Since we have been on the topic of financial concerns and ways to relieve those concerns it is only right for me to give some more ways that can contribute to the relief of those nagging financial concerns. Profitability is a major component in the business world if it wasn't then there would be no stores, manufactures or you. Most people enjoy being able to make money and not lose it, so why should you settle when you can be earning more. You can be earning more money from various factors.
With the rapid growth of the healthcare technology corridor, we have seen many changes and there will many more to come. With those changes there is a possibility if you don't change your current practices you will likely lose money instead of earn money. Now I don't know if that is a financial concern of yours but it should be. I will discuss 5 tracking metrics that will allow you to make more profits and build your practice the way it should be.
Metric 1. The First Pass Resolution Rate:
What is the first pass resolution rate may be the question you are asking well, the first pass resolution rate is the share of a practice's claims that get paid by insures on the first submission. This is easily calculated by taking the total number of claim charges paid divided by the total number of charges submitted. With this report you should be looking to have a rate of 90% or above. The first pass resolution rate is important because as it is a direct reflection of your revenue cycle and the processes you employ to continue to have a steady cash flow in your practice from verifying insurance eligibility, adding authorizations and inputting accurate patient demographics to tasks like coding and billing. Ensuring these processes are right the first time is critical to maximizing both efficiency and profitability
Metric 2. Days in Accounts Receivable:
Days in Accounts Receivable is a representation of the average number of days that it takes a practice to be paid. In essence, the lower the number the faster the practice is getting paid. There are a few ways that this can be calculated but here I will give you the industry standard of the calculation, take the total current receivables also known as credits divided by the average daily gross charge amount. Your benchmark goal for Days in Accounts Receivable should stay below 50 days, but should be in the general range of 30-40 days. Your accounts receivables are very important because it provides you an insight into the efficiency of your revenue cycle management processes. By keeping a close eye on this metric you can easily find the factors that are directly effecting your finances.
Metric 3. Percentage of Accounts Receivable >120 Days:
Accounts Receivable are generally categorized into groups called aging buckets based on 30 day increments. The break down normally looks like this 30, 60, 90 and 120 days. so here again you can see from the previous metrics that the lower the age the better. To calculate the percentage of accounts receivable >120 days you would take the Dollar value of A/R >120 days divided by the Dollar value of total A/R. This will allow you to have a reasonable benchmark goal of less than 25% of your total A/R should be in the >120 days bucket. This metric is important because it will give you clear indicators of how your practice is effectively securing reimbursements and in a timely fashion. It will also give you the red flags that will show you that the percentages are rising and now you will know that you have serious issues in your revenue cycle, and that they can be addressed promptly.
Metric 4. Net Collection Rate:
The Net Collection Rate is the percentage of the total potential reimbursement that is collected out of the total allowed amount. The net Collection Rate is also commonly referred to as the adjusted collection rate. You can easily calculate this rate by following this formula (Payments-Credits)/ (Changes- Contractual Adjustments). This metric allows you to assess the effectiveness of your practice. It will tell you objectively the share of the revenue your practice is due and what is essentially been left on the table. The opportunity of lost will be reflected by factors such as untimely filing and noncollectable debt. Ensure that your Net Collection Rate is not weak because if it is in cause for people to be replaced and invest in new tools.
Metric 5. Average Reimbursement Per Encounter:
The Average reimbursement per encounter metric is the average amount a practice collects per encounter. Simple right. So this is also a very easy metric to calculate. Take the total reimbursement divided by the # of encounters in a given time period. There is really no way to beanchmark this metric and realisically set a goal as many factors effect each encounter as patients are different in their needs and what happens when they see the provider. But if you are able to gather lillte pieces of the data i.e with a snapshot of a given time period you are able to see the amount that has been collected per encounter. This is a very important metric to track inside of the practice as it will show you how you are performing and can be compared to historical data to show if your pratice is excelling in its revenue cycle or on the downward slope of decline. If your practice is on a decline in its revenue than it may be time for the provider to look at diversifying the patient or payer mix.
These 5 metrics are critical performance indicators, and help to make practices see where they are losing out and where they can change to make sure that their revenue cycle does not become in jeopardy. These metrics are very insightful on their own but are at their most value when analyzed in context, over time and against relevant benchmark goals. It should become a second nature or a habit to set internal benchmark goals for you practice and let your staff know what you are looking at so they can too become more conscious of the overall state of the practice. While setting internal benchmark goals you should also set external benchmark goals to compare against the industry standards. If your practice doesn’t have clearly defined key performance indicators, it will be difficult to gauge results and raise your practice’s profitability in the long-term.
For more information as to how you can plug the holes in your cash flow pipeline Contact us today and let the Evolving, Efficient, Experts in Healthcare get you to your bottom-line by giving you the tools to track the aforementioned metrics and bring your revenue cycle to its full potential.
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Website: Triple E Medical Solutions LLC
