By: Gene Spirito, MBA on November 25th, 2021
Print/Save as PDF
Medical Billing / RCM
If you don’t know what’s happening inside your practice in the back office in terms of billing and accounts receivable, how can you expect to determine the status of your organization? Are you meeting your financial goals or falling short? And depending on whether the answer is “yes” or “no,” how will you make a plan to either continue with the improvements or to stop a downward trend in profits? Your accounting team will be happy to tell you that the more measurements you have about the state of your billing, the better. This is why so many practices will focus on tracking key performance indicators for medical billing. What follows arethe most important billing and collections key performance indicators (KPIs). By looking at each stage of the revenue cycle, you can easily spot where you need help the most. Not all of your patients will be able to pay their bills on time, and surely you have taken this into account as you review all revenue coming into your practice. But bad debt rate, expressed as a percentage, is one of the essentialmedical billing KPIsyou will want to be tracking. You calculate this percentage by dividing allowed charges by bad debt write-offs. Another important KPI, you calculate the gross collection rate by dividing money from payments by the billed charges. It’s a useful measurement to make comparisons of your organization’s cash flow. By studying the fluctuations, you can get a better idea of what future collections will be like. Changes in patient population, fees, and insurance providers will always affect the gross collection rate. To discover how much revenue your practice is collecting out of all bills you are eligible to be paid for, you will work out the net collection rate. It’s determined by dividing payments by all allowed charges. With the net collection rate, you can compare different groups in your company, observing demographic changes affecting the percentages your teams collect. What exactly are the average charges for each accession or test you conduct? Knowing this information will help you predict future costs, which is instrumental in forecasting commissions, profits, and costs of running your practice. You may track this figure according to test classifications per each accession. Learning how effective your practice’s resolve rate is will show you how disciplined your staff is in managing the flow of revenue. You calculate this by dividing the number of claims in a given period by the total claims paid in that same span. Larger percentages indicate a better rate. If you come up with a lower rate than you prefer, it might be time to consult with professionals to see if there are issues with how your staff verifies patient eligibility or if you are making errors in coding. A high denial rate can be a disaster for your practice. Dividing the number of claims denied by the number of claims remitted will give you this rate, which tends to range from about 5 to 10 percent in the healthcare industry in the U.S. For many organizations, manual collections are the bottleneck, with a solution being to automate your collections processes. For many practices, some of the most importantmedical billing KPIshave to do with how many days the bills have been spending in accounts receivable. After dividing your ending accounts receivable by your average daily charge, you’ll have this KPI to examine and improve. A wide range of errors can lead to your practice seeing a higher unbilled claims percentage. Get a handle on this key performance indicator by calculating the number of claims divided by unclaimed ones rejected because of faulty or missing information. Details such as incorrect doctor’s orders, failing to include DX codes (or using the wrong ones), and mistakes in patient demographic information can all lead to a higher KPI for unbilled claims. To get a better idea of where your profits are coming from, you use month-over-month revenue to track funds according to payors, tests, and clients. Perhaps the lab you use is struggling to work efficiently. You may want to compare which are the most profitable clients. This KPI also helps you identify which tests are causing the most problems in getting reimbursed, such as disputes over their medical necessity. Gaining a better understanding of your medical billing situation is much easier when you make a habit of tracking key performance indicators. Once you begin systematically collecting details on what you’re being paid and when, and who is not paying ,and how these trends develop, you can develop solutions to improve these statistics. To help you do better with billing and collections,check out our free and informative medical billing services guide.1. Keep an Eye On Bad Debt Rate, one of the More ImportantMedical Billing KPIs
2. Gross Collection Rate
3. Net Collection Rate
4. Average (and Median) Price Per Accession
5. Resolve Rate
6. Denial Rate
7. How Many Days in Account Receivable?
8. Unbilled Claims Percentage
9. Month-Over-Month Revenue
10. Operating Margin
Key Takeaway:
About Gene Spirito, MBA
Gene has been involved in sales and deploying well over 1,000 revenue cycle management and billing solutions for medical practices, groups, networks, and laboratories of every specialty. With more than 25 years’ experience, Gene has guided so many ADS clients toward the configuration that would work best for them such as services through MedicsRCM, or in-house automation with the MedicsCloud Suite. Gene has an undergraduate from Villanova University, and an MBA from Temple University. Not surprisingly, Gene’s an avid Wildcats fan (the VU basketball team).
As someone deeply entrenched in the realm of medical billing and revenue cycle management (RCM), I bring to the table a wealth of hands-on experience and a comprehensive understanding of the intricate processes involved in managing the financial aspects of medical practices. Throughout my career, I've been directly involved in implementing and optimizing over 1,000 revenue cycle management and billing solutions for various medical entities, including practices, groups, networks, and laboratories spanning diverse specialties.
My expertise extends across a spectrum of crucial areas within medical billing and RCM, encompassing everything from tracking key performance indicators (KPIs) to identifying and resolving inefficiencies in billing processes. With over 25 years of dedicated experience, I've witnessed firsthand the evolving landscape of healthcare finance and the indispensable role that accurate billing practices play in the success and sustainability of medical organizations.
Now, let's delve into the concepts highlighted in the provided article on medical billing KPIs and revenue cycle management:
-
Bad Debt Rate: This KPI represents the percentage of bad debt write-offs in relation to allowed charges. It's a critical metric for assessing the financial health of a practice and gauging its ability to recover outstanding debts from patients.
-
Gross Collection Rate: Calculated by dividing payments received by billed charges, the gross collection rate offers insights into the efficiency of revenue collection processes. Fluctuations in this rate can signal changes in patient demographics, fee structures, or insurance reimbursem*nts.
-
Net Collection Rate: This metric reveals the percentage of revenue collected out of all eligible charges. It helps practices evaluate their collection performance across different patient groups and demographic segments.
-
Average (and Median) Price Per Accession: Understanding the average charges associated with each test or accession enables practices to forecast costs, profits, and overall operational expenses accurately.
-
Resolve Rate: The resolve rate indicates the effectiveness of a practice's revenue management efforts by measuring the ratio of claims paid to total claims submitted within a specific period.
-
Denial Rate: Denial rate reflects the proportion of claims denied compared to claims submitted for reimbursem*nt. High denial rates can signify underlying issues in coding, eligibility verification, or documentation.
-
Days in Accounts Receivable (A/R): This KPI measures the average number of days it takes for bills to be collected after being issued, offering insights into cash flow management and revenue cycle efficiency.
-
Unbilled Claims Percentage: Unbilled claims represent rejected or unprocessed claims due to errors or missing information. Monitoring this metric helps practices identify and rectify billing inaccuracies.
-
Month-Over-Month Revenue: Tracking revenue fluctuations over consecutive months enables practices to analyze trends, identify profitable clients, and address reimbursem*nt challenges effectively.
-
Operating Margin: Operating margin provides a comprehensive view of a practice's financial performance by comparing revenue against operational expenses. It serves as a key indicator of overall profitability and financial sustainability.
By meticulously monitoring these key performance indicators and leveraging dedicated software solutions, medical practices can optimize their billing processes, minimize revenue loss, and enhance overall financial viability. Effective management of medical billing KPIs is paramount for informed decision-making and sustained success in today's healthcare landscape.
Connect with Gene Spirito, MBA, for further insights and guidance on navigating the complexities of medical billing and revenue cycle management.
