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5 Key Performance Indicators to Monitor for a Healthy Revenue Cycle

By Cynthia Fletcher

February 8, 2023

One of the most critical aspects of running a successful revenue cycle program is identifying key performance indicators (KPIs) that will help you measure the health of your revenue cycle. There is a vast amount of data available in EHRs and billing systems. It’s impossible and unnecessary to monitor every data point. However, measuring the right data points sets a healthy organization apart from a struggling one. Monitoring just five metrics can help you better understand the strength of and better manage your revenue cycle.

While KPIs may vary from organization to organization, the path to identifying those KPIs is similar. Avoid getting lost in the sea of data by aligning to organizational goals. To do this, establish what data is most critical to your organization’s success. Once identified, notify the appropriate leaders and gain consensus about what is most vital to the organization’s success.

Below are 5 KPIs that healthcare organizations seeking to optimize their revenue workflow, improve provider payment rates, and contain revenue should monitor.

  1. Clean Claim Rate – Notably, one of the most important KPIs in revenue cycle management, the industry standard for a clean claim rate (CCR) is >= 95%. This metric is a direct representation of the quality of your processes prior to claim submission.

    A high CCR means healthy processes are in place, which results in fewer claim resubmissions and less manual intervention. It also means faster payments for providers.

    Conversely, a low CCR indicates some problems need to be addressed with your physicians or coding staff.

  2. Cost to collect – While difficult to measure, the cost to collect provides critical information about where most of the spend occurs, providing much-needed transparency to those who manage healthcare organizational finances.

    Many organizations determine the cost to collect by calculating the cost of their staff compared to what they can collect. Unfortunately, this method oversimplifies the process. It ignores the complexities of some roles and may not factor in the revenue that could be collected but isn’t due to incorrect staffing levels or undertrained staff.

    A better way to measure the cost to collect is to complete a Value Stream Mapping of the entire process flow. This involves identifying all the processes involved in the revenue cycle and understanding the costs and resources required for each. Once completed, the organization will have the data needed to understand which processes can be modified, eliminated, or automated to reduce effort, thereby reducing cost.

  3. Average days in A/R - The average days in A/R you should aim for will vary depending on your organization. For example, practices that are mostly office visits would have an A/R value of less than 30 days, while specialties with a greater variance in procedures will have a higher days in A/R average.

    Once you know your average and identify your target, you can put simple processes in place to improve. Actions such as posting charges daily, promptly following up with payers, immediately working denials, and automating payment posting can all help reduce A/R days.

  4. Denial rate - The average denial rate should be less than 5%. The majority of denials typically contain issues such as patient registration and authorization. Other major denial reasons include missing or invalid claim data and coding errors.

    Understanding the root causes of denials is the first step to reducing your denial rate. Once you know the causes, you can take action to improve claim submissions and ensure you keep your denial rate under 5%.

  5. Net collection rate (NCR) - Many organizations have an NCR of <90%, yet the industry standard is >97%. One of the most common and avoidable reasons is unpaid, self-pay debt, which staff should have collected before services were performed.

    Secondly, denial management, or lack thereof, contributes to a low NCR. Understanding why claims are denied or written off is essential for improving collection rates. By deepening your knowledge of denial, you can identify trends, such as:

    • Coding errors
    • Incorrect diagnosis codes
    • Lack of prior authorization
    • Not filing claims on time

    Once you know the reasons, you can then put measures in place to address the issue and thereby improve NCR.

5 Key Performance Indicators to Monitor for a Healthy Revenue Cycle

When KPIs Don’t Measure Up

Now that you know the most critical KPIs to monitor, you may question what to do if your team is underperforming. If a KPI is underperforming, you can identify the problematic function. You can solve the problem by:

The impact of changing your denial rate or net collection rate by even a few points is significant, especially when you consider lost revenue.

Engaging experts can help you identify and address underperformance and develop a plan to correct it.   

Cynthia Fletcher

Cynthia Fletcher

Author

Executive Director – Customer Success

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