The first step towards effective Revenue Cycle Management (RCM) is to identify the core metrics to be focused on, the actions to be taken to optimize them individually, and ultimately the specific goals you seek to achieve on each section of the cycle. In essence, RCM is an organized set of processes to aid in getting healthcare providers compensated for the services optimally they provide to patients. As healthcare organizations need to do more with less, they must utilize a consistent set of key performance indicators (KPIs) to assess the effectiveness of the revenue cycle. These indicators can provide insights into the practice's financial health and promote data-driven decision-making.
A healthcare provider's practice's front-end, mid-cycle, and back-end functions have unique KPIs. The front office KPIs focus on patient intake, scheduling, and registration, indicating patient experience quality and effectiveness of the information. The Mid-cycle KPIs demonstrate the quality of clinical documentation, the ability to reduce denial rates and improve first-pass resolution rates. The Back-Office KPIs are about revenue optimization and indicate the ability to recover the dollars the practice could have otherwise lost. Each should be managed cohesively to ensure maximal effectiveness.
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Front Office RCM KPIs
The front office schedules patients registers them on the system, and validates their ability to pay for the services they will receive. The front office staff must ensure a positive patient experience while obtaining and capturing all information needed to efficiently deliver care and get the practice paid for the medical services.
Incomplete or inaccurate patient demographic information (such as name, date of birth, or insurance ID) can result in claim denials. A Workgroup for Electronic Data Interchange (WEDI) report estimated that as much as 26% of claim denials were due to errors in patient eligibility and demographic data.
Front-office managers can utilize the following metrics to gauge the efficacy of the front office:
No-Show Rate: A high no-show rate, i.e., the percentage of patients who fail to show up for a scheduled appointment, indicates lost revenue. Automated reminders, telephonic follow-ups, etc., can help reduce the no-show rates.
Schedule Utilization Rate: A direct measure of productivity, the schedule utilization rate is the percentage of the providers' available time being utilized actively for appointments and patient encounters. High schedule utilization rates indicate that the practice uses the provider's time efficiently. The front-office staff can improve schedule utilization rates by observing patterns and managing provider availability accordingly.
Appointment Wait Time: Indicative of the quality of patient experience at a practice, Appointment Wait Time is the time between a patient requesting an appointment and receiving confirmation. Excessive wait times can lead to a bad patient experience and lost revenue (short-term and long-term) for the provider. Front office staff can reduce appointment wait time by monitoring provider schedules and systematically placing appointments.
Same-Day Appointment Availability Rate: As the name suggests, this KPI is the percentage of patients who can schedule an appointment for the same day when they request one. The high availability of same-day appointments positively impacts patient satisfaction and improves the provider's productivity. It could also indicate if the practice is excessively staffed as a whole or for some specific specialties.
Appointment Lead Time: The Appointment Lead Time is the duration between the request and scheduling of the appointment. Excessively long appointment lead times and inconsistent/fluctuating lead times can decrease patient satisfaction and lead to a provider's revenue loss. An efficient front office team can monitor the data, identify appointment patterns, and optimize this for the provider.
Provider Productivity: This KPI is the number of appointments each provider attends in a period (a day, a week, etc.). A high provider productivity rate can increase the practice's revenue if optimally billed and realized, offering improved patient healthcare access. A medical group can improve provider productivity through efficient appointment scheduling and training the physician and support staff to accelerate encounters without compromising the quality of care and clinical documentation.
Patient Registration Accuracy Rate: A measure of the effectiveness of capturing and storing patient information on revenue cycle and EHR systems, high patient registration accuracy leads to accurate billing by eliminating preventable billing errors and consequent denials.
Insurance verification accuracy: Tracking the accuracy of insurance information entered by front-office staff can help reduce claim denials and improve revenue cycle management.
Patient Check-In/Check-Out Time indicates the quality of patient experience during an encounter with the provider. It is the duration between the check-in time (at arrival) and the check-out time (after completion of the appointment).
