The focus of your medical practice should be on patient care, but in order to be sustainable as a profession, you also have to pay attention to your revenue. Medical billing is complicated and there are many factors affecting income, so you can’t get an accurate picture of your revenue cycle management (RCM) just by calculating net income.
So what metrics or key performance indicators (KPIs) should you use to understand how your practice is doing? The following are simple yet informative numbers to look at. Some of them are monetary, but there are also metrics that help to assess your billing practices because there is much more to revenue management than just tracking income.
In addition to helping you understand your revenue, these metrics can indicate where there are problems with your medical billing processes, point out problem payers and help you stay in compliance with regulations.
Metrics to Assess Your Medical Billing Process
Length of time to submit claims: Your claims should be prepared, scrubbed and submitted within 24-48 hours of delivering the service. Not only does submitting claims sooner result in payment being made sooner, but when claims are processed right away, they are less likely to fall through the cracks and get lost, and if there are any questions it is much easier for practitioners to give answers right after the patient is seen and the visit is still fresh in memory.
Labor hours per claim: A simple calculation of how much time the average claim takes will show you a dollar value for how much you pay staff for filing claims, but when viewed over time, will also provide a metric that will indicate if efficiency is falling, which could indicate a need for more training or when a software upgrade is required to stay in sync with code changes.
Denial/rejection rate: The percentage of all submitted claims that are rejected or denied shows how efficient your coding and billing is. It can be useful to break this down further by procedures to see if some with more complicated coding are causing problems that can be resolved by further training of billers and coders.
First pass resolve rate: The percentage of total claims that get paid with no rejection or denial is a key indicator of the overall quality of your RCM, from payer credentialing and preauthorization to coding and claim scrubbing. The percentage should be decreasing until it is 10% or lower.
Reasons for claim denials: This is best interpreted by looking at each reason as a percentage of the total denials. The most useful reasons to look at are likely to be what percentage of claims were denied due to authorization (including referral) issues, payer documentation requirements not met and coding issues.
Percentage of claims rejected and denied by payer: It is also helpful to break down the percentage of unpaid claims by payer so that you can see where you may need to change your procedure to make sure all of a particular payer’s criteria are met.
Metrics to Analyze Revenue
There are many different types of reports that provide useful information, but not all of them can be useful on a daily basis. It is important to accumulate enough data between reviews, and you don’t want reviewing reports to become too time consuming either.
Most of the numbers won’t be meaningful on their own, what you need to look at is the trend over time. For most of them, it will be valuable to look at the continuous amount over time, but also to compare the month to the same month in past years and to compare matching year-to-date values for the current and past years.
Payments received: This is a basic metric for any business, and medical practices are no exception. It is important to look at the amount deposited in the bank rather than the value of approved claims. Overall, the number should be trending upward, and it is important to consider changes to the business when considering the cause of revenue changes, such as addition or loss of practitioners, and new or discontinued services.
Accounts receivable (AR) summary: This is another fundamental metric to follow. The total amount of your accounts receivable should be trending downward.
Days in AR: The average number of days it takes to receive payment is also a basic metric to track. It should be trending down, and ideally will be under 30 days. This number includes amounts owed by both payers and patients.
Tracking each of these metrics will give you the information you need to make smart business decisions and to recognize when a problem is occurring and fix it before it gets any worse. There are many factors that will determine the numbers, so comparing over time, to identify patterns and trends, is the way you will get data that allows you to pinpoint problem areas and track the growth of your practice.