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.
How To Make 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.
Average Reimbursement per Visit
This is the average amount a practice collects per encounter or per visit. This metric gives practices a sense of whether they’re performing well or could realistically be bringing in more money. Tracking this number will also help you estimate future revenue based on expected volumes.
Do the Math:
Total Reimbursement ÷ # of Encounters in a Given Time Period
Industry average: Due to variation across specialties, there is no universal industry benchmark for this metric.
When tracked over time and compared with historical practice results, this metric provides a simple, yet powerful gauge of whether your practice is trending in a positive or negative direction. If you’re on a downward path, your practice must take steps to get back on track, perhaps by diversifying your patient or payer mix.
Clean Claim Rate
This is the percentage of claims complete and error free upon first submission. The clean claim rate is a reflection of your previsit processes and procedures such as verifying eligibility and maintaining accurate, complete patient demographics. Returned claims not only delay the receipt of payment, it consumes valuable time that could be spent on patient care or other practice priorities.
Do the Math:
Total Number of Rejected Claims ÷ Total Number of New Claims Submitted
Industry average: 90-95%
If your clean claim rate is not ideal, take a look at the top five reasons your claims are rejected. Often subtle changes in workflows, such as improved patient registration processes, or tweaks to the practice management software can lead to improvements, and therefore faster reimbursement and improved Days in A/R.
How To Set Fee Schedules
There is nothing worse than leaving insurance money on the table. It is important to review fee schedules annually or semi-annually to ensure you are charging a high enough fee to collect the full contracted or allowed amount by each insurance carrier.
One of the important concepts to keep in mind is that no matter what an insurance plan is willing to pay for a claim, they will never pay more than you bill them. So, if BCBS is willing to pay $150 for a level 3 office visit but you bill them $125, they will only pay you $125.
E/M services: 2-2.5 times Medicare FFS rates for your state/locality
Surgeries and medical procedures: 2.5-3 times Medicare FFS rates for your state/locality
Receiving 100% reimbursement of your gross charge for a single CPT is a clear indicator that your fees may not be high enough. Run a CPT level payer analysis using your practice management software to look for specific reimbursements from payers that equal your gross charge for a particular CPT code.
While it may be time-consuming initially, create and maintain a spreadsheet of all your contractual rates per CPT code. By identifying the highest reimbursement per CPT across all payers, you can ensure your gross charge is set high enough to capture the full reimbursement.
At-a-Glance Indicator Chart
|Days in A/R||>50 days||30-40 days||<30 days|
|Receivables Older than 120 Days||>25%||10-15%||<10%|
|Clean Claims Rate||<95%||95-97%||>97%|
|Patient Debt Older than 90 Days||>25%||15-20%||<15%|
|Avg. Reimbursement per Visit||Calculate monthly and compare over time|
|Fee Schedules||Review quarterly|