Home Page > Business Intelligence > Key Performance Indicators (KPIs) > Measuring Revenue Cycle Performance: 4 Key Benchmarks to Share, Use and Review

Measuring Revenue Cycle Performance: 4 Key Benchmarks to Share, Use and Review

The concept of performance measurement isn’t new, but it’s gaining more attention as the healthcare field strives to improve both quality and efficiency. Your practice’s revenue cycle is a prime target for performance measurement because it can help you understand your financial strengths and weaknesses, and design effective improvement strategies.

But where do you begin? Over the years, I have found it particularly helpful to share four key metrics with staff members. You and your staff should not only be aware of these essential benchmarks, but regularly review and use them to structure improvement activities:

  1. Days in accounts receivable (A/R). This indicator demonstrates a practice’s ability to quickly turn over A/R. It represents the number of days of A/R outstanding, based on the practice’s average daily charge volume. Reviewing this benchmark regularly can help highlight any internal efficiency issues, as well as potential payer road blocks. When calculating this data point, it’s important to break out days in A/R by payer, otherwise you may miss potential trouble spots—including individual payers that have a higher-than-average days in A/R.
  2. A/R greater than 90 days (A/R>90). Like days in A/R, this benchmark looks at a practice’s ability to get claims paid in a timely manner. It specifically reveals the amount of A/R older than 90 days as a percentage of the total A/R, which is important for catching those claims in danger of missing deadlines for timely claims filing. This metric can highlight problems with aging claims and pinpoint specific payers that warrant improvement strategies.
  3. Net collections percentage. This metric shows how effective your practice is at collecting all legitimate reimbursement. By looking at your allowables versus what you’ve actually collected, you can identify shortcomings in your collections process. For example, this metric can reveal how much revenue is lost due to factors such as uncollectible bad debt; untimely filing; inappropriate adjustments; payment posting errors; or claim underpayments. When calculating this percentage, it’s important to access your fee schedules or reimbursement schemas for each payer. Otherwise, you won’t truly know what should have been paid.
  4. Ratio of billing staff to providers. This percentage looks at how many staff members are needed to effectively bill for your practice. If this benchmark is high, it can mean underlying problems in the revenue cycle, such as too many rejections, denials, or appeals—all time-consuming activities that require an increase in staff. Using automated tools can help reduce this ratio. For example, real-time patient eligibility tools can help proactively decrease denials while online claims editing capability (including CCI and LCD compliance edits) can speed rejection turnaround. With fewer rejections and denials, comes a lessened need for appeals. And maximizing electronic claims submission, ERA, and EFTs allows you to post payments quickly, with minimal manual labor.

In many practices, the ratio of billing staff to providers metric is viewed strictly as an “expense” indicator. However, I believe that it’s also a significant overall gauge of your practice’s financial health; the lower your billing staff-to-provider ratio, the more consistent your revenue cycle tends to be.

Although these are the four metrics I find to be most important to track and share with all staff members, your practice may want to share additional statistics so staff has a more complete overview of the revenue cycle. For more in-depth information on establishing these key metrics, avoiding common problems and measuring success, download the resource guide, Key Metrics in Revenue Cycle Management.