You are helping patients every day to track their health stats. But what revenue cycle metrics are you using to track your medical practice’s health? The year 2022 promises to be yet another challenging year for healthcare. Monitoring critical medical practice KPI’s (key performance indicators) is vital to know how your medical practice is performing financially and where improvements may be needed.
There is no dearth of revenue cycle data with modern practice management software. But viewing unlimited data can be overwhelming, which is why you must list the revenue cycle metrics that you want to track on an ongoing basis. Here’s our pick of the top six RCM measures.
- Cost of each patient consult
Patient visits bring in revenue but also cost you money. If the cost of seeing patients is more than the revenue per patient being earned, there is a problem. Calculate the cost of each patient encounter by dividing your medical practice’s operating expenses by the number of patient encounters. If you find that the per-patient cost is higher than the average per-patient revenue generated, it could be that (a) you need to revise the practice’s fee schedule, or (b) you need to assess how you can reduce the cost of each patient visit.
- Total Revenue – Patient and Insurance
Changes in the healthcare landscape have meant that patient payment responsibility has increased over the last few years. When calculating the total revenue for your medical practice, break it down into both insurance revenue and patient revenue.
Prior information on the fee to be borne by patients is an area that deserves greater focus. Research shows that only 50 percent of patients clearly understand medical costs before being treated. Using patient portals and offering multiple payment options are also effective patient collection strategies to secure revenues during COVID-19.
- Days in accounts receivables
Timely collections are the lifeblood of your medical practice. The days in accounts receivables revenue cycle metric tells you how many days it takes to collect your payments.
Here’s how to calculate days in accounts receivables. Say you have charged $800,000 in the past year; your average daily revenue is $2171. If the value of your accounts receivables is $70000, the days in accounts receivables for your medical practice is 70000 divided by 2171, which is 32 days.
While the performance varies with specialty and payer mix, ideally, your medical practice’s days in accounts receivables should not exceed 40 days. If this revenue cycle metric is consistently high for your medical practice, or if you see a spike in the number, it could be an indicator of medical billing inaccuracies, patient documentation errors, excessive use of unspecified codes, and flaws in the insurance prior authorization stage. For cash-only patients, inform the expected medical bill prior to the appointment and collect the payment at the time of visit.
Customer reminder phone calls should start after 30 days past due, and you should consider hiring an experienced collections service once the accounts move into the greater than 60 days. Also, work with medical billing partner to resolve discrepancies in insurance claims submission (remember that for most insurance carriers, the timely filing limits is often 90 days from the date of service).
- Accounts over 90 days
Have a separate agent report for insurance and patient receivables aging over 90 days. The better performing medical practices have no more than 5 to 8 percent off aging claims in the greater than the 90 days bucket. Measure where your practice stands today and then set a benchmark for reducing it over the next few months. For instance, you can set a target of 70 percent of receivables in 0 to 30 days, 20 percent in 31 to 60 days, 5 percent in 61 to 90 days, and the remaining 5 percent over 91 days.
- Net collections percentage
Net collections percentage is the value of total reimbursements collected versus the allowed amount. The figure reflects the efficiency of your billing and collections process. If you are able to collect $85000 against a billed value of $100000, the net collection percentage works out to 85 percent. It’s recommended that you use a rolling average of 12 months to calculate the figure and have a target of at least 95 percent net collections.
To improve your net collection percentage, calculate the collection percentage for each payor to determine if the problem is more serious with a particular insurance company. If there is no outlier trend, it implies that the inefficiencies are internal (i.e., in your medical billing and collections process). Seek the help of a professional medical coding and billing consultant to study your revenue cycle management processes.
- Claim denial rate
The claims denial rate can be calculated by dividing the value of claims declined by the total amount billed. It can also be calculated as the percentage of the number of claims denied and billed ( instead of the dollar value).
It’s estimated that medical practices spend $118 in recovery costs for resolving a single denied claim. A high claim denial rate can lower your revenues by as much as 10 percent. Reducing the claim denial rate is critical for smooth revenue cycle management for your medical practice. Aim for a claim denial rate of less than 5 percent. Read our earlier post on how to reduce claim denials in your medical practice.
Choose the top revenue cycle metrics you want to focus on for 2022 and ensure that you track them consistently every month and quarter. To enjoy improved revenue results faster, PracticeForces can help. We have been assisting U.S medical practices across specialties since 2003 to improve their revenues year-on-year. Learn more about how we can help you track revenue cycle metrics and boost revenues in 2022.