With electronic billing and digital medical records now firmly entrenched across the healthcare industry, an endless amount of highly valuable data is at your fingertips. In fact, the amount of data can seem overwhelming. Which reports should you be running for your practice or specialty? How is your practice really doing operationally and financially?
“I am surprised by the number of practices that do not perform any sort of internal financial benchmarking or performance analysis. Of course, it’s often difficult to know where to start and what measures to track,” says Doug Swords, Co-Founder and RCM Director of Azalea Health. “Luckily, the data you need to properly measure your performance is easier to obtain than ever before. I always recommend starting small, getting comfortable tracking a small number of important benchmarks, and then growing from there.”
Azalea’s revenue cycle management (RCM) experts have identified six critical aspects of a practice’s financial health which add up to an insightful financial report card. In this blog post, we examine three of those measurements: Days in A/R, Receivables and Patient Debt.
In Part 2 of this series, we’ll take a look at three other key measurements: Clean Claims Rate, Average Reimbursement per Visit and Fee Schedules.
Making Sense of Your Financial Data
Days in Accounts Receivables
Days in A/R is the number of days it takes a practice to collect on services provided. The lower the number, the faster a practice is obtaining payment on average. Monitoring this metric can help you unearth factors hurting your finances.
Do the Math:
(Total Current Receivables – Credits) ÷ Average Daily Gross Charge Amount
Industry average: 50-60 days
Good: 30-40 days
Ideal range: < 30 days
If you experience an increase in Days in A/R determine:
- Are claims getting out the door quickly enough?
- Are denial rates too high?
- Is a specific payer creating delays?
Conversely, if you see a decrease, do not automatically assume it’s the result of improvements. Dig in and make sure unnecessary adjustments are not being made to falsely improve the A/R. Looking at payment ratios and adjustment ratios are a good way to catch this.
Receivables Older than 120 Days
This is the percentage of your A/R that has gone unpaid for more than 120 days. Statistics show that as time goes on, the likelihood that you will collect on this revenue shrinks. This metric is a clear indicator of how effective your practice is at securing reimbursements in a timely manner.
Do the Math:
(Total A/R >120 days x 100) ÷ Total A/R
Industry average: 15-25%
Ideal range: <10%
High or rising percentages serve as red flags, warning you of issues with your practice’s RCM. It could be a sign that your staff is overwhelmed and/or not acting quickly enough when working denials, writing appeals or following up on unpaid claims that need to be addressed promptly.
Patients with Bad Debt
The rise in high-deductible health plans and patient self-pay is complicating the financial situation of providers. Bad patient debt can become an expensive problem. As the account ages, the likelihood of collecting payment from the patient decreases by as much as 50 percent every 30 days. After three statements are sent with no activity, the chances for patient payoff are as low as 6 percent.
Do the Math:
(Patient-Responsible A/R over 90 days x 100) ÷ Total Patient-Responsible A/R
Industry average: 25+%
Ideal range: <15%
Make a concentrated effort to improve collections with changes to your time-of-service collections workflows. Providing scripts to the front desk staff and role-playing can help staff nicely prompt patients with past due balances to set up a payment plan or to be prepared to pay at their next visit.
Leverage your practice management system to build in alerts for staff to identify patients with a history of bad debt. You can also strategically use merchant services to offer online bill pay, payment plans, and credit card on file options to your patients. Avoid extra statement costs by sending balances to a third-party collection agency when the balance becomes more than 90 days old and the patient is making no attempt to pay off the balance.
Azalea Is Here to Help
It can be difficult the first time – and even the 50th time – you examine your RCM and metrics. Are there factors you’re overlooking or giving too much importance? Which metrics should you examine daily, weekly and monthly?
RCM experts from Azalea are available to provide a free financial analysis of your practice. Contact our team today, and we’ll help you work towards straight As on your financial report card.