Navigating the complex landscape of Revenue Cycle Management (RCM) in a medical practice is akin to piloting an airliner through the uncertain and often turbulent skies of financial health. Key Performance Indicators (KPIs) serve as the crucial instruments – like an airliner’s cockpit controls, enabling physicians and practice owners to gauge the effectiveness of their RCM system as they go. Just as pilots rely on instruments for a smooth flight, healthcare professionals can leverage KPIs to ensure a steady course and steer their practice toward optimal financial performance and success.
Mastering the KPIs of your RCM system is paramount for physicians and practice administrators. Because many of the moving parts of an RCM system have results which are not seen in real time, actions taken today may not have visible results for weeks or even months. Effectively understanding and monitoring these financial instruments earlier in the process helps to ensure less unpleasant surprises down the road and confirms when positive actions are paying off.
Embarking on our journey to financial excellence in medical practice, we will explore a short list of must-know Key Performance Indicators (KPIs) central to mastering your Revenue Cycle Management (RCM) system. KPIs can (and should) exist for many different areas of a medical practice, or any business, but our list will focus on the most important KPIs related to billing and collections. These are vital metrics that’ll serve as your navigational instruments and help guide your practice.
The path of your medical claims and RCM process follows a linear path for the most part, so we will examine our KPIs in a similar order starting with Claim Creation and moving through Submission, then Processing and finally Payment Posting.
Total Charges Billed: This basic KPI provides insights into the overall volume of services provided and serves as a metric for assessing revenue and practice growth and identifying areas for potential expansion or optimization within the practice’s RCM system. This number is simply the total dollar amount of charges you posted and billed out for the month.
Clean Claim Rate: Most of your charges will be billed out electronically through what’s known as a clearinghouse. This is an electronic intermediary that receives your electronic claims and sorts them and forwards them to specific insurance companies for processing. Claims must be correctly formatted with accurate information and are called Clean Claims when they are received without having any issues. The Clearinghouse will give you a report that states if your claims are clean or not and kick out any claims it can’t pass along to payers. Maintaining a high clean claim rate is vital to reducing delays and denials, leading to faster claims processing and payment. Your Clean Claim Rate is impacted by proper procedure coding and accurate data entry of patient information such as insurance company ID numbers and subscriber demographic information.
Denial Rate: Once an insurance company receives your claim, they will process it and either pay it or deny it. This KPI tracks the percentage of claims denied by insurance companies. Similar to your Clean Claims Rate, Denials may highlight problem areas deep down in your practice such as faulty procedure coding by providers, a poor process for confirming patient’s insurance benefits, or even issues with provider credentialing.
Insurance company denials are to be expected in small amounts, and most can be resolved with additional documentation or clarification. However, they are an indication of a specific problem when they are repeated frequently, and they delay your payment significantly. It’s very important to manage your denied claims promptly and to have a routine system in place for timely resubmission of denied claims.
Collection Total: With any luck, you are now receiving payment on claims, and they are being posted on patient’s accounts. This basic KPI is the dollar amount of payments you are receiving each month and posting against your Accounts Receivable. It will serve as a fundamental measure of your practice’s financial growth, or decline.
Collection Rate:Â Collection Rate is the percentage of payments received against your charges. For example, receiving $50K in payments from $100K billed would be a Collection Rate of 50%. Your Collection Rate can be figured as a rolling percentage of current payments against current charges, or with fancier software, can be based on the specific charges that were billed.
This requires tracking of the entire payment history of specific charges to see what eventual payments were received from insurance, patient and includes insurance company contracted adjustments. Your collection totals are an indication of how successfully your practice collects revenue and provides insight into areas to improve such as optimizing patient billing processes and negotiating favorable contracts with payers.
Average Reimbursement per Procedure:Â This KPI requires a little more digging but is well worth the time and effort. It measures the payments received for specific procedure codes, including items you may have billed such as Durable Medical Equipment (DME), vaccines or other services. Knowing what your average reimbursement is for every service in your practice is critical to determining which services are profitable or not. For example, some pieces of DME (braces, splints) may serve similar functions but are reimbursed at different amounts.
Knowing the reimbursement per procedure, along with your cost of goods is necessary to make sound decisions about which services and items to promote. This KPI is also necessary for checking up on your payor contracts and making sure your basic E&M codes are being paid according to the contracted rate. You would not be able to renegotiate your contract or file a complaint with a payor without knowing what you are being paid for specific codes.
Now equipped with these basic, yet pivotal KPIs, practice owners and administrators can feel empowered to navigate the complexities of healthcare finance with confidence and precision. By mastering these instruments, practices can optimize revenue streams, mitigate risks, and ensure long-term sustainability in an often-cloudy and unpredictable healthcare landscape.