When doctors think of vital signs, they're usually thinking of patients, not the metrics and statistics that indicate whether the practice is healthy and financially viable. But for practice administrators or office managers, these financial vital signs are the key to understanding the revenue cycle management and its strengths and vulnerabilities.
In past posts, we've talked about many of the in-depth reports and dashboards that managers of the financially successful practices track, but today we'll take a look at some "snapshot" metrics you can examine in 10 minutes or less to give you an overview of your financial health—and see how you compare to best practices in the industry.
Window time of service collections
This is one of the easiest places to make changes in your revenue cycle management. Industry best practices show an average of 90% or higher time of service collections, with some practices coming close to 100% success. Be sure to make it easy for your patients to pay their co-payments and coinsurance amounts:
- Accept credit card payments.
- Collect co-payments at check-in, not check-out.
- Calculate estimated coinsurance amounts and collect at check-in.
Days from time of service to billing
Top performing practices accomplish their insurance billing in three days or less from the time of service, which is only possible if you have an efficient system for data capture, coding, claims scrubbing, and electronic submission. Delaying the billing beyond three days extends the revenue cycle, letting the insurance companies hold on to your money longer and delaying any actions needed for improper adjustments and rejections.
If your practice is on the slow side, evaluate your processes for:
- Charge capture
- Coding and documentation
- Charge entry
- Claims transmission
- Denial management (pre-certification, pre-authorization, verification)
Average days in Accounts Receivable
Our benchmarking shows that top performing practices have an average of 40 days in Accounts Receivable. To calculate your average days in A/R, follow this formula:
- Add all your gross charges for a given period (three months, for example)
- Subtract all credits from the charges.
- Divide the figure in #2 above by the number of days in the period (90 in this example). This is your practice's Average Daily Charges.
- Now divide your total receivables by your Average Daily Charges to calculate your Average Days in A/R.
If your Average Days in A/R is higher than it should be, take a look at your carriers and see if you can pinpoint problems with slow payment; are there coding or documentation errors or other process improvements that could speed up the process? Next, check your collections policies. Do you offer payment plans and ways for patients to review and pay their bills on-line through a patient portal or other financial access system?
Related Article: 3 Effective Tips for Medical Practices to Enhance Patient Engagement
Percentage of claims paid within 45 days
A good benchmark for this revenue cycle metric is to achieve 85% to 90% claims resolution within 45 days from time of service. If you have a higher than average percentage of claims going beyond this window of golden opportunity, you may need to revisit your denial management process. Today, many denials revolve around one of the following common issues:
- Registration errors (errors in names, DOB, other demographic information)
- Coding errors (this is perhaps the most common reason behind claims denials)
- Authorizations and certifications (check expiration dates, exceeded number of services)
- Medical necessity (are your documentation procedures in place to ensure medical necessity requirements are met?)
Once you identify where your denials are originating, you can take steps to correct the problem and reduce your denials.
These four metrics are by not means an exhaustive list of numbers you should be tracking, but they do give you a quick and easy peek at how your practice is performing compared to industry benchmarks. If you have questions about how to improve your practice "vital signs," contact us today for a free consultation and billing analysis.