In the healthcare industry, revenue cycle management (RCM) is the administrative process of generating and monitoring collections from patient services. These activities include scheduling patient appointments, entering charges into accounting software, and sending statements to patients. There are numerous RCM metrics that healthcare organizations can use, but four of the most important ones are days in accounts receivable, first pass corrected claim rate, denial rate, and collection rate.
Days in accounts receivable is a measure of how quickly an organization receives payment for services rendered. The first pass corrected claim rate is a measure of how many claims are submitted correctly the first time. The denial rate is a measure of how many claims are denied by insurers. And collection rate is a measure of how much of an organization’s billed charges are actually collected.
Here are five quantifiable metrics within your revenue cycle that you should measure on a regular basis.
First Pass Resolution Rate
The first pass resolution rate measures the number of claims that get resolved the first time they are submitted. FPRR is an indication of the success of your revenue cycle management process. If it is too low, you need to analyze why. For example, if it’s a high-acuity claim, you might have to make sure that you have enough staff available to handle it.
If it’s a low-acuity claim and your FPRR is high, you may want to review what type of information is missing from the claim submission. A key metric for measuring the efficiency of your revenue cycle management process is that it indicates how quickly providers can be paid when they submit claims.
Net Collection Rate
The net collection rate measures a practice’s effectiveness in collecting reimbursements. It refers to the percentage of reimbursements achieved out of the total amount of reimbursements allowed based on payer contracts. This is also known as the “allowance rate,” as it reflects how much money your practice has been paid by insurance companies for all services rendered during a given period of time (e.g., quarter).
The allowance rate can be calculated by dividing total allowed charges by total allowed charges plus denied charges and then multiplying by 100%. A high collection rate indicates that your practice is doing well at collecting from insurance companies, which results in increased cash flow and profitability. A low collection rate could mean that you need to work harder on improving collections or consider switching carriers if they don’t pay claims efficiently.
Once you’ve identified the root cause(s) for your high denial rate, you’ll need to determine if those reasons are fixable or unfixable. If they’re unfixable, such as an incorrect coding issue or coding error, then there’s not much that can be done other than following up with the payer and submitting the claim at a later date. If it’s fixable, however, such as incomplete documentation or missing information then taking steps towards correcting these issues will help bring down your denial rate over time.
The denials can be broken down into two categories:
- Claims that were denied because they were not covered by the patient’s insurance plan (known as non-covered claims)
- Claims that were denied because they did not meet the requirements for payment or had other problems with them (known as other claims).
Days in Accounts Receivable
Days in accounts receivable, or A/R, refers to the average number of days it takes a practice to collect a payment. The lower the number, the faster payments are being received. Measuring days in A/R will help you forecast practice income and further evaluate the effectiveness of your revenue cycle. Cancellation rate is how often patients cancel appointments without giving notice. This metric is helpful for measuring customer satisfaction and retention, as well as identifying trends in patient behavior. You can use this information to improve your communication with patients when scheduling appointments and other procedures.
A/R days is an important metric to track because it represents how well you’re collecting payments from your patients. The faster you can collect payments, the more cash flow you’ll have in your business and the fewer days of debt you’ll have to carry on your books. Medical practices have different A/R days depending on their industry, size and location. For example, a large physician group in a metropolitan area may have an average A/R of 30 days whereas a small independent practice in rural America might have an average A/R of 90 days or more.
Cost to Collect
Cash collections make up the amount of money that is actually collected from insurance companies and patients. This includes both accounts receivable (money owed to you) and accounts payable (money that you owe to others). You can use this metric to determine whether or not your collection efforts are working, as well as identify areas where improvement is needed.
This metric represents the total amount of money owed by patients and insurance companies who haven’t paid their bills. It will vary depending on how long after services were rendered that payment is expected, but it will generally include any unpaid balances with interest charges added on top.
Payment days refer to how long it takes for an account to be settled in full after being submitted for payment. This time frame will vary across industries, but a good benchmark is 60 days or less. If your business has a high number of payment days on its books, it could indicate trouble ahead because many people prefer not to wait for their money.
How to calculate your RCM metrics in the healthcare business?
Regularly measuring and analyzing a set number of data points is a manageable first step to making changes necessary to increase your practice’s profit. It takes some time and effort, but the end result will be worth it.
The primary benefit of using RCM metrics is that they allow you to track and determine the revenue cycle efficiency of your practice. By comparing your actual results against expected results, you can identify areas where improvements may be needed.
The following sections describe five key metrics that should be measured and analyzed on a regular basis:
1) Revenue per patient visit (RPPV)
2) Number of claims submitted per day
3) Average days in account receivable (DAR)
4) On-time payment rate (OTPR)
5) Patient satisfaction ratings
How to use your RCM metrics to boost medical profits?
ROI is a crucial metric for medical assistant practices. But it’s not the only one. The RCM metrics you choose to track can have a direct impact on your bottom line. As a medical professional, you’re probably familiar with the acronym RCM. If not, it stands for revenue cycle management, which is a fancy way of saying the business side of healthcare. Your ability to manage this aspect of your practice will have a huge impact on your bottom line. If you’re not sure how to manage your RCM metrics, don’t worry Medcare MSO will help you to boost their medical profits.
Medcare MSO is a medical billing service company that can help you take your healthcare business to the next level. Medcare MSO offers medical billing services for medical practices of all sizes, from small clinics to multi-location hospitals. Medcare MSO can handle all your billing needs from start to finish. We provide biller training and support to help you get your new staff up to speed quickly. Medcare MSO offers first-rate customer service that ensures your patients are happy with their experience with your practice.