With a busy staff and full schedule of patients each day, it may appear as if your practice is thriving. But take a closer look at some of its vital signs — net collections, accounts receivable (A/R), write-offs and other revenue trends — and you may realize your practice suffers from conditions that could threaten its longevity.
It’s challenging to transition your practice from a fee-for-service model to value-based care while also striving to stay financially healthy. This is especially true when you’re contending with a strict and ever-changing regulatory environment in which high-deductible health plans and complex payer fee schedules are increasingly the norm.
To ensure your practice is financially strong, it’s important to gain a deeper understanding about how to get paid for specific services, which key performance indicators (KPIs) are most important to track over time and how to make necessary improvements or adjustments.
Symptoms of a problem
In today’s evolving healthcare market, it’s more important than ever to ensure your practice receives every penny it’s owed. As a starting point, track financial performance metrics such as net collections ratio, days in A/R, claims older than 60 days, clean claims ratio and revenue change year-over-year.
While these numbers may look good on the surface, dig deeper to see if your practice is missing additional hidden revenue opportunities. For example, 28 percent of providers don’t know the amount of patient collections they write off each year, according to Greenway’s research. Without greater visibility into details like this, providers likely don’t know what is causing the write-off, or if changes could be made to reduce those losses — while also increasing revenue.
Here are five key metrics that can shed light on your practice’s financial health:
This measures the effectiveness in collecting reimbursement dollars. However, this metric is not relevant unless two months have passed since the reporting period, as this feeds providers with a clearer picture of collections after the claim cycle. Net collections can be impacted by high deductibles that increase patient liability, procedures that are not covered, incorrect posting processes or unworked A/R. Practices must know the difference between gross and net collections and assure that all adjustments were made correctly.
Average collections per visit
This is the amount of money collected per encounter. Average collections per visit is an excellent way to examine year-over-year trends within your practice. Like net collections, average collections are influenced by increased patient liabilities and unworked A/R as well as changes in payer contracts and procedure and payer mixes. Practices should also consider tracking charges per visit to help identify and remediate any coding inconsistencies.
Days in A/R
This represents the average number of days it takes for your practice to be reimbursed. Rejections and/or denials, incorrect coding, credentialing issues and incorrect posting and appeals processes can stretch out the time it takes to be paid. Practices should break out days in A/R by insurance plan and patient so they can get a better sense of where problems exist, such as consistent coding errors, that they can address to speed up payment time. Any A/R that has surpassed 365 days from date of service should be considered for potential write-off.