Whether you are a solo practice or group practice or represents a healthcare organization, keeping a close eye on financial health is really crucial. While measuring financial health for your practice, just focussing on cash inflow is not important, you should have a more inclusive approach. How can you identify areas of financial strength and where improvements are needed? You can measure the overall financial health of your organization against key performance indicators (KPIs). In this article, we listed and discussed such 5 KPIs required to run a financially healthy practice. By understanding these 5 key performance indicators, you can gain valuable insights into your practice’s revenue cycle. Keep in mind that KPI guidelines may vary based on specific goals of your practice so consider them only as guidelines and apply them as per your practice’s revenue cycle requirements.
Start monitoring insurance and patient collections trends. Keep track of unbilled insurance and patient collections, also start recording the number of days required for payment realization. Calculate the adjusted collection rate i.e., the sum of all payments minus refunds divided by total charges. As per industry standards, your practice should seek an adjusted collection rate above 95 percent. Monitor payment lag i.e., the turnaround time for expected payment to determine if you need to take steps to speed up payments. To help ensure consistent monthly payments, set practice-wide standards for when charges need to be billed. By tracking collection rates and monitoring adjustments, your practice can project cash flows more accurately. Tracking collections and adjustments will help you to identify payers and patients that harm your practice’s cash flow.
Uncollected patient responsibility that is deemed unrecoverable is considered as bad debt. Most practices are not aware of patient insurance coverage and benefits at the time of service. The absence of eligibility and benefits reports leads to failure to collect deductibles and co-payments at the time of service. Monitoring and analyzing bad debt data provides insight into the effectiveness of your practice’s point-of-service and overall collection efforts from patients. A lower bad debt average indicates efficiency in the revenue cycle process, especially with regard to patient collections.
The percentage of claims submitted to payers without defect or manual intervention is called the clean claims rate. You can determine clean claim percentage by dividing the total number of claims submitted and a number of claims accepted by payers. As per industry standards, an acceptable clean claim percentage should not be less than 95 percent. However, this may vary depending upon the medical specialty of practice and other factors. If more than 10 percent of your claims are getting rejected then you might be entering wrong/non-updated patient demographics and insurance information. Not having eligibility and benefits reports at the time of claim submission could also decrease the clean claim percentage. Try to monitor the clean claims rate weekly; monthly is still acceptable. Doing so will uncover any issues with your practice’s front-end or claim submission processes. Eliminating barriers to clean claims submissions, such as persistent demographic or medical coding errors, means faster payment.
As the name suggests, days on AR (accounts receivable) represent the average amount of time it takes for your services to be reimbursed. Days in AR can be found out by dividing, total accounts receivable amount and average daily charges for the last 90 days. An acceptable range for days in AR is 18 to 32 days, which means you should get paid for your services within a month and not more than that. If you are doing everything on your own and don’t have denial and accounts receivable experts in your team then it could lead to more AR days. Applying an appropriate AR benchmark and monitoring how your practice performs against it will help guide process improvements in claims submission and billing. A best practice is to monitor days in AR bi-monthly and more frequently if your organization is experiencing any business-related changes.
The percentage of claims denied by payers is referred to as the denial rate. You can calculate the denial rate by diving the total dollar amount of claims denied by payers and the total dollar amount of claims submitted. As per industry standards, a denial rate under 10 percent is considered acceptable. This may vary depending upon the type of denial, such as an initial denial compared to one received after an appeal, specialty, and other factors. If your denial rate is high, you should take a look at the types of denials you're receiving. There are many reasons a claim may be denied. Payers may reject services due to a lack of medical necessity or because services took place outside of the appropriate time frame. Denials may also be attributed to non-coverage by the patient’s insurance plan. A low denial rate indicates a strong claims submission process and the likelihood of healthy cash flow. What’s more, your practice needs fewer staff members to collect the cash you’ve earned.
KPIs are measurable, objective values. They enable you to develop precise, obtainable business goals and measure your progress toward meeting these goals. Most of the practice owners try to do everything on their own and might get stuck. A reliable and affordable medical billing company could handle complete revenue cycle operations on your behalf and can help you to increase practice collections. MedicalBillersandCoders (MBC) is a leading provider of medical billing and coding services. Our billing and coding expertise over various medical specialties ensures quick and accurate insurance reimbursements. To know more about our coding and billing services please contact us at firstname.lastname@example.org / 888-357-3226