Two of the most important Key Performance Indicators (KPIs) used in determining the health of your revenue cycle are: Accounts Receivable (A/R) performance and claim denial percentage. These KPIs aren’t just numbers—they’re indicators of what needs to change for a healthcare organization to become more efficient and profitable, and can be used to provide solutions specific to payer inconsistency.
A recent study performed by Crow Horwath revealed minor differences across different commercial insurers in their claims reimbursement and denials performance. This inconsistency can challenge hospitals and lead to a loss of revenue if they do not adjust how they bill each process to align with individual payers. Of course, tailoring billing to each payer adds time to the billing process. Is that time worth it? If it is, how can you adjust your billing process to match the specific requirements of each payer?
Accounts Receivable: Why Is This an Important Metric?
The amount of time within an account receivable protocol is the number of days between a patient being discharged and the payment being made. The faster the turnover in A/R, the more cash you have on hand. A healthy A/R can make the difference between adding more debt to an organization or directly paying for new equipment or other costs. The goal of this KPI is to minimize the amount of time between submitting a claim and receiving payment for that claim.
Some of the factors that contribute to this goal are:
- Filing the claim in a timely manner,
- Filing an error-free, accurate claim,
- Revising any soft denials quickly, and
- Quickly submitting additional paperwork as needed.
The Crowe Horwath study looked at five different private payers to determine statistics regarding A/R payments:
- The quickest private payer averaged at 52.2-day reimbursement, while the slowest averaged 67.7 days, a 15-day difference.
- The best practices for commercial or managed care payers was 39.2 days; private payers were much slower to process and pay claims.
- All of the five private payers reported that over 20% of their claims had been in A/R for more than 90 days. The lowest reported 24.3% of claims were 90 days old or older, while the highest percentage reported was 38.2%.
One reason why nearly a fourth of all claims hit the 90-day mark is that private payers often were challenged by high inpatient claims. This is one area with respect to which tailoring each bill to the payer can be helpful. By learning the processes each of these payers uses and adjusting billing accordingly, one can reduce KPI in A/R, resulting in claims being processed and paid more quickly. This, in turn, translates into having more cash on hand.
Claims Denial Performance and How KPI Inconsistencies Hurt Revenue
Because payers have different processes for claims submissions and management, it is often difficult to determine a base KPI that you can use to create solutions that align with all associated payers. Without a standardized process of what to tailor your processes to, it doesn’t matter what you implement; you won’t improve your KPI with every single payer. In fact, the inconsistencies in payer processes could result in a perceived solution that enhances your KPI with some payers while harming it with others.
Commercial payers often have disparities in several requirements, such as:
- Contract terms,
- Benefit plan designs, and
- Clinical documentation support.
According to the Crowe Horwath study, these disparities typically lead to a number of differences in denial rates and write-offs. Again, the study analyzed various managed care payers to uncover the following statistics:
- The initial denial rate between the five payers ranged from 7.5% to 11.1%.
- This rate averages out to hospitals potentially losing one dollar out of every ten dollars submitted for reimbursement.
- Most claims were denied because the appropriate amount of medical information was not submitted. These soft denials result in unnecessarily lost revenue or additional work to follow-up on claims through providing needed information.
- Hard denials that led to write-offs represented anywhere from 0.8% to 2.4% across the five payers.
While uncollectible claims may seem ambiguous, they still account for a significant amount of lost revenue. With a disparity of almost two percent, this once again illustrates why it’s essential to tailor billing to the requirements of specific payers. A small amount of work upfront can result in a much lower number of denied claims.
Your organization relies on a healthy profit margin and a healthy revenue cycle. When payer disparity endangers a revenue cycle, it can result in lost payments and force a healthcare organization further into debt. How can you adjust your billing to take these disparities into account without putting undue stress on the members of your billing staff?
Connect with eRecievables, a team of experts who are ready to assist you with all of your claims needs. By shouldering the task of tailoring your billing to each of your payers, eReceivables can help improve your facility’s revenue and reduce the rate of denied claims.