Diagnose key metrics that can help you track financial issues in your medical practice- and improve profits - before it’s too late.
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.
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.
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.
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.
These are wholly preventable and can be remedied with a change in process, policy or behavior. Problems that lead to these unexpected denials include inconsistent benefits and eligibility verification, lack of review of medical policy changes, incorrect coding processes and inconsistent maintenance of system tables. It’s possible to recoup some of this money, but resubmitting denied claims comes at a cost - and that takes away from the bottom line. The Medical Group Management Association (MGMA) estimates that it costs a practice an average of $25 for each denial that must be reworked and resubmitted. Overall, industry standards indicate unexpected denials should comprise less than 5 percent of total denials.
This is the number of days between date of service and claim submission. The posting lag can vary because of provider coding processes or whether the patient is there for an office visit or a procedure. Practices should strive to reduce the lag to less than five days for office-based services and 12 days for combined hospital and office-based services.
Once you recognize the symptoms that could negatively impact your practice, it’s time to take action to improve your practice’s financial health. Consider areas where your practice can optimize systems and operations.
Improve training and apply best practices to eliminate recurring billing, coding or submission issues. Similarly, examine denial trends and discover ways to address the most common problems.
For example, to improve net collections, adopt best practices aimed at streamlining the charge entry process, which includes: 1) eligibility and referral management functionality; 2) tips and tricks for patient payment posting; and 3) how to upload documents into the EHR. By optimizing billing tables and updating fee schedules, you can ensure payments to your practice are accurate. It also helps to have staff work on denials every day to avoid timely filing delays and untimely appeals.
If days in A/R is a concern, practices can examine denial codes to see if there are common reasons why claims are being rejected. That way, staff can take appropriate actions to mitigate these issues in the future. Training front desk staff on eligibility requirements and having them run patient eligibility prior to the date of service will cut down on denials later in the process.
Another valuable tool is a monthly reporting package, which practice managers and owners can review to see where the practice stands in terms of current days in A/R, aging percentage, clean claims rate, service analysis and other KPIs. These reports can help identify opportunities for improvement across departments.
To address potential missed revenue opportunities, avoid general adjustments, write-offs or under-coding office visits. For example, one practice noticed that a new specialist’s top billed procedure was being written off as a non-covered service. Upon reviewing this with providers, the practice was able to establish a new diagnosis code that better supported the procedure and ensured claims were paid.
Performance metrics are vital, but they are only the first step on the journey to healthy financial performance. Once you interpret and understand these KPIs, you can dig deeper and discover which workflows and processes may impact your practice’s performance. Then you can identify where to plug revenue leaks. All of these steps will ensure a better bottom line and ultimately smooth sailing.
Marvin Luz is a senior director of revenue services for Greenway Health, a leading health information technology and services provider. Marvin