10 Essential Key Metrics To Measure RCM Success 21 Jul 2021
What Is Revenue Cycle Management?
Revenue cycle management or – RCM – is a proactive method used by the global healthcare systems, especially in the United States, to monitor and keep a record of the revenue from patients. It includes the complete revenue history – from the patient’s initial encounter with the hospital to their final bill settlements. It is a common procedure of the health administration team.
The revenue cycle is defined as all clinical and organizational functions that confer to the initial records, administration, and reserve of patient service revenue. It is a loop that defines and accounts for the life cycle of a patient (and ensuing payments and revenue) through a typical healthcare meeting from initial registration to final payment, i.e. adjustment of accounts receivables.
The revenue cycle starts when a patient books an appointment, and it concludes when the healthcare provider has received all the payments. Any error in revenue cycle management will lead to delayed payments or no payments at all to the healthcare provider. The healthcare revenue cycle management process is a complicated procedure, and it requires continual supervision. In order to ensure the process is hassle-free, healthcare providers can outsource revenue cycle management to specialized agents like Velan, a Revenue Cycle Management Company.
Velan – The best RCM team you can count on
We follow stringent processes to ensure our client’s RCM is on point and track. When you associate with Velan, you will have a dedicated account manager and a team of revenue experts with specialty-specific knowledge to provide healthcare revenue cycle management solutions. Our team will manage your delinquent claims, track down denials, and help you follow the best practices and key metrics to measure RCM success. We are committed to exceeding the medical billing benchmarks and achieve KPI for the hospital revenue cycle above industry standards.
Our healthcare revenue cycle management process team makes sure that there are zero billing errors. This way, the reimbursements from the insurance companies will be streamlined and seamless. Our healthcare revenue cycle management teams are in charge of handling compliance with accurate coding regulations. We use the right coding of the services subject to the practice to make sure that insurance claims can be processed hassle-free and the practitioner is compensated for all of their services rendered.
Our revenue cycle management services include handling EHR, HIS, PACS, RIS, VNA, CPOE, mHealth, claims management, supply chain management, healthcare analytics, telehealth, CRM, and fraud management.
Partnering with Velan for your healthcare revenue cycle management needs will get you on target to increase your revenue — and grow your practice.
What is a Key Performance Indicator?
Healthcare is rapidly progressing, and healthcare practices are obliged to perform at maximum efficiency while keeping their revenue cycle operations intact. Looking at the KPI for the hospital revenue cycle is a great way to know overall RCM performance, the key metrics to measure RCM success, and recognize strengths and weaknesses.
The key performance indicators are beneficial to identify gaps, address them, help to lower the compliance risks and ensure the accuracy of charges. Though the KPI for the hospital revenue cycle will vary based on each specific practice’s needs and objectives, here are 10 key performance indicators to help measure RCM success.
10 Key Metrics to Measure RCM Success
Healthcare domains are progressing rapidly. Administering the financial well-being of your practice plays an important role in your future growth. When you understand the key metrics that influence your revenue cycle and the importance of tracking KPIs in revenue cycle management, you will be able to handle the overall revenue cycle process better by making strategic changes to improve revenue and lower costs.
Independent medical practice owners have a lot of responsibilities. Hence, it is crucial to pivot on quantifiable metrics within your revenue cycle. It will help your practice to impartially measure and upgrade.
We have listed our ten validated KPIs that will help measure your revenue cycle process for success:
KPI #1: Point-Of-Service (POS) Cash Collections
POC Cash Collections discerns the efficacy of your POS systems. It helps to discover problems in the POS operations that affect RCM. It tracks POS collection and payment received before the services were rendered and up to seven days after. It is recommended for small-sized and medium-sized organizations that do not require long-term payment options (within the seven days average). Increased efficiency in upfront payments will lead to decreased collections and lesser revenue loss.
To understand the KPI’s efficiency value, divide the POS payments by the total self-pay cash collected.
