Today's billing landscape is not an easy one to navigate for many medical practices. The transition to value-based care and rising patient responsibility make the management of day-to-day operations even more challenging. Now more than ever, it's critical to regularly measure the financial health of your practice and if your staff is performing at peak efficiency. Key Performance Indicators (KPIs) help physicians and management understand the strengths and weaknesses of their revenue cycle and help guide future decisions. They also help prioritize resources and help recognize key success drivers.
If you're feeling overwhelmed, start with a focus on quality and track KPIs that will heavily impact your financial performance. Here are eight you should track on a daily, weekly, or monthly basis and the tools you'll need to turn those numbers into actionable insights.
Better financial performance begins with taking control of your data.
Daily and Weekly KPIs Cash Receipts
- Revenue is the driving force of your business, so money that's collected and deposited should be monitored daily. Cash can't be benchmarked, but you can compare it to a previous period to ensure that cash flow is steady or improving. Keep in mind that this KPI can fluctuate greatly depending on things like the addition of new employees, new services, cancelled appointments and procedures, and how quickly patients pay for their medical bills.Charges
- This KPI should be watched in conjunction with cash receipts. Since charges drive revenue, any fluctuation in charges will cause a fluctuation in cash, so monitor this closely.Payables
- Knowing when your unpaid invoices are due and if your practice has the cash to cover them in a timely manner is absolutely critical. The more you can track and improve your payables, the more lenient your vendor credit terms may be, which can save your practice a lot of money. Also, you can increase accounts payable process transparency and accountability among A/P staff.Monthly KPIsDays in Receivables Outstanding (DRO)
- This is the average number of days it takes you to collect payments due to your practice. The calculation for DRO is:
You can certainly determine the average daily charge based on 365 days, but 90 days takes seasonality into account, as well as various fluctuations in business growth. So, how do you know if you're doing well? Here are the industry benchmarks for medical billing DRO:
High Performing Billing Department - 30 days or less
Average Performing Billing Department - 40-50 days
Below Average Performing Billing Department - 60 days or more
If your practice is hitting the below average mark or even the average performing, there are a lot of things you can do to improve your number. Analyze your back-end processes to ensure that you're avoiding duplicate billing, incorrect CPT modifiers, and inaccurate patient information that lead to more claim denials. Consider your patient payment process as well. Are you making it convenient for patients to pay their bills? Tools like an online patient payment portal
and payment plans
give patients the ability to pay for their medical expenses in a way that works for their budget. And bonus, they improve patient retention too!Receivables Outstanding Over 120 Days
- This is a great indicator of whether or not your patients and insurers are paying you in a timely manner. This KPI will also pinpoint claim denial timeliness issues and effectiveness of follow up on no-response claims. The calculation is:
A realistic number to shoot for is less than 12%. You can obvisouly change the age category to whatever you choose, but the point it to choose a category and stick to it for consistency. You can track this KPI in two ways
By Patient - Patients are the new payers in healthcare, so it's obviously critical to keep track of this number. This calculation can be affected by eligibility verification, how patients are paying for their bills, and whether or not they have a clear understanding of how their insurance works. Like DRO, you can improve this number by analyzing and improving your patient payment process.
By Insurer - This ratio will indicate whether or not your in-house billing staff or outsourced staff is tracking reimbursement and denials effectively.Denial Rate
- This KPI tracks the percentage of denied claims and provides insight into how efficiently your claims process is operating. You can calculate your denial rate with the following:
To improve this number, consider how much your claims management process is manual. You can accelerate your collections performance with claims scrubbing, electronic remittance and auto coding/charge posting. You can learn more about that here
- This is a great reflection of the overall effectiveness of your RCM process - from eligibility to coding and billing. The calculation for resolve rate is:
The higher the percentage, the better. If your rate is high, that means your staff and the proceses they follow are working effectively. If your rate is low, look at eligibility verification, coding, authorizations, and credentialing. Since providers spend 10-30 minutes and $50 on average to re-work a claim, a low rate impacts both cash flow and staffing costs.Cash Collection as a Percentage of Net Patient Services Revenue
- This KPI evaluates your ability to transfer net patient services into cash. You can develop this KPI with this calculation:
When making this calculation, be sure to exclude a few things: patient-related settlements and payments, Medicare pass-through, and Medicaid DSH payments. You should also avoid collected patient service cash from ambulance services, post-acute services, and physician practices and clinics unless they're recognized as a provider-based clinic by Medicare.
We've mentioned the tools you need to improve these KPIs, but what about the tools you need to analyze them in the first place? They key is organizing your KPIs into dashboards through a business intelligence reporting and analytics tool
. This will improve your ability to identify trends and patterns, as well as increase awareness around what variables impact your practice. It will also allow you to easily share those findings with staff and management!
Receiving medical billing reports on a daily, weekly, and monthly basis will improve your ability to monitor financial performance by leaps and bounds. But keep this in mind, these are only outcomes and a report won't improve them for you. Analyze your reports, ask questions, work closely with your billing department, and help steer them in the right direction to improve KPIs and the practice as a whole.
Monitor, analyze, and improve your financial health from one dashboard.