice to measure. The number of days in account receivable (A/R) represents the average length of time it takes for a claim to be paid. Potential cash flow issues or missed opportunities to invest and earn interest are just a couple results of practices waiting too long for payment. And according to the Medical Group Management Association’s most recent poll, 49% of medical practice leaders say their time in A/R increased in 2021.

The ideal time for a claim in A/R is between 30-40 days with a goal of keeping it under 45. Once deadlines pass, it can be difficult to collect at all for the services rendered.

To calculate:

  • Divide total current receivables by average daily charge amount
  • Net the credits by subtracting the current credit balance from the current total receivables
  • Get the average daily charge amount by dividing total gross charges for the past 12 months by 365

NET COLLECTION RATE

More effective to track than gross collection rate, this is the percentage of the total amount an organization can realistically expect to collect for care and services.

Tracking this metric is key because it represents the efficiency of the RCM, the ability to mitigate missed payments, communicate with insurance payers and patients alike, and to submit clean claims in the first place.

While the COVID-19 pandemic has in part negatively impacted net collection rates, it’s commonly accepted that a good collection rate ranges between 98.5% to 99%.

CLAIM DENIAL RATE

It’s not enough to aim for a high rate of first pass payment (CCR); it’s also crucial to strive for a lower claims denial rate. Know the numbers to paint a better picture about what your revenue cycle is up against.

To calculate claim denial rate, divide the total dollar amount of claims denied by payers by the total amount submitted (within the given period). Claim denial rates above 10% indicate an unhealthy RCM process and financial flow. In this case, consider analyzing eligibility verification, coding, and credentialing functions.

BAD DEBT RATE

This is the reimbursement for services healthcare organizations have potentially written off. Calculate this KPI by dividing amounts written off by allowed charges. Considering the growing amount of medical debt across the U.S., it’s critical to stay aware and ahead of this metric.

COLLECTION COST

Hospitals or clinics that are able to close claims quickly and reduce outside collection costs set themselves up to remain competitive. Not only are they able to offer more cost-effective services, they free up resources to invest in other key areas such as patient experience and necessary infrastructure.

REFERRAL RATES

By accurately tracking referrals and new patient intake, organizations can get a clearer picture of the services provided as well as the required budgets. These referral rates can also provide insights on opportunities to improve service lines, which can in turn increase cash flow.


Adam Shewmaker can be reached at 502.566.1054 or
ashewmaker@ddahealthcare.com