5 revenue cycle KPIs every CFO should track right now

The shift to value-based care and patient financial responsibility is putting more pressure on providers to focus on the efficiency of their billing processes.

Key Performance Indicators (KPIs) will help you both understand the strengths of your business and identify areas for process improvement. Here are five KPIs every CFO should be tracking right now to efficiently allocate resources and improve revenue cycle workflows.

Total Charge Lag
This KPI is calculated by subtracting the date of service by CPT code and total number of CPT unit of service codes billed from the total number of days from revenue recognition date. It measures your charge capture workflow efficiency and identifies cash delay. Seven days is typically the threshold for performance and anything past thirty days is a major red flag. Holding charges can delay payment and potentially be lost to capture. A high charge lag can be caused by unclear or missing documentation and coding inefficiency. In terms of process improvement, consider reporting your charges by both physician and service. This will give you the ability to identify and close gaps between services delivered and any corresponding backlogs. Also, consider your staff productivity. Regular training or even outsourced coding can improve coding efficiency.

Point of Service Collection Rate
This calculation represents payments collected prior to treatment, at time of service, and up to seven days after treatment or discharge. Those include past due balances, self-pay and loan payments, and cash collected on bad debt accounts. You can calculate your POS Collection Rate by dividing total patient POS payments by total self-pay cash collected over any given period. Typically, this KPI is tracked monthly but can be tracked as often as necessary. The POS Collection Rate is a great indicator of how effectively your front-end staff is communicating patient financial obligation and any services you offer to help patients pay their medical bills. The ideal collection rate is 90% and anything below 75-80% is a red flag. A low percentage means that your staff is failing to collect payment at appointment scheduling, confirmation or at time of service. To improve your collection rate, ensure that staff is properly trained on the benefits, policies and terms of each payment tool you provide on the patient side such as an online payment portal or payment plan. Also, train staff how to address a variety of scenarios when asking the patient to pay, especially those that involve confusion or frustration about how much is owed.

Days in Receivables Outstanding (DRO)
This KPI averages the number of days it takes you to collect payments due to your practice. The calculation is made by dividing the sum of total receivables and credit balances by the average daily charge. The rule of thumb is to determine the average daily charge by 90 days, which takes seasonality and fluctuation in business growth into account. You can certainly determine based on 365 days if needed. The industry DRO benchmarks are 30 days or less for high performing billing departments, 40-50 days for average performance, and 60 days or more for below average. There are a lot of things you can do if you’re hitting the below average or average performing marks. Analyze your back-end process to identify if duplicate billing, incorrect CPT modifiers, or inaccurate patient information capture is taking place. Consider the patient payment process as well. Are you making it convenient for patients to pay for their medical bills? If you’re not already offering solutions like an online payment portal or payment plan options, you’re missing a giant opportunity to increase revenue and improve your patients’ experience.

Denial Resolve Rate
The Denial Resolve Rate reflects the effectiveness of your revenue cycle in all areas – from eligibility to coding and billing. The calculation can be determined by dividing the total number of claims paid for a given time by the total number of claims in that same period. The higher the percentage, the better. A high percentage rate means your staff is working effectively. If your rate is low, analyze your eligibility, coding, authorizations, and credentialing processes. What can be automated to streamline your staff’s workflow? Remember that on average providers spend $118 per claim on appeals, so simplifying your processes will improve both cash flow and staff productivity.

Cost to Collect
Your average cost to collect on patients greatly affects the overall efficiency of your collections management process. This can be calculated by dividing the total revenue cycle cost by the total patient service cash collected. Total costs include patient access, patient accounting, outsourcing, benefits, subscription fees, software (optional) and IT (optional). Total cash includes patient related settlements and payments as well as bad debt recoveries. Cost to collect can be difficult to accurately measure so taking a comprehensive approach when managing this KPI is best. Assess your entire revenue cycle from front to back. As discussed for the POS Collection Rate, educating both staff members and patients on the tools available for convenient payment will improve your cost to collect. Also, automate what daily functions you can to alleviate unnecessary manual work and allow staff members to shift focus on more important tasks.

Sources:
http://www.hfma.org/MAP/mapkeys/
https://www.beckershospitalreview.com/finance/denial-rework-costs-providers-roughly-118-per-claim-4-takeaways.html
https://www.parallon.com/insights/uncovering-your-true-cost-collect-data-driven-performance

Bio:
Jenna Tropea is the Online Marketing Strategist at ImagineSoftware and writes on a range of topics from patient engagement to healthcare policy and regulations.

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