Collecting revenue for the medical services you provide is (obviously) vital to the short- and long-term success of your medical practice.
However it is not as simple as “provide the service, get paid for the service”. If it were, all of our lives would be much, much easier.
The fact of the matter is that medical billing is complicated. We are not even factoring in the coding aspect, which is tough in its own right. In this particular blog we are just focusing on the process of billing and collecting what is due to your practice based on the services you provide.
It can be challenging to understand just how well, or poorly, your practice is doing with regard to the ability to effectively and efficiently collect revenue. To better understand this, there are key performance indicators (KPIs) that can help you evaluate just how you are performing regarding revenue collection.
Let’s examine five KPIs we believe you should be tracking:
- Days in Accounts Receivable (A/R) – This one is pretty straightforward. This is how many days it takes for your practice to collect on either insurance claims or patient bills. Obviously, you want to be paid faster so a lower number here is preferred.
- Clean Claims Ratio – This refers to how many times a claim is paid on the first submission. This is an important metric because if you are having to consistently rework a claim then your days in AR will most likely be higher. Plus you must factor in the opportunity cost of having an employee rework the claim.
- Denial Rate – This metric ties into the clean claims ratio, but it factors in ALL the claim denials you see. So if you have a claim that gets denied multiple times, it will be factored in here. This can be useful in identifying certain trends such as denials from a certain insurance or for a particular procedure. This will allow you to take more precise corrective action.
- Gross and Net Collection ratio – We are going to cheat a little here and put two separate metrics in line item. We are doing this because if you are looking at one, you probably should be looking at the other. Gross net collection is your total payments divided by total charges. Net collection ratio is what your practice is actually able to collect on. This gives you a more realistic look at the revenue your practice is bringing in during a certain time period.
- Bad Debt Rate – This refers to medical bills that go uncollected. While every practice will have patients who struggle to pay their bills, if you have a high bad debt rate then you will most likely see cash flow issues. You can lower your bad debt rate by collecting patient co-pays upfront, checking insurance coverage, and providing online payment options.
These are not the only KPIs that you can or even should be tracking. These are just a good start that will provide valuable insight into your practice’s ability to collect revenue in a timely manner. You can use this data to potentially make changes to processes where you believe improvement can be made.