If hospitals wish to maintain or improve profitability, there are certain things they need to keep an eye on when it comes to revenue cycle management. There are specific metrics that can be monitored which will allow hospitals to get the maximum amount of reimbursement possible, as well as enhancing the effectiveness of their billing departments. In general, the metrics that will enable hospitals to do this are ones that will push them to surpass what is already of expected of them.
These metrics are not all created equally, however; some of them must be checked on every day, while others might only require a quarterly or even an annual checkup. Let’s take a look at five different metrics hospitals should monitor in order to help ensure that they are moving in the right direction and maintaining their profitability.
First Pass Payment Recovery Rate
This metric informs hospitals about how successful they are at receiving full payment for their insurance billing claims the first time that they are submitted. This is one of those metrics that it would be a good idea to check monthly or at the very least quarterly, in order to better monitor submission and payment rates.
When it comes to this metric, a rate greater than or equal to 80 percent should be considered good for first pass recovery payments. It’s important to note that measuring this specific metric is important as compared to just measuring the percentages of “clean claims,” because it also requires that the payment was accurate and timely in order to facilitate a full close out of a billed receivable.
Net Collection Rate
This metric measures the overall effectiveness of a healthcare organization in terms of collecting reimbursement for all services provided. When it comes to the desired percentage rate for this metric, the optimal range should be in the 98 to 99 percentage area. The goal with this metric is to ensure that not a single service provided goes unpaid for and that bad debt, like the kind that can come along with denials management, is avoided whenever and wherever possible, including within the appeals process.
Cost to Collect
The cost of collection is another metric that will be very valuable to monitor if hospitals wish to run their revenue cycle management with maximum efficiency and improve their cash flow. The cost to collect should be regarded as a component of the overall profitability of an organization. When hospitals understand exactly how much they are paying their internal team and vendors, as well as their overhead and facility costs, they can then ensure that they are getting the highest possible value for the money which is being expended.
When it comes to achieving optimal profitability, hospitals need to look for ways that they can be more cost-effective with their services so that they can then invest in other more useful areas, such as infrastructure or physician engagement.
Self-Pay and Over-the-Counter Collections
In order to avoid losing payments, healthcare organizations need to train their employees in terms of payment practices, including requesting payment from patients prior to service. This is necessary because, if a hospital loses out on even a small co-pay, this can be very costly in the long run, especially if it loses out on multiple co-pays that can add up to big amounts regarding accounts receivable.
The best way to avoid these potentially crippling losses is to inform and educate patients about what their financial responsibility will be in regard to their healthcare. When a healthcare organization initially provides its patients with this understanding, they are then far more likely to provide their payments in a timely manner. This, in turn, creates a better experience for the patient through eliminating confusion and surprise, and it also allows the provider to receive full payment without having to address unnecessary issues.
Referral patterns are another useful metric to keep track of for optimal management of the revenue cycle. If any negative trends are detected within these patterns, it’s essential that the provider take immediate steps to correct them. If analyzed diligently and correctly, these patterns can provide a clear path to both maintaining and meeting a targeted budget.
There are a handful of metrics that healthcare providers can keep an eye on in order to improve their cash flow. Metrics like referral patterns, self-pay, net collection rates, cost to collect, and first, pass payment recovery rates all can provide a comprehensive picture of the revenue cycle and any extra expenditures that might be encountered.
As far as metrics go, it’s hard to keep tabs on every single metric, but these 5 are crucial to the revenue cycle and will help healthcare providers save a lot of money, without having to bring in an AR management team. By analyzing these metrics, providers can better understand where they are at today, and how they will get to where they want to be tomorrow.