7 KPIs, 3 tips for improving medical billing performance
Looking to tune up revenue for your healthcare practice? Focusing on collections, managing denials, and resubmitting corrected claims are good places to start. Also critical are key performance indicators (KPIs) in healthcare practice profitability.
Among these healthcare metrics and KPIs, days in accounts receivable (A/R), clean claims ratio (CCR), and net collections ratio are vital to understanding financial performance. So too is the ability to recognize problem areas early and maximize collections.
Practices should monitor their revenue cycle management (RCM) processes closely to achieve maximum reimbursement and the collection of outstanding payments. To protect cash flow and ensure practice profitability, check out these best practices for an effective RCM strategy.
1. Implement value-based services and promptly collect what is owed
As the U.S. healthcare system continues to transition to value-based care, there is no reason practices should sacrifice revenue goals as they strive to improve patient outcomes. Accomplishing both is possible with a solid understanding of KPIs in healthcare.
A value-based system of care empowers providers to ensure patients receive ongoing care to promote a healthy lifestyle while increasing office efficiency and improving practice profitability. Delivering high-value reimbursable services can strengthen patient-provider relationships. Wellness visits — delivered either in person or via telehealth — tend to be among the highest-paying opportunities for payer reimbursements.
Practices interested in increasing value-based reimbursements should consider the Chronic Care Management (CCM) program offered by the Centers for Medicare & Medicaid Services (CMS). 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 such as a physician assistant, nurse practitioner, clinical nurse specialist, and certified nurse midwife. Care coordination services, which help providers manage care for patients with multiple conditions, can provide a valuable revenue stream. Read this CCM best practices blog to learn more.
To ensure a timely understanding of cash flow, practices — especially those that participate in insurance plans and provide value-based care services — should prioritize the following healthcare metrics and KPIs:
- KPI 1: Days in accounts receivable (A/R) represents the average length of time it takes for a submitted claim to be paid. While practices wait for payment for services, 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 45 days will help ensure the practice’s financial health. Also keep in mind the 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 using these steps:
- Add posted charges for your chosen period
- Subtract credits received
- Divide by the number of days in that period
- Then, divide your total accounts receivable by the average daily charges
- KPI 2: The 0-60 percentage. This KPI in medical billing represents the projected inflows of cash as a 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.
- KPI 3: The gross collection rate 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.
- KPI 4: 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 reimbursement. It reflects how denial rates, unreimbursed visits, and other factors affect revenue.
With increasing regulatory oversight, there are some limitations on how a practice may bill patients and submit for some reimbursement claims. Beyond verifying insurance eligibility before appointments, in accordance with the No Surprises Act, effective Jan. 1, 2022, and the Hospital Price Transparency rule, effective Jan. 1, 2021, medical facilities should communicate transparently about any patient responsibility and let patients know of the amount in advance of providing the services.
Regardless, practices should implement a payment policy that facilitates collections, including contacting patients with outstanding balances promptly. Be sure to adjust projected income based on these steps and process billing in a timely fashion to safeguard stable balances.
Seeking ways to improve processes while keeping track of billing requirements may require the services of an efficient revenue management solution. For additional tips to help maintain or increase revenues, read this blog on improving patient collections.
2. Prevent claim denials by understanding payer requirements
Claim denials are sure to negatively impact the revenue stream and can lead to patient frustration, so preventing claim denials is a key step for effective RCM. Each payer has its own fee schedule and billing requirements that practices must follow. Adhering to these requirements means ensuring that the patient is covered for the services being provided, and knowing the appropriate codes and necessary modifiers to use when submitting claims for in-office or telehealth visits.
In addition to understanding payer requirements, practices should aim to reduce denials by paying attention to:
- Eligibility and benefits: Prior to the visit, confirm patients’ insurance details, verify eligibility and benefit coverage, check for secondary and tertiary insurance, and obtain authorization where needed.
- Procedure codes: Use valid procedure codes and modifiers for services provided. Be sure to indicate whether the services were provided via telehealth, and in such cases, include point of service (POS) codes to indicate where the services were received.
- Changes to diagnosis codes: Stay on top of new, changed, or deleted diagnosis codes.
Since top payers are responsible for much of your practice revenue, monitor them for underpayments by reviewing payments routinely and track how much you collect from each payer. To avoid leaving money on the table, address issues quickly as they arise. This will prevent a major impact on revenue.
3. Correct and resubmit past claim denials.
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 and reduce billing backlog. By having a streamlined process for identifying common mistakes, you can ensure revenue isn’t lost.
Important metrics to monitor for these are:
- KPI 5: The clean claims ratio (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.
- KPI 6: 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.
- KPI 7: 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.
Expert help to improve key performance indicators in healthcare
In today’s challenging regulatory environment, practices are enlisting financial partners to help manage their revenue cycle.
If your 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. Additionally, if any members of staff leave your practice, you may lack adequate resources to maintain your billing processes at an optimal level.
Working with an 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. Check out this infographic for seven crucial questions to ask a potential medical billing company.
When you partner with Greenway Revenue Services (GRS), you have a 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 exceed industry standards for KPIs in healthcare.
In the initial discovery process, the GRS 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.