Build a consistent charge workflow, and revenue will flow in more consistently.
Keeping up with daily patient appointments, scheduling and claim submissions is likely not enough to maintain the financial health of your specialty practice. Just as health care teams monitor their patients, medical practices should keep a close eye on their financial key performance indicators, or KPIs.
Consulting with specialty medical practices, monitoring three specific KPIs goes a long way in improving the revenue cycle and a practice’s overall finances.
Certain KPIs are used to evaluate treatment outcomes, these KPIs do the same for the revenue side of your practice. With high-deductible insurance plans this means more and more patients pay a large share of their medical costs, the metrics on your billing performance and patient and third-party payments is crucial. This is especially true for smaller, specialty practices that may not have the financial resources of larger healthcare systems.
A 2017 revenue management cycle study of small practices by market researchers Black Book highlights that finding “83% of Physician Practices under five practitioners said the slow payment of high-deductible plan patients are their top collection challenge.” And, the Association of Credit and Collection Professionals found that it costs four times more to collect from a patient than it does from an insurance company.
As financial health care continues to change and evolve, specialty practices that review KPIs will know where their financial practices are strong and what areas need attention. Then, when process changes are implemented, KPI monitoring will show whether those changes are successful.
3 KPIs to improve your billing and collection cycle
If you’re not already doing this, start tracking the percentage of the total reimbursement your practice collected out of the total allowable billed amount. This metric shows how efficient your revenue cycle is and your rate of collections. Net collections represent what your practice realistically can expect to receive in terms of reimbursement. It also highlights how denial rates, unreimbursed visits and other collection factors affect your practice’s overall revenue.
Claim Denial Rate.
When a claim is denied by a third-party payer, it costs your practice by delaying revenue and in staff resources. A smooth revenue cycle means a low number of claim denials. Look to the reasons for claim denials to see if there are recurring reasons behind it. Out-of-network care, patient eligibility for the care provided, improper coding all some of the reasons a claim may be denied. If one billing area is consistently causing a claim denial, tracking this metric will alert you to make necessary changes.
To calculate your denial rate, divide the number of claims denied by the number billed. You can also calculate this rate by dividing the monetary amount denied by the amount billed.
Clean Claim Rate or CCR
The CCR, or first-pass ratio, is the percentage of claims paid at first submission. It is a clean claim: error free, never rejected and with no preventable denial. A clean claim means your practice is getting paid quickly.
For specialty practices, a high CCR may point to its sound financial health. CCRs can range from 70% to 85%. If your CCR is above 90%, your collections team is performing well, while the benchmark metric is equal or greater than 95%.
2. Time to Charge Entry.
Charge entry involves accurately entering the required patient information, data, and values as part of a patient's medical records. This process is the start of processing claims for payment.
The time lag from when a patient visits your clinic and the claim is submitted reveals the efficiency of your front-end workflow. The right number of days for your clinic depends on the efficiency of your coding, charge posting and claim generation processes.
If you build a consistent charge workflow, revenue will more consistently flow in. Conversely, if there are frequent delays in completing charge entries, you may receive reduced revenue for specific revenue cycles.
3. Days in Accounts Receivable (A/R).
The number of days a claim spends in accounts shows the efficiency of your revenue cycle. Patients with outstanding accounts of high balances and insurance companies delaying or payment of or denying claims are negatively affecting your practice’s revenue cycle.
Third-party payers may allow up to 90 days to submit a claim but waiting this long can adversely affect smaller specialty clinics. Consider creating a policy setting the number of allowable days to submit a claim, and ensure your front-end team is properly trained and given the resources for a fast turnaround of claim submissions.
For many specialty clinics, the number of days a claim is in A/R is the best measure to monitor cash flow. While most billing software systems use 30-day periods to identify days in A/R, for smaller practices, submitting a claim within 30 days is usually most efficient in terms of receiving revenue and front office productivity.
Once the A/R metrics are in hand, you can see where and why claims are being held up for payment. Best practices point to 35 days as the benchmark metric for this KPI.
Bonus! 3 Additional KPIs to track
Number of New Patients
As patients leave your practice, you want to attract new patients. This is a challenge many medical practice encounter as patients “age out” at age 18, move away, or no longer need specialty medical care your practice provides. Tracking the number of new patients you’re bringing in over time shows if your practice is stable, growing or shrinking. If the KPI shows your practice is losing patients, you will know your revenue will also be affected and can take steps to attract new patients to keep your practice viable.
No-Show and Missed Appointment Rates
When a patient doesn’t show up for an appointment, your practice financially suffers. Four no-shows a day can cost a practice hundreds of thousands of dollars each year, depending on the number of physicians in the practice. Track this KPI by dividing the number of appointments missed by the number of patients scheduled. If the rate is higher than one or, at most, two per day, implement measures like automated reminders to help reduce the daily number of no-shows.
Total Practice Revenue
As the healthcare payment landscape changes, with patients increasingly self-paying for all or a substantial proportion of health care, specialty practices should track their total revenue. Take your total monthly revenue and then separate it into patient and insurance revenue. This allows you to see the percentage of patient self-pay in your revenue stream, whether it is a financial issue, and take steps to help mitigate it.
Maintaining a healthy revenue stream for the financial health of your practice can be a tricky balancing act. And, we know providing quality care for patients is your first and primary goal for medical practices. Ensuring the financial health of your practice makes this possible.