Key performance indicators (KPIs) are quantifiable measures of performance over time that signal progress toward an intended result. They provide insights on your current operations and areas for improvements by locating areas of success or concern.
We’re taking a closer look at Key Performance Indicators (KPIs) and their contribution to improving the revenue cycle. The medical revenue cycle is a crucial part of the financial success for any healthcare provider.
The medical revenue cycle includes all processes from the moment a patient schedules an appointment through payment reimbursement. “Oftentimes, we see revenue cycle treated as a department that sits on the back end with billing,” said Melissa Scott, director of advisory services at the healthcare technology company Change Healthcare.
“The problem with this is that everything should be done accurately and efficiently prior to claim generation to get the claim out the door and paid on the first submission. Errors in front-end processes such as registration, patient demographics, insurance verification, and eligibility can cause all the things done right after that point to be thwarted and result in a denial. Every person that touches data that ends up on a claim, or aids in the care and documentation process that supports billing and reimbursement, needs to understand they are part of revenue cycle and how they impact the organization’s KPIs” (Scott).
The Journal of AHIMA calls attention to the impact remote work has had on managing the revenue cycle. As a result of the recent widespread adaptation of remote work, RCM managers have to rely on data and dashboards to monitor productivity. They can no longer walk the floor, chat with team members, and keep tabs on the work everyone is doing. This further showcases the importance of tracking and analyzing KPIs.
Healthcare Revenue Cycle KPIs
Monitoring KPIs is a great way to keep your RCM performing at its optimal rate. By reviewing your KPIs frequently, will locate areas of opportunity for improvement and in some cases, determine if education or training is needed for your team. RCCS can help you set KPIs, audit your current cycle and training to help you reach your future goals. Examples of KPIs:
|A/R > 90||<10%|
|Average days in A/R||35 Days|
|Bad debt rate||<5%|
|Charge lag||Depends on your organization|
|Clean claim rate||>95%|
|Days to submit||<48 Hours|
Examples of Healthcare Revenue Cycle KPIs
Code and Charge Accuracy
Medical coding is a vital part of the revenue cycle, ensuring that patients’ encounters are accurately reflected in the medical record and the services provided were properly documented. Coding accuracy also ensures any extra information is captured beyond DRG codes, such as the physician and date of service information.
Medical compliance reviews every aspect of how charges were made to ensure accuracy and prevent any fraudulent activity. KPIs to track and monitor for coding and charge accuracy include:
- Medical Coding Accuracy
Medical coders or coding managers should aim to achieve an accuracy rate of 95% for individual records. Higher accuracy rates are expected when coding DRGs. Low coding accuracy can lead to failed compliance penalties and lawsuits.
- First Pass Resolution Rate
This KPI measures the percentage of claims that get reimbursed upon their first submission. Tracking this data will indicate your revenue cycle’s effectiveness and your facility’s coding accuracy. Lower percentages indicate areas of your revenue cycle that require attention.
- Missed Charges
Every organization should track this KPI closely and investigate any missed charge patterns to ensure they are receiving full reimbursement. Errors can occur for a variety of reasons, but most commonly caused by human error or technology gaps. By locating these issues early, healthcare providers can avoid revenue leakages and maintain trust with their patients.
Code and Charge Productivity
Revenue cycle managers are responsible for locating coding and billing errors to ensure that revenue is accurately recorded and reimbursed. Additionally, they must make sure claims are properly filed as soon as possible to avoid longer reimbursement periods.
Three KPIs that revenue integrity managers should monitor for code and charge productivity include the following:
- Charge Capture Lag Time
Tracking lag time can locate broken charge capture workflows. This KPI focuses on the weaknesses of documentation and the process flow of getting information from the patient to the coding staff.
- Discharged, Not Final Billed (DNFB)
Revenue integrity manager can track the number and dollar amount of DNFB files to diagnose and solve specific workflow issues. This information is important for both billing and coding, as it can help ensure that your organization is reimbursed appropriately. A higher number of claims that have not yet been filed or are waiting for coding/billing work are a cause for concern.
- Coding Productivity
Organizations should aim for coding productivity of 95% or higher. No more than 5% of the coding load should be in the queue at any given moment. Hiring more coders is not a solution for this problem, it could be a process or a technology issue that could reduce the volume of coding.
There are several KPIs you should consider when it comes to revenue reconciliation. By understanding how these metrics change over time; you can identify areas of improvement and make the necessary changes to avoid the loss of revenue.
- Denial Volume
On average, claims denials cost healthcare organizations 5% of their net revenue. To avoid lost revenue, analysts inspect denial percentages and the dollar amount from denied claims. Denial rates typically range from 5% to 10%, with less than 5% considered successful. By understanding denial patterns, you can improve or automated your workflows which will result in a higher approval rate for claims.
- Denials Appeal Rate
Tracking this KPI allows a comparison of the total number of denials appealed to the total volume of denials. A high percentage of appeals is ideal. However, low percentages of appeals mean there are opportunities for automatic write-offs or adjustments.
- Days in Receivables Outstanding (DRO)
DRO tracks the average number of days it takes to collect payments. A high-performing billing department will take an average of 30 days or less to collect all payments due.
- Underpayment Recoveries
Becker’s Hospital CFO Report estimates that hospitals are underpaid 2% to 5% of net patient revenue. Every organization must monitor underpayments and measure the success of efforts to recover the lost revenue.
To ensure that your medical revenue cycle is performing as expected and revenue leakage is minimal, it’s important to monitor any of these KPIs. These metrics can help identify areas of risk that are high and low payment processing. By fixing these problems, you can improve your company’s overall performance.
Medical Revenue Cycle Management Services and KPIs assistance
Some of the benefits of optimizing your revenue cycle include increased cash flow, reduced cost-to-collect, greater point-of-service cash collections, and fewer denials. The revenue cycle must be efficient and effective from start to finish to avoid the risk of revenue leakage. Sometimes, all the variables and contributing factors affecting your revenue cycle become overwhelming. How do you know when it’s time to seek assistance?
Melissa Scott, director of advisory services, advises that it may be time to hire some revenue cycle assistance if underperforming KPIs include bad debt, charity, cash-to-net revenue, credit balance AR, billing turnaround, and the percentage of claims paid on the first pass.
Relias offers a robust library of quality online courses that allow you to invest in your staff’s coding education, which can in turn impact your overall revenue cycle.
Revenue Cycle Coding Strategies offers expert revenue cycle optimization services if you’ve determined you need additional assistance.