We’ve talked in the past about the various ways you can benchmark and define your healthcare organization’s bottom line. But once you’ve done that, you need to consistently monitor your progress to keep your organization on track. Many KPIs measure service excellence and patient satisfaction, while others focus on recovery statistics as the primary gauge of success.
We’re breaking down three simple metrics you can monitor to ensure the ongoing health of your hospital’s revenue cycle management efforts.
Days in AR
Understanding the age of your receivables can help you make key decisions in your revenue cycle process, to address issues that may be preventing payments. For example, if the number of accounts under 30 – 40 Days in AR is low, it could point to potential problems with your process of collecting money upfront or setting appropriate patient expectations.
Days in AR can also help to identify slow-paying commercial payers by, comparing the age of accounts across each of your primary insurance companies, and can shine a spotlight on the success of your medical debt collection agency.
To calculate Days in AR (or the number of days it takes you to get paid), subtract your credit balance from your total receivables and divide that total by your average daily charge amount. Your Days in AR should be below 50 days.
Denial Rate
In addition to slow payers, most healthcare organizations can pinpoint those commercial payers with higher denial rates. Your Denial Rate is the percentage of claims that are denied by insurance. Keeping an eye on this metric, in addition to Days in AR, can alert you to any issues you might be experiencing with a payer, your billing and coding processes, or even changes to your payer contracts that could dramatically affect your cash flow.
According to Healthcare Finance, hospitals nationally are facing average denial rates between 6% and 13%, when best practices indicate they should be below 5%. With the proper denials management programs in place, your organization can inch out of the “danger zone” toward a healthier bottom line.
To calculate your denial rate, add the total dollar amount of claims denied by payers within a given time frame and divide that by the total dollar amount of claims submitted during the same period. For a more in-depth look at your various commercial contracts, we recommend repairing this process by payer to better understand where your denials are coming from.
Days in AR Greater Than 120 Days
If you have an unusually high number of accounts that have aged beyond 120 days, it should indicate that you need to address your payment monitoring system, patient collection program, or both. The older a debt, the less likely it is that you will recover it in full (and the more expensive it becomes to attempt to collect it). If your healthcare organization has more than 15-20% of accounts at this stage, you may want to consider outsourcing your debt collection to an agency with a proven history of recovering older debts.
If your regular monitoring indicates issues within your revenue cycle, Revco Solutions can help. From our Advanced Self Pay Strategy and early-out services to insurance denials management and patient-focused medical debt collection, we have a solution to fix any issues along your path to a healthy bottom line.