KPI #2: Clean Claim Rate (CCR)
Clean Claim Rate (CCR) refers to the problems and inefficiencies that take place in claim submission and claim to process. Rejected claims take a lot of time to undergo changes, seek approval, and they also demand charges. The time taken for the claim submission and resolution will result in delayed replies for determining eligibility and completing payments.
While other KPIs are focused on efficient claims processing, this KPI shows an average of daily claims that pass rather than the total number of claims accepted.
KPI #3: Days in Discharged Not Final Billed (DNFB)
The Discharged Not Final Billed (DNFB) KPI calculates the performance of the revenue cycle by focusing on the claims-generation process. Due to inputting claims and any issue associated with the delayed claims, the cash flow will be impacted, and this KPI will indicate the values.
To calculate the metric – income statement and unbilled accounts receivable, divide the total of DNFB dollars by the average daily gross patient service revenue.
KPI #4: Bad Debt
If you want to understand your potential collections’ efficacy, you can use the Bad Debt KPI. This KPI also helps to determine the success ratio of pre-service financial counseling and other similar programs. However, it is not helpful for calculating lost debts. A higher bad debt value squarely indicates the inefficiency in the previous revenue cycle areas – POS collections and financial counseling.
To determine the bad debt value, divide the income statement’s bad debt by the gross patient service revenue over a defined period.
KPI #5: Days in Accounts Receivable (A/R)
Days in accounts receivable, or A/R, indicates the average number of days a practice takes to collect payment. The lower the number of days, the faster the payments will be procured. The value helps to calculate the success efficacy in obtaining the payment for services and how considerably the practice runs the exceeding their Accounts Receivables. Note that assessing the days in A/R will help you estimate the practice income and further evaluate your revenue cycle.
To determine this KPI value, extract information from the balance sheet and income statement and then divide the total A/R by the average daily net patient service revenue.
An alternative to calculating the daily net patient service revenue is to divide the total annual sales by 365.
KPI #6: Late Charge as Percentage of Total Charges
Late Charges KPI is the percentage of total charges that measure the total efficiency of revenue capture and find out opportunities to perk up revenue capture. In order to find out the opportunities, your practice must cut down unnecessary costs, improve compliance, and accelerate the cash flow.
KPI #7: Cost to Collect
Cost to Collect KPI is the coveted performance indicator that calculates productivity and efficiency.
To determine the metric value, divide the total revenue cycle cost by total cash collected. Including the IT costs are, however, optional.
KPI #8: Resolve Rate
The Resolve Rate KPI describes the overall efficacy of your RCM process from eligibility to coding and billing.
To find this metric value, divide the total number of claims paid for a specific period by the total number of claims for a particular time. If your rate is higher, it means that your staff and the process are both adequate. If the rate is lower, look out for credentialing eligibility verification, authorizations, and coding. Since insurance providers consume 10-30 minutes and an average of $50 per rework claim, a flat rate will distress both staffing costs and cash flow.
The result is the higher the percentage, the better for the practice.
KPI #9: Cash Collections as a Percentage of Net Patient Service Revenue
The HFMA authorized the organizations to determine the KPI value by dividing the total collected patient service cash, found on the balance sheet, by the average monthly net patient service revenue, which is on the income statement.
Insurance Provider organizations should omit some total collected patient service cash, which includes patient-related settlements and payments, like safety-net, Direct Graduate Medical Education, Medicare pass-through, and Medicaid DSH payments.
KPI #10: Net Collection Percentage
The net collection percentage determines effectiveness by cumulating ‘collectible’ dollars. To discover the value:
- Deduct the refunds from the total receipts.
- Delete the contractual adjustments from the total charges.
- Divide the first value by the second value. The net collection percentage can vary based on three factors: orders, payments, and adjustments.
If adjustments increase compared to payments and charges, the net collection percentage result will improve. It is crucial to confirm the staff is accurately posting adjustments and that accounts are not written off rather than collected or appealed.