According to Nielsen, the top New Year’s resolution for 2015 is staying fit and healthy. The close second? Losing weight. As a result, throngs of people are currently monitoring health-related metrics, from resting heart rate to weight and body mass index (BMI). At first, many will face their daily weigh-in or weekly BMI check with dread. Soon, though, they’ll start to see results. The dreaded scale will bring good news and a feeling of accomplishment.
Similarly, managers and staff can improve their practice’s financial health in 2015 by setting goals and tracking key revenue cycle metrics. Monitoring these metrics can provide a starting point for benchmarking, help you pinpoint specific areas to address, and allow you to track your success. Four key performance indicators of particular importance are:
- Days in accounts receivable (A/R) measures how long it typically takes for a service to be paid by all responsible parties. It’s likely the single most important revenue cycle metric because it tells us the number of days that our practice is unpaid for money owed.
- Percentage of A/R greater than 120 days represents the amount of receivables older than 120 day, expressed as a percentage of the practice’s total current receivables. A measure of a practice’s ability to obtain timely reimbursement, it’s an excellent aging indicator to observe.
- The adjusted (or net) collection rate measures the percentage of collected reimbursement compared to the allowed amount based on a practice’s contractual obligations. It shows two things: 1) how effectively a practice collects all legitimate reimbursement, and 2) how much revenue is lost to factors such as bad debt and untimely filing.
- The denial rate is the percentage of claims denied by payers. The lower this percent, the better your cash flow – and the less work required by your staff. This metric becomes even more critical as ICD-10 approaches; industry experts project that denial rates will dramatically increase during and after the transition.
To learn more about calculating these metrics and benchmarking your performance against the industry standard, read Improving the Financial Health of Financial-Owned Practices: Four Key Metrics for Success by Jim Denny or download the Key Metrics in Revenue Cycle Management resource guide. May 2015 be your practice’s financially healthiest year yet!