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greenway blog November 25, 2020

6 KPIs, 7 best practices for improving medical billing performance

 

In healthcare, practices follow the process of revenue cycle management (RCM) to ensure they receive reimbursement for the care they provide. Managing denials, increasing collections, and scrubbing or resubmitting claims are a few basic revenue cycle activities practices must accomplish.

But to protect cash flow and ensure practice profitability, the RCM strategy must track key billing metrics and follow best practices for revenue success. 

Medical billing performance metrics. Illustration.

Which medical billing KPIs should practices calculate?

Medical billing key performance indicators (KPIs) help practices keep track of their financial health. Among these KPIs, days in accounts receivable (A/R), clean claims ratio (CCR), and net collections ratio are vital to understanding financial performance, recognizing any problem areas, and identifying fluctuations in revenue.

Read on for six KPIs to track for revenue improvement.

  1. Days in accounts receivable (A/R)

Days in A/R represents the average length of time it takes for a claim to be paid. While practices wait for payment, cash flow — and opportunities to invest and earn interest — decrease.

Practices should aim for the industry benchmark of 33 days in A/R. Keeping this metric under at least 45 days will help ensure your practice’s financial health.

You’ll also want to keep in mind insurance carriers’ timely filing limits (often 90 days from the date of service). Once these deadlines pass, it can be difficult for providers to receive any payment for services rendered.

To calculate days in A/R, first choose a length of time to measure, such as 30 days, six months, or 12 months. Then, determine average daily charges by …

  1. Adding posted charges for your chosen time period
  2. Subtracting credits received
  3. Dividing by the number of days in that period

Finally, divide your total accounts receivable by the average daily charges.

Closely related to days in A/R is the 0-60 percentage. This KPI represents the percentage of insurance A/R aging in the two youngest buckets: 0-30 days and 31-60 days. Payments due are sorted into the bucket that represents how many days ago the service was billed. To calculate the 0-60 percentage, divide the combined A/R in the 0-30 bucket and the 31-60 bucket by your total A/R.

  1. Clean claims ratio (CCR)

The CCR, or first-pass ratio, is the percent of clean claims — or claims paid at first submission. A clean claim has never been rejected, does not have a preventable denial, has not been filed more than once, and contains no errors.

Since clean claims mean you’re getting paid faster, you’ll want to identify your CCR, gauge time spent reworking denied claims, and pinpoint reasons for claim denials.

Most practices’ CCR ranges from 70% to 85%. Having a CCR above 90% or 95% reflects a successful RCM strategy.

  1. Denial rate

The claims denial rate gives practices a picture of how many of its claims are denied. While practices should aim for a high CCR, they should strive for a low claims denial rate.

To calculate your denial rate, divide the number of claims denied by the number billed. You can also calculate this rate by dividing the monetary amount denied by the amount billed.

  1. Bad debt rate

If you want to gauge the extent to which potential collections have been written off, take a look at your practice’s bad debt rate. To calculate this KPI, divide monetary amounts written off by allowed charges.

  1. Net collections ratio

The net collections ratio is the percentage of total reimbursement collected out of the total allowed amount. This metric represents the efficiency of the revenue cycle and, thus, is the ultimate indicator of collections success.

Unlike gross charges, net collections represent what your practice realistically can expect to receive in terms of reimbursement. It reflects how denial rates, unreimbursed visits, and other factors affect revenue.

  1. Gross collection rate

Although this metric is not as useful as the net collections ratio, it gives your practice another perspective on collections. Determine your practice’s gross collection rate by calculating total reimbursement received out of the total amount charged.

Improve medical billing performance. Illustration.

What are best practices for revenue cycle management (RCM)?

While tracking KPIs can give you a snapshot of your practice’s financial performance, you’ll need to apply RCM best practices to improve billing processes and efficiency.

Here are a few tips to boost revenue and grow your practice:

  1. Understand payer requirements and monitor major payers

Each payer has its own fee schedule and billing requirements that practices must follow. Adhering to these requirements means ensuring the patient is covered for services, knowing the codes for in-office or outpatient care, determining required documentation and patient demographic information, identifying necessary modifiers, and performing other tasks as necessary.

Practices should ensure they’re receiving their contracted rates from payers and update fee schedules annually. Additionally, they should renegotiate contracts with payers as the expiration period nears. (Schedule this task on your calendar as a reminder.)

Since your top payers are responsible for much of your practice revenue, monitor them for underpayments by reviewing payments routinely and tracking how much you collect from each payer. To avoid leaving money on the table, address issues quickly as they arise. This will prevent future impact on revenue.