Mid-Cycle KPIs
Mid- Revenue Cycle elements are responsible for measuring medical coding reliability, claim submission accuracy, and effectiveness of denial management. According to a recent report by the American Medical Association (AMA), Coding errors are one of the top reasons for claim denials, accounting for 15.5% of all claim denials. The report found that the top coding-related reasons for claim denials were:
Inappropriate or invalid codes
Lack of specificity in the diagnosis or procedure code
Incorrect coding sequence
Mismatched codes and modifiers
Use of outdated codes
The Mid-Revenue Cycle KPIs enable optimal revenue realization, decreased costs, and more efficient operations. HIM and Coding managers can utilize the following metrics to gauge the efficacy of the mid-cycle:
Coding Accuracy Rate: Coding Accuracy Rate: This measures the general reliability and quality of the medical Coding function of the practice. Higher coding accuracy enables quicker claims processing and more accurate payments while reducing the likelihood of denials.
Claim Rejection Rate: Payers reject a certain percentage of claims submitted by the provider, known as the claim rejection rate. A lower claim rejection rate indicates an efficient and effective billing function that generates valid claims promptly.
Days to Bill: Days to bill is the average number of days to submit a claim after the provider-patient encounter. A shorter period to bill can improve cash flow for the practice.
Charge lag: The charge lag is the time between the healthcare service and the charge entry into the provider's billing system. A shorter charge lag can lead to faster claim submission and improved revenue.
Claim rework rate: The rework rate measures the percentage of claims that need to be resubmitted or corrected due to errors. A high claim rework rate implies a mid-cycle staff problem or process requiring correction.
Clean Claims Rate: The clean claims rate is the percentage of all submitted claims the payer processes without errors/rejections. A higher clean claims rate indicates an efficient billing process and staff.
First Pass Claim Rate: The first pass claim rate is the percentage of claims processed and paid on the first submission without any clarifications or revisions. It is a subset of the clean claims rate.
Back Office RCM KPIs
The back office of a healthcare provider manages the accounts receivable, collections, and financial reporting processes for a medical group or practice. Back-office RCM KPIs may include:
Measuring the time taken for collections
The efficiency of accounts receivable (AR) processing
Net collections
Denial rates
Writing-off bad debt
These KPIs ultimately lead to increased revenue, reduced costs, and more efficient operations.
A 2020 survey conducted by the Healthcare Financial Management Association found that providers who used technology to improve back-office RCM functions had better financial performance and lower denial rates than those who did not. The survey also found that using analytics and automation in RCM processes was associated with higher clean claims rates and faster collections.
By having efficient billing and collections processes, healthcare providers can free up time and resources to focus on delivering better healthcare and achieving better patient outcomes.
Accounts Receivable Turnover Ratio: This metric indicates the number of times a provider makes collections on accounts receivable during a given period, thus implying the efficiency of realizing cash flow. A higher turnover ratio indicates that the practice can collect its receivables and realize revenue due to them.
Days in Accounts Receivable (DAR): The number of days it takes for payment to be received after a claim is submitted indicates the efficiency of the back-end cycle. Lower days in accounts receivable show the efficiency and quality of the overall revenue cycle. By benchmarking against MGMA standard benchmarks for DAR, the practice can understand how well they are doing.
Net Collection Rate. The net collection rate measures the provider/practice's successful revenue collection as a percentage of the overall dollars claimed. A higher Net Collection Rate indicates an effective Revenue Cycle Management (RCM) process and positive financial health for the practice by allowing them to realize a greater portion of their revenue.
Denial Rate: Measured as a percentage of the number of claims denied by payers against the number of claims submitted, the denial rate shows the effectiveness of the revenue cycle in general and medical coding quality in particular. Lower denial rates mean the RCM process is effective and reliable, with a higher likelihood of successful payment for services rendered.
Denial rate by reason code: By categorizing claims based on the specific reason assigned by the payer and represented by the preset code, the revenue cycle team can identify patterns, map out common errors, and implement strategies to reduce denials.
Patient Balances Outstanding: This metric means the outstanding amounts due from patients for medical services received. Lower patient balances outstanding indicate a more effective collection process and improved financial health for the provider/practice.
Average Reimbursement per Encounter: The Average Reimbursement per Encounter metric evaluates the average reimbursement the practice/provider receives for every patient encounter. A higher average reimbursement per encounter indicates better financial performance and a more efficient billing process for the practice.
Conclusion
By tracking and monitoring key performance indicators (KPIs), medical groups and physician practices can make data-driven decisions to improve revenue and profitability while maintaining high-quality patient care. Medical groups and physician practices can optimize revenue generation and cost management by effectively managing the front, middle, and back-office RCM processes, resulting in increased profitability and more efficient operations.