Practice Financial Evaluation

Which practice financial evaluation metrics can help in revenue?

Medical billing key performance indicators (KPIs) help practices to keep track of their monthly revenue. Among these KPIs, days in accounts receivable (A/R), clean claims ratio (CCR), and net collections ratio are crucial to expertise financial performance, recognizing any trouble regions, and figuring out fluctuations in revenue. Read on for 6 KPIs to track for monthly revenue improvement.

1. Days in accounts receivable (A/R): Days in A/R represents the turn-around period of time it takes for a claim to be paid. While practices look ahead to payment, cash flow — and possibilities to make investments and earn interest — decrease. Practices must meet the industry benchmark of 33 days in A/R. Keeping this metric below as a minimum 45 days will assist ensure your practice’s financial health. You’ll additionally need to keep in mind insurance carriers’ timely filing limits (frequently 90 days from the date of service). Once those closing dates pass, it could be tough for providers to receive any payment for services rendered. To calculate days in A/R, first pick a duration of time to measure, which include 30 days, 60 days, 90 days or 365 days. Then, decide the average daily charges by the practice. Adding posted charges for your chosen time frame Subtracting credits received Dividing by the number of days in that period Finally, divide your overall accounts receivable by the average daily charges. Closely associated with days in A/R is the 0-60 percentage. This KPI represents the percentage of insurance A/R aging in the youngest buckets: 0-30 days and 31-60 days. Payments due are looked after into the bucket that represents what number of days in the past the service was billed. To calculate the 0-60 percentage, divide the combined A/R in the 0-30 bucket and the 31-60 bucket by your total A/R.

2. Clean claims ratio (CCR): The CCR, or first-pass claim ratio, is the percentage of clean claims or claims paid at first submission. A clean claim has never been rejected, does not have a preventable denial, has not been filed more than once, and contains no errors. Since clean claims mean you’re getting paid faster, you’ll need to become aware of your CCR, gauge time spent correcting denied claims, and pinpoint reasons for claim denials. Most practices’ CCR ranges from 70% to 85%. Having a CCR above 90% or 95% displays a successful RCM approach.

3. Claim denial rate: The claims denial rate offers practices a picture of how many claims are denied. While practices must aim for a high CCR, they must attempt for an extremely low claims denial rate. To calculate your denial rate, divide the number of claims denied by the number of claims billed. You also can calculate this rate by dividing the financial amount denied by the amount billed.

4. Bad debt rate: If you need to gauge the volume to which potential collections have been written off, check your practice’s bad debt rate. To calculate this KPI, divide financial amounts written off by allowed charges.

5. Net collections ratio: The net collections ratio is the percentage of overall reimbursement collected out of the total allowed amount. This metric represents the performance of the revenue cycle and, thus, is the ultimate indicator of collections success. Unlike gross charges, net collections constitute what your practice realistically can expect to receive in terms of reimbursement. It reflects how denial rates, unreimbursed visits, and other factors affect revenue. Gross series charge Although this metric isn’t as beneficial as the net collections ratio, it gives your practice another perspective on collections. Determine your practice’s gross collection rate by calculating overall reimbursement received out of the entire charge volume.

6. Gross collection rate: Although this metric isn’t as useful as the net collections ratio, it will provide your practice another perspective on collections. You can determine your practice’s gross collection rate by calculating overall reimbursement received out of the entire charge volume.