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RCM KPIs That You Need to Keep Track of at Your Practice

The key indicator of the success of your practice is how well your revenue cycle is working. In other words, it depends on the reimbursements or the cash flow at your practice. If your practice is not receiving reimbursements at the same rate it is introducing new patients, then there is a serious backlog somewhere. This lack of reimbursements can be even costlier to your practice if you do not know where the bottlenecks are. Outsourcing your RCM process can help you track down your issues and combat them head-on.

Regardless of whether you outsource your RCM process, you still need to be on the lookout for key performance indicators to track your revenue cycle. The indicators you are tracking are often the ones that are being targeted by the vendors or your administrative staff, in an attempt to increase reimbursements and improve cash flow.

Six KPIs to track your revenue cycle

There are many performance indicators that should be tracked regularly in an attempt to understand how well your practice is doing. Without an appropriate system to track these indicators, you may experience low revenue and reduced profits but may not understand where the problem lies. To avoid such problems, mentioned below are six key performance indicators that you should be on the lookout for, to monitor the success of your revenue cycle.

AR days

Accounts Receivable days refer to the amount of time it takes for your practice to be reimbursed by a payer or paid by a patient. The more AR days, higher the risk of your practice suffering from a decreased cash flow. This can be hurtful to your practice, as lack of revenue can limit how well your practice can run.

The general rule is to keep the AR days below 45 days meaning that a claim should be paid within 45 days of submission and a patient should pay the due bill within 45 days of receiving the first bill. Generally, the threshold should be 33 days, anything over which should raise concern and require aggressive follow up.

To calculate AR days for your practice, you need to first determine the time frame against which you are measuring, for example, 3 months or 6 months. Once the time frame is determined, add all the charges submitted in this time frame and then subtract all the charges that have been paid. The final number can be simply divided by the number of days in the time frame you had determined earlier, and the answer is equal to the days in AR for your practice.

Clean Claims Ratio

The clean claims ratio, also known as the first-pass ratio is the percentage of claims that are paid directly, without any rejections or denials. These claims get paid in the first pass, as a clean claim, meaning that these claims are getting paid faster than all other claims. This ratio is the indicator of the success of your revenue cycle management strategy, and if the percentage is less than 80 percent, you should be worried. Anything below 80 percent means there are frequent denials or rejections of claims at your practice. This means that your practice isn’t receiving reimbursements as frequently as it should.

To ensure timely reimbursements and a profit boost at your practice, you need to increase the clean claims ratio to at least above 90 percent. On average, practices have a clean claims ratio between 70 percent and 85 percent. 

Denial rate

While you are checking the clean claims ratio and trying your best to keep it well above 90 percent, you should also be tracking the denial rate of your practice. A high clean claims ratio and a low denial rate are some of the best indicators of the success of your revenue cycle management strategy.

Denial rate, as the name implies, is the number of claims that were billed that resulted in a denial. To calculate the denial rate at your practice, you should divide the number of denials by the number of claims filed, during a specific time. The lower the answer, the better it is for your profit rates and cash flow.

Bad debt rate

High bad debt rate is a key indicator of the worst prognosis for the revenue cycle of your practice. A bad debt rate refers to the claims and bills that have to be written off because they have been deemed unrecoverable and will not result in a payment. Although denials are often confused with bad debt rates, it is crucial to differentiate between the two. While denials can be rectified and made to result in reimbursements, a bad debt rate is much more serious and detrimental to the success of your practice. You can calculate this rate by dividing the written-off charges by allowed charges.

Net collections ratio

Net Collections Ratio is an easy-to-calculate performance indicator of your practice. To calculate the Net Collections Ratio, you need to divide the reimbursements by the total allowed charges. This ratio allows you to visualize how well the collections agency is working and how well the collections system, prior to the involvement of an agency, is running. It also tells you, in a very realistic manner, how all other key performance indicators are affecting your revenue and profits.

Gross collection rate

This indicator simplifies the overall reimbursements rate by dividing the overall reimbursements received by the total number of claims submitted. It is not as detailed or realistic in its expectation of revenue, but it does provide insights into the bigger picture. It is not as important of a performance indicator as others mentioned above, but it is still important in a quick determination of how well the revenue cycle is being managed, at your practice, as a whole. 

Practolytics believes in setting up expectations with its clients in terms of maintaining the key performance indicators at the required thresholds, ensuring client satisfaction and proper claims processing. Talk to our experts to understand how these key performance indicators can make an impact on the overall financial health of your practice.

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