Revenue cycle management relies on key performance indicators to monitor the day-to-day operations of healthcare organizations wishing to remain profitable and offer the finest patient care. These metrics represent the mathematical tools that allow administrators to gauge revenue cycle efficiency and make real-time adjustments to strategies that benefit institutions and patients alike. The numbers also form the basis of periodic scorecards and reports to all institutional stakeholders and are essential to holding departments accountable.
Key performance indicators (KPI) also enable healthcare professionals to spend less time on administrative tasks and more time on patient care — the primary objective of a hospital’s existence.
This three-part series begins with a review of the early cycle stages that help promote positive cash flow and efficient revenue cycle management and culminates with the back-loaded measures promoting institutional longevity. The HFMA Map Keys page provided sources for some of this information.
Patient Access Stage
Maintaining a positive cash flow is a function of many data points including those resulting from patient and institutional interactions. As explained by MAP Keys, it is important to track Patient Access metrics related to pre-registration, insurance verification, and the service authorization rates for inpatient and outpatient care, including two noteworthy KPIs.
Conversion Rate of Uninsured Patient to Payer Source
Tracking the Conversion Rate of Uninsured Patients to Payer Source indicates the success rate of helping uninsured patients as well as the minimizing of financial loss. This KPI is typically tracked on a monthly basis using the following formula:
Failure in this revenue cycle management area may result in significant final loss if the institution cannot collect the unpaid charges.
Point of Service Cash Collections
Patient Point-of-Service Payments represent payments collected prior to treatment, at the time of service, and up to seven days after treatment or discharge. This KPI also includes undistributed payments, cash collected on bad debt accounts, self-pay and loan payments, and some pre-admitting payments and combined hospital and physician payments. This KPI may be tracked as often as necessary and used to gauge effectiveness over time (e.g. Month-to-Month POS Cash Collections):
Closely related to POS Cash Collections, an outstanding Day of Service Collection Rate can help produce long-term revenue generation by tracking patient contributions due at the time of visits. A favorable Day of Service Collection Rate also confirms that providers are properly explaining each patient’s financial obligations before the day of service.
The POS Cash Collections Rate should be over 90 percent.
With nearly all patients receiving compensation from private or government payers, institutions with effective claims management processing systems stand a better chance of maintaining positive cash flow and providing a high level of patient care because it is considerably more expensive to file claims multiple times versus one time. Fortunately, advances in medical billing technology reduce clerical errors and the risk of non-payments and delayed payments.
Clean Claim Rate
The Clean Claim Rate indicates that claims result in payment with effective revenue cycle practices including verifying insurance eligibility, applying authorizations and accurate coding and billing.
Metrics above 90 percent are ideal, but averages among U.S. hospitals range from 75 – 85 percent.
The Clean Claim Rate is calculated by dividing the Total Number of Claims Paid by the Total Number of Claims Remitted for a given time period:
Under-performing organizations would be well-served by reviewing variables such as incorrect pre-billing edits on claims forms to validate claim accuracy, billing codes and filing formats before submission.
Claim Denial Rate
Tracking claim denials is important to revenue cycle management because it indicates the degree of effective claims processing as well as the ability to secure funding from payers.
Calculate the claim denial rate by dividing the total number of claims denied by the aggregate number of claims denied by the aggregate number of claims remitted.
A denial rate below 5 percent is ideal, but the industry average is 5 – 10 percent.
For the number of claims denied, organizations can find the total number of processed claims in a month and identify the actionable denials, or denials that could be corrected within the organization to boost reimbursement. This includes payments containing a denial code on payer remittance advice, initial claim denials, appeal denials, and zero and partial payment accounts with denial codes.
The value does not include denials for non-covered services, patient financial responsibility, and duplicate claims. It also excludes Medicare Recovery Audit Contractor (RAC) recoupments and encounter claims.
What’s Next for Revenue Cycle Management?
Part two of this series looks at mid-cycle revenue cycle management measures promoting institutional longevity such as Account Resolution. Part three focuses on the Financial Management KPIs pertaining to late-stage revenue cycle management
In the meantime, healthcare organizations in search of external debt collection agencies capable of collecting on delinquent accounts may contact Optio Solutions to learn about its foundation of compliance, certification, data security and technology as well as individualized strategies offering a favorable return on investment and brand protection.