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Critical Revenue Cycle Metrics Practices

Must Be Aware Of
Knowledge of industry standard metrics that trac re!enue
cycle "erformance is im"erati!e
for "hysician "ractices to
manage their re!enue cycle
"ro"erly and maintain their cash
flow# $his awareness will hel"
to identify the ga"s during an
internal audit and tae effecti!e
measures to correct them#
%owe!er& tracing the right analytics is critical to manage
the medical billing operations and cash flow, and 'ring
you the desired results# %ere& we loo at four crucial
re!enue cycle metrics that e!ery "ractice should now and
the ways to manage them#
Rate of Claim Denials
$his rate re"resents the "ercentage of claims denied 'y the
"ayers# ( low denial rate is always desira'le and it
indicates the "ractice)s cash flow# $he formula to calculate
this rate is*
$otal +ollar (mount of +enied ,laims - $otal +ollar
(mount of Su'mitted ,laims
$he a!erage denial rate is normally 'etween .-10/#
(nything greater than 10/ is a sign of "oor "erformance#
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umber of Days in Accounts Receivable !A"R#
(ccounts recei!a'le can 'e defined as a measure of how
long it taes for a ser!ice to 'e "aid 'y the res"onsi'le
"arties# $o 'e more s"ecific& it will tell you how long to
collect a day)s worth of charges& on a!erage# $he days in
(01 can 'e calculated using the following formula#
2$otal ,urrent 1ecei!a'les after ,redits3 - 2(!erage +aily
,harge (mount3 4 +ays in (01& where 5(!erage +aily
,harge (mount 4 12 months of gross charges066.#)
$his !alue will !ary according to the s"ecialty and "ayer
mi7# 8ormally& 90 to .0 days in (01 can 'e considered a
reasona'le o':ecti!e for "ractices while (01 greater than
.0 days can 'e an indicator of "oor "erformance#
%ealthcare e7"erts "oint out that days in (01 can cloa
!arious areas of under"erformance that "ractices need to
watch out for such as*
Payer$specific Delays % $hough the days in (01
could 'e 9. as a whole& ;edicaid claims might
a!erage 7.& which signals a "ro'lem that re<uires
attention#
Collection Accounts % Since the accounts sent to
collection agencies are often written off the current
recei!a'les& they are not considered while calculating
days in (01# $hough sending accounts to collections
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can im"ro!e days in (01& it would co!er u" more
serious issues#
Payment Plans % $hese allow days in (01 to rise 'y
"ro!iding e7tra time for reim'ursement#
Aged Claims = >!en though o!erall days in (01 may
'e good& it can still hide high amounts in the older
aging 'ucets#
?e will see how to manage these under"erformance areas
later#
Percentage of A"R & '() Days
$his is a measure of the a'ility of "ractices to get "aid in a
well-timed manner and indicates the amount of recei!a'les
older than 120 days of the total current recei!a'les# It can
'e calculated 'y*
+ollar (mount of (01@120 from +ate of Ser!ice - +ollar
(mount of $otal (01
$hough 12-2. "ercent of (01 greater than 120 days is
considered as an a!erage rate& a "ercentage greater than
2./ can 'e a sign of "oor "erformance# $he 'est
"erformers may see less than 12 "ercent#
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et Collection Rate
$his is also nown as ad:usted collection rate& which is a
measure of the "ractice)s effecti!eness in collecting all
legitimate reim'ursement and it shows the "ercentage
gained out of the reim'ursement allowed according to the
contractual o'ligations of the "ractice# $his rate also
indicates how much re!enue lost 'ecause of uncollecti'le
'ad de't& untimely filing and other non-contractual
ad:ustments# It can 'e calculated 'y*
Aayments 2;inus ,redits3 - ,harges 2;inus (""ro!ed
,ontractual (d:ustments3
+o this for a s"ecific time frame# $y"ically& the calculation
should 'e "erformed on the 'asis of matching the "ayments
to the charges that created them for "re!enting fluctuations
in results# If it is not "ossi'le to match "ayments with their
originating charges& the "ractices should use aged data&
ty"ically from si7 months 'ac& to calculate this rate in
order to mae sure that ma:ority of the claims used for the
calculation ha!e had sufficient time to clear# $he o!erall
net collection rate of 9.-99/ or greater is an a!erage
"erformance& while an amount less than 9./ can 'e an
indicator of "oor "erformance#
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*ips to Manage +ey Metrics
Aro"er management of these metrics is crucial for 'illing
claims effecti!ely and maintaining good cash flow# %ere
are some ti"s "ro!ided 'y healthcare e7"erts#
1e:ecting claims through internal systems 'efore they
are sent to a "ayer is the 'est a""roach to reduce the
denial rate# Bsing a clearinghouse or claims scru''er
to identify errors can "re!ent the denial and a!oid
delay in the final "ayment "osting#
$o a!oid missing "otential "ro'lems related to "ayer-
s"ecific delays& calculate the o!erall days 'y "ayer&
a"art from calculating the days in (01#
In order to ha!e a true "icture of the situation&
calculate the days in (01 with and without accounts
sent to collections#
,reate and designate "ayment "lans as a se"arate
C"ayerD so that (01 can 'e calculated with or without
considering "ayment "lans#
;onitor statistics related to aged claims se"arately#
>nsure that you 'ase the calculation of "ercentage of
(01 greater than 120 days on the actual age of a claim
2the date of ser!ice3 or else when a claim is Cre-agedD
to CEeroD whene!er it mo!es from one "ayer to
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another& the "ractice may "ro:ect a dece"ti!e
im"ression of "ositi!e "erformance#
$he common mistae of including ina""ro"riate write-
offs in the calculation can ha""en while a""lying
ina""ro"riate charge ad:ustments when "osting
"ayments# $his can 'e sol!ed 'y distinguishing
'etween the two sets of ad:ustments and tracing
contractual ad:ustments on the 'asis of reason#
Arofessional 'illing ser!ices is an ideal alternati!e if you do
not ha!e enough time to manage these !ital metrics# It will
hel" sa!e time and effort while also ensuring streamlined
(01 collection#