With the growing take on value-based reimbursement and healthcare consumerism, it has become vital for provider organizations to ensure their healthcare revenue cycle is operating at maximum efficiency. However, while many healthcare organizations understand the importance of RCM, as well as their current barriers to success, few can dig deep enough to change the underlying problem. Why? They can’t define what it is!
Today, many forward-thinking hospitals and healthcare leaders have turned to KPIs to gain a strategic view of various operations, improve or standardize their internal processes, and compare their performance against their peers. By evaluating specific indicators, such as accounts receivable, cash collection, claim denials, denial write-offs, and the cost to collect, you can better determine where your revenue cycle is under-performing and the resulting impact on your bottom line.
In this article, we are going to discuss the importance of MAP Keys in tracking the top 5 KPIs. While the following five KPIs are areas within which many providers have inefficiencies, they may not directly apply to your particular processes as described below. Your KPIs should be designed to measure your processes, which means adjustments should be made so that the KPIs align with your practice’s unique processes.
Your KPI in Accounts Receivable (A/R) is likely to be net days. To calculate your net days in A/R, you’ll first need to determine your net A/R. Begin by evaluating your balance sheet, which should include the following:
- Credit balances,
- Uncollectable accounts,
- Charity discounts. and
- Third party payer contractual allowances
Once you’ve determined your net A/R, you should divide it by your income for the same period. You can then divide your net A/R by the average daily net patient service revenue to determine your net days in A/R. With this KPI, you can determine the efficiency of your revenue cycle.
The KPI for cash collection will be calculated as a percentage of your net patient services revenue and will allow you to assess your overall financial health by determining the amount of net patient services revenue you have on hand as cash.
To calculate this percentage, divide your total collected patient service cash by your average monthly net patient service revenue. If you rarely have patients who pay cash for services, this KPI may not be as meaningful. To useful crucial to make certain that the KPIs which you are using to measure your revenue cycle are relevant.
By developing a denial rate KPI, an organization can not only track the percentage of denied claims but also clarify its payer compliance capabilities and their rate of accuracy when reimbursing claims. Developing this KPI is simple, in that all that it requires is dividing the number of denied claims by the total number of claims filed within a one-month period.
You may want to omit some denied claims, however, including those for non-covered services, duplicate claims, or claims for services which patients are responsible for paying. By removing these hard denial claims, you’ll be able to determine the percentage of actionable claims—those that you could have collected if errors had been identified or corrected on time.
It’s important to remember that KPIs are not metrics. While you can look at this percentage to determine the percentage of claims denied, that number does you no good if you’re not using it to develop a process to reduce this percentage. The data gathered from developing your KPIs does nothing if it doesn’t help drive change and the development of solutions.
A denial write-off KPI can also be an invaluable resource in relation to your claims denials management process. This KPI, as a percentage of net patient services, allows providers to monitor their lost claims reimbursement more effectively, after appeal efforts have been made, or when providers decide to write-off expected revenue.
This KPI is developed by dividing the net amount written off by the average monthly net patient service revenue. The resulting percentage represents the average amount of money lost on a monthly basis. By leveraging this KPI, you will be able to develop solutions that can improve your pre-authorization processes and reduce the amount of money formerly lost to procedures that aren’t covered.
Cost to Collect
Your Cost to Collect is the amount of money needed to collect on claims and is determined by dividing your total revenue cycle cost by your patient service cash collected. The resulting percentage indicates the efficiency and productivity of your revenue cycle.
Most organizations choose to calculate this on a monthly basis, but you could use weekly, quarterly, or even daily information if that works better for your practice. Remember that KPIs need to be customized to provide you with information and benchmarks that work best for your organization.
Developing these KPIs is only the first step in making your revenue cycle stronger. You also have to make use of them to create solutions for the part of the cycle that is not performing as you would like. At times, this requires an outside point-of-view. The professionals at eReceivables can provide that third-party view of your system. By partnering with them, you can obtain solutions that help improve your revenue cycle.