How do you measure the revenue cycle efficiency (RCE) of revenue cycle management (RCM) process? In today’s market conditions, it’s crucial to regularly assess the key performance indicator (KPI) achievements of your revenue cycle operations. We’ll discuss vital metrics that act as benchmarks for RCE and operational effectiveness. Each metric offers valuable insights into revenue cycle productivity and efficiency. Monitoring metrics like days in account receivable (AR) and collection rates helps practices optimize cash flow and minimize revenue cycle performance interruptions. Additionally, analyzing the accounts receivable aging reports helps you prioritize collection efforts and maintain robust cash flow. Explore with us how these metrics drive financial stability and success in healthcare practices through periodic evaluation.
Claim Denial Rate
Definition of the KPI
The claim denial rate measures the percentage of claims denied by payers out of total claims submitted within a period. It reflects the efficiency of the revenue cycle process and the effectiveness of billing and coding practices.
Formula for Calculation
Claim Denial Rate = (Number of Denied Claims / Total Number of Claims Submitted) x 100%
Industry Benchmark
Industry data suggests that the average denial rate for healthcare claims falls within the range of 10%–15%.
Reasons for high Denial Rates
Several factors can contribute to a higher claim denial rate. These include coding errors, insufficient documentation, eligibility issues, and incorrect patient information. Inadequate staff training and outdated billing practices can also lead to increased denials.
Key Indicators to Watch
Healthcare decision-makers can reduce claim denial rates by improving coding accuracy and documentation practices. Additionally, by analyzing payer-level denial trends, regular audits can also help identify and address common denial reasons.
Our Performance Metrics
Our goal is to maintain a claim denial rate 40%–50% lower than industry benchmarks. We commit to accomplishing this by monitoring denials, making timely resolutions, and staying on top of follow-ups to provide superior results.
Days in Accounts Receivable (AR)
Definition of the KPI
Days in Accounts Receivable (AR) measures the average days it takes to collect payments on the services rendered. The days in AR score reflect the efficiency of the revenue cycle operations, especially those specific to the billing and collection processes. Days in AR give an idea of how quickly can you convert the account receivables.
Formula for Calculation
Days in AR = (Total AR Outstanding / Total Charges for the Period) x Number of Days in the Period
Industry Benchmark
According to the Medical Group Management Association (MGMA), the industry standard for days in AR ranges from 40 to 50 days. Practices aim to keep this metric as low as possible to ensure timely revenue realization.
Reasons for High Days in AR?
Several factors can contribute to higher days in AR, including delayed claim submission, unworked denials, and inefficient billing processes. Inaccurate coding, eligibility verification issues, and incomplete documentation will also affect the days in AR.
Key Indicators to Watch
Healthcare organizations should focus on streamlining billing and collections processes to reduce days in AR. Improving coding accuracy is essential to achieving this, and at the same time, implementing effective follow-up procedures for outstanding claims also plays a key role. Improving communication with the payers on appeals can be beneficial, while optimizing claim submission workflows is recommended.
Our Performance Metrics
We maintain 20%–30% fewer days in AR compared to industry benchmarks. We optimize revenue cycle productivity by implementing best practices, leveraging technology, and providing comprehensive training to our team members to help them stay ahead of industry standards.
Clean Claim Rate
Definition of the KPI
The clean claim measures the percentage of claims submitted to payers and paid without rejections or errors in the first submission. This reflects the efficiency of billing processes and the accuracy of coding practices, ultimately impacting reimbursement and revenue cycle performance.
Formula for Calculation
Clean Claim Rate = (Number of Clean Claims Paid / Total Number of Claims Submitted) x 100
Industry Benchmark
Industry standards suggest that a high clean claim rate should typically exceed 80%. Healthcare practices aim to achieve and maintain this benchmark to ensure minimal revenue cycle performance disruptions and optimal reimbursement rates.
Reasons for the Low Clean Claim Rate?
Several factors can influence a lower clean claim rate, including coding errors, incomplete or inaccurate patient information, and insufficient documentation. There are common instances, such as payer-specific requirements, where changes in payer policies were not followed, contributing to claim rejections and errors.
Key Indicators to Watch
Healthcare organizations should enhance coding accuracy to improve the clean claim rate, and pre-billing services can support this. Effective claim-scrubbing processes and thorough documentation are crucial. Frequent staff training on payer requirements and coding guidelines and utilizing technology solutions like automated claim editing software are recommended.
Our Performance Metrics
Our organization maintains a clean claim rate 8%–11% higher than the industry benchmark. By implementing rigorous quality assurance measures, conducting regular audits, and providing ongoing education and training to staff, we strive to consistently achieve high clean claim rates.
Collection Rate
Definition of the KPI
The collection rate is a vital KPI in the RCM process that measures the percentage of billed charges collected from patients and payers. It indicates the effectiveness of the practice in converting billed charges into actual payments, reflecting its financial stability and cash flow management.
Formula for Calculation
Collection Rate = (Total Payments Received / Total Billed Charges) * 100
Industry Benchmark
Industry benchmarks suggest that healthcare practices should aim for a collection rate ranging from 92% to 94%. Achieving and maintaining this benchmark is essential for ensuring consistent cash flow and financial stability, enabling the practice to meet its operational and financial obligations.
Reasons for the Low Collection Rate?
Several factors can influence a lower collection rate, including delayed or incomplete claims submission, inadequate patient education on billing and payment processes, high-deductible health plans leading to increased patient responsibility, ineffective follow-up on outstanding balances, and payer reimbursement delays or denials.
Key Indicators to Watch
To improve the collection rate, healthcare organizations should focus on optimizing billing and claims processing workflows, implementing effective patient financial counseling and education programs by leveraging technology solutions for automated payment reminders and follow-up, and enhancing staff training on effective revenue cycle operations practices.
Our Performance Metrics
We maintain a collection rate 40% to 50% better than the industry benchmark, and we are aiming for a rate of 96% or higher. By implementing proactive efficiency-driven strategies for revenue cycle productivity, leveraging technology-driven solutions, and providing comprehensive patient financial counseling, you can improve financial stability, operational efficiency, and productivity.
Accounts Receivable (AR) Aging
Definition of the KPI
Accounts receivable (AR) aging categorizes outstanding balances based on the length of time they have been outstanding, usually in 30-day increments. It provides insights into the timeliness of payment collections and the overall effectiveness of revenue cycle operations, helping the practices identify overdue accounts and prioritize collection efforts. Account receivable (AR) aging should be reported for both insurance balances and patient balances.
Formula for Calculation
AR Aging = (Outstanding Balance in a 30-day increment/Total Outstanding Balance) * 100
Industry Benchmark
According to industry standards, healthcare practices should aim to keep the majority of their AR in the 0 to 30-day category to maintain healthy cash flow. While there isn’t a specific percentage benchmark, the goal is to minimize the proportion of outstanding balances in older aging categories (e.g., 60–90 days or over 90 days).
Reasons for High AR?
Several factors, such as delayed processing and submission of claims, can contribute to high AR aging. Those are denied or rejected claims requiring rework, inefficient follow-up on unpaid claims, inadequate patient payment collections, payer reimbursement delays, and inaccuracies in billing and coding.
Key Indicators to Watch
Healthcare organizations reduce AR aging by streamlining billing and claim processing workflows. This helps to expedite claim submission and reduce denials. Implementing effective follow-up and appeals processes for unpaid claims and enhancing patient financial counseling and payment collection strategies should be closely watched.
Our Performance Metrics
We maintain AR aging metrics 8%–12% better than the industry benchmark. Through proactive revenue cycle strategies, workflow optimization, and technology-driven solutions, we ensure optimal AR aging for your practices’ financial stability.
Sustainable Success with Invent HealthMatics
How often do you monitor the revenue cycle productivity KPIs? Keeping track of the KPI trends for each process can be challenging, and at the same time, missing out on the KPIs can affect your revenue cycle operations greatly. With an experienced revenue cycle partner like Invent HealthMatics, you can have the peace of mind that we will consistently achieve the productivity and performance KPIs month over month. Start your journey with us today, and let us guide your practice towards achieving the best results.