  1. Prevent claim denials

In addition to understanding payer requirements, practices should work to reduce denials by paying attention to these factors:

  • Eligibility and benefits: Prior to the visit, confirm insurance, verify eligibility and benefit coverage, check for secondary and tertiary insurance, and obtain authorization if needed. At each visit, get a copy of the front and back of the patient’s insurance cards to reverify.
  • Procedure codes: Use a valid procedure code and modifier for services provided and the patient's age, and make sure you have a valid NCD code or description.
  • Changes to diagnosis codes: Stay on top of new, changed, or deleted diagnosis codes.

Since denials impact the revenue stream and can lead to patient frustration, preventing claim denials is a key step for effective RCM.

  1. Make reworking claims a priority

Some practices only focus on new claims coming in, rather than spending time fixing old mistakes or denials. But if you don’t review these denied or rejected claims, you won’t get the most from your revenue cycle. The longer it takes for a denied claim to be reworked, the more it ages, and your practice will continue to miss out on reimbursement from services rendered.

To prioritize reworking claims, start by creating a timely plan for your billing team to proactively follow up on denied claims. By having a streamlined process for identifying common mistakes, you can ensure revenue isn’t lost.

  1. Collect what you’re owed

With rising patient premiums and increasing regulatory oversight, it can be difficult for practices to collect the money they need to stay afloat.

Beyond verifying insurance eligibility before appointments, practices should communicate transparently about any patient responsibility. You can let patients know of this amount in advance either by calling or sending a message through your patient messaging solution. Additionally, practices should implement a payment policy to require patient responsibility at check-in and should contact patients with outstanding balances routinely. For additional tips, read this blog on improving patient collections.

  1. Take advantage of value-based reimbursement

As practices move toward value-based care, they don’t have to sacrifice revenue goals to improve patient outcomes. Practices can accomplish both goals — enhancing the patient experience and strengthening their bottom line. Delivering high-value reimbursable services can strengthen patient-provider relationships and improve patient health, while also increasing revenue.

Office visits, Chronic Care Management (CCM), and other services that provide value to patients also tend to be the highest-paying opportunities for payer reimbursements. Value-based care empowers providers to ensure patients receive ongoing care to promote a healthy lifestyle, while concurrently increasing office efficiency and improving their practices’ profitability.

As you transition to value-based care, remember to keep track of billing requirements, look for ways to improve processes, and employ revenue management solutions or services for extra help.

  1. Consider care coordination management

Practices interested in increasing value-based reimbursements should also consider the CCM program offered by the Centers for Medicare & Medicaid Services (CMS). Care coordination services, which help providers manage care for patients with multiple conditions, can provide practices another revenue stream.

Patients with two or more conditions expected to last at least 12 months are eligible for CCM. Services can be provided by a physician or non-physician practitioner — including physician assistants, nurse practitioners, clinical nurse specialists, and certified nurse midwives. For more information, read this CCM best practices blog.

  1. Get expert billing help for revenue cycle management success

If your internal billing team has high turnover and you invest significant time training new staff, your practice probably isn’t bringing in as much money as it could. The same holds true if your billing staff is stretched across multiple roles. In addition, if any members of the staff leave your practice, you may lack the resources to maintain your billing processes.

Partnering with an expert RCM service can help lighten your billing responsibilities and boost your cash flow. A knowledgeable billing manager and team can contribute their experience reworking claims and their knowledge of fee schedules and regulatory changes.

If you’re evaluating a potential RCM partner, view this infographic for seven crucial questions to ask.

A team you can trust

In today’s challenging regulatory environment, many practices are enlisting a dedicated financial partner to help manage their revenue cycle. 

When you partner with Greenway Revenue Services, you have a dedicated account manager and team of revenue experts with specialty-specific knowledge. This team will tackle delinquent claims, track down denials, and help you follow billing best practices. With our commitment to exceed medical billing benchmarks, we can help your practice achieve KPIs above industry standards.

In the initial discovery process, the Greenway Revenue Services team will shed light on critical areas needing immediate improvement. Then, through regular financial reviews, we will help you discover additional opportunities to improve, comparing your results to previous months and years along the way.

Partnering with Greenway for your medical billing needs will get you on track to grow your revenue — and your practice.

CLICK HERE to learn why high-performing practices across specialties choose Greenway Revenue Services. Or watch our 3-minute overview video HERE.

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