Top 10 Revenue Cycle Management KPIs to Track

Healthcare practices must embrace Revenue Cycle Management (RCM) to receive payment for the services offered on time and at the right amount to remain financially viable. To enhance RCM, healthcare providers and medical billing companies must monitor and analyze key performance indicators (KPIs) that offer a deep understanding of cash collection, operations, and the possible revenue lost in due course of business. The blog outlines the 10 most used revenue cycle management KPIs. How can they be improved, and what are the healthy implications of each measure provision?

What is Revenue Cycle Management?

RCM, more popularly known as Revenue Cycle Management, involves carrying out a set of administrative and financial functions to encompass the entire patient service revenue cycle. This involves managing appointment and patient registration, coding, billing, and collecting revenue after providing services. The primary goal of an RCM system is to achieve prompt payment for the delivered healthcare services with the least possible billing mistakes, payment rejections, and income loss. Throughout this process, KPIs remain indispensable in assessing the outcomes and formulating corrective actions.

Top 10 Revenue Cycle Management KPIs Every Healthcare Provider Should Track

Tracking these RCM KPIs provides insights into performance, helping healthcare providers improve collection rates, reduce costs, and maintain cash flow.

1. Days in Accounts Receivable (A/R)

Companies measure the number of Days Sales Outstanding (DSO) to determine how long, on average, it takes for them to collect cash from clients after providing services. This crucial key performance indicator assesses how quickly revenue is converted to cash flow, impacting operational viability. For instance, high days in A/R can indicate inefficiencies in billing, collection, or follow-up processes, which can cause cash flow problems and deterioration of service. Several industries prefer to maintain “Days in A/R” between 30 and 40 days. However, the shorter, the better for financial stability. To mitigate the problem, reduce the delays in submitting claims, educate the employees on the collection process, and implement automated procedures in case of collection delays. Utilizing systems to work on the aged debtors first will assist in improving collection concentration and control over working capital.

2. Net Collection Rate

The Net Collection Rate measures the effectiveness of the collection efforts by expressing the amount received as a percentage of collectible revenue within the payers’ approved amounts. The billing and collections system evaluates its ability to account for every owed dollar to the provider, except for those that are known to be uncollectible.

A Net Collection Rate of less than 95% is often a warning sign for potential loss of revenue in the cause of underpayments or denials, both of which are elements that can increase over time and affect cash flow. Ensuring a high net collection rate manages the revenue cycle well, resulting in minimal revenue losses and proper collections. To make it better, work on making sure that the information available is correct, ensure compliance on the denied claims, and check the payers’ contracts frequently to make sure that the payment rates are just and prompt.

3. First-Pass Resolution Rate (FPRR)

First-Pass Resolution Rate (FPRR) refers to the proportion of claims that insurers pay on the first submission without any follow-up. This metric is a modern axiom of the billing process. Which measures how well the provider can send clean claims without any cleanup needed further down the process. When there is a high FPRR (above 90%), claims were, if anything, submitted accurately, reducing the amount of rework and administrative overhead and, more importantly, avoiding unnecessary delays in payments. Outlier Low FPRR might indicate problems such as poor coding PO, data verification, or misuse of payer’s guidelines, all of which take time and money. Optimizing coding processes, double-checking patient records, and educating them on accurate documenting practices can resolve this. Implementing a claim-scrubbing software that screens patients’ records even before submission will raise the first-pass rate. Therefore shortening the time to receive payment.

4. Claim Denial Rate

The Claim Denial Rate is the share of claims that payers turn down. More often than not, such practices are due to wrongful coding and issues with eligibility requiring support. Considering the lack of information altogether. This performance indicator measures how well the billing and documentation team completed their work and how much potential revenue they may have lost. Individuals’ denial rates strain cash flows and increase costs associated with administration. This may result in write-offs if they are not properly controlled. Rejected claims need more time and effort for follow-ups and repercussions. This will elevate the collected costs and potentially hinder other claims from progressing within the system. Study the patterns of denials to pinpoint the issues that frequently arise. This calls for better coverage at the eligibility stage and improving coding practices to maintain the denial ratio. That is less than 5% to enhance revenue without compromising it.

5. Cost to Collect

The overall cost of collecting the revenues is divided by the total revenues collected to determine the Cost to Collect. This statistic is important to profitability as collection costs straining the margins tend to limit the available funds for re-investment. The desired figure is less than 3-4% of revenue to ensure profit margins. Especially for those practices that generate high operating expenses for collection services. The overall cost of collecting the revenues is divided by the total revenues collected to determine the Cost to Collect. Use metrics to rank which series of collections will have the most significant impact. Medical billing services should outsource expensive tasks, allowing staff to concentrate on more critical activities.

6. Bad Debt Rate

The Bad Debt Rate defines the ratio of patients’ unpaid balances and overdue accounts that were classified as uncollectible. It is due to many failed collection attempts, mostly due to unpaid patient accounts. A high ratio of bad debts causes regenerative issues such as upfront collections and patient engagement. Payment counseling or even finance risk management. Keeping this KPI below 2-3% is important to avert losses and protect profitability from expensing unnecessary write-offs. In this case, it is necessary to introduce the assessment. It provides payment expectations, plans, and simple ways to pay off debts. Proactive cash management practices. For example, collecting fees upon registration can also help lower bad debts.

7. Charge Capture Rate

The Charge Capture Rate refers to billing out the number of services provided, avoiding losses from uncharged billable services. Effective charge capture helps maximize revenue by capturing services that would have otherwise been unbilled. An ideal rate would be over 98%. The persistence of over 90% in the collection does not guarantee that the organization can go without revenue losses. Unique electronic health records (EHR) systems support charge capture and perform frequent verifications to find unbilled services. To minimize loss of revenue, regular staff training on the documentation shows how programming services are billed. It is to ensure all billable services are recorded as such.

8. Clean Claim Rate

Clean Claim Rate denotes the ratio of claims presented with no mishaps, aiming to decrease the chances of rejections. Thus, a substantial clean claim rate is important as it enhances the speed of the revenue cycle. It curtails the chances of any hold-up and lessens the administrative burden of doing reproach. Distinctive payments enhance cash flow management and utilization of available resources. These payments are promptly made on the first attempt instead of correcting submitted claims.

Periodically review patients’ claims to analyze the factors causing a low clean claim rate. This considers implementing claim-scrubbing technology aimed at checking basic errors. Due to the dynamic nature of code changes. This incorporates interdisciplinary communication and regular education on complete and accurate documentation. In addition, periodic reviews to resolve persistent problems will enhance the accuracy of claim submissions. Thereby reducing the likelihood of denial and speeding up payment.

9. Average Reimbursement Rate per Encounter

The Average Reimbursement Rate per Encounter indicates the revenue the healthcare provider earns for these considered issues. Once all corrections have been made. It presents perspectives on the revenue generated by patient visits throughout the different payers and services. This KPI provides providers insight into which payer contracts are profitable and possible billing or coding errors that could affect revenue. Attention to supervisory reimbursements also allows them to find dynamic revenue collection patterns. Normalize the financial results for various services and conveniently resolve issues of delays in payments. To enhance it, providers should periodically assess and adjust existing contracts with payers to achieve more optimal reimbursement rates. It improves the quality of documentation and coding of the patient’s bills. Streamlines the collection of outstanding patients’ balances to increase the revenue yield per visit.

10. Patient Payment Rate

The Patient Payment Rate measures the percentage of revenue collected from patients. This is becoming progressively important because of the competitiveness brought about by high deductible health insurance. An 80-90% patient payment performance ensures positive cash flow regardless of the trend of transferring cost burdens to patients. Excess patient balances may strain cash flow; thus, timely collection of patient payments is critical to achieving financial health. Provide payment solutions such as online payment systems and inform patients about their financial obligations before appointments. Easy payment options in conjunction with payment reminders sent to the patients. Doing so on the collection due date helps healthcare facilities enhance patient collections.

Conclusion

To maximize revenue and reduce revenue leakage, continually track those KPIs that affect the Revenue Cycle’s performance. Tracking these top 10 RCM KPIs helps healthcare providers avoid the pitfalls of their revenue cycle management processes. It allows them to focus on collections promptly, ensure against excessive claim denials, and reinforce the financial underpinning. Adopting technological solutions and outsourcing to expert medical billing companies can further improve the performance of the KPIs. Which empowers healthcare providers to concentrate on providing quality services without worrisome financial underpinnings.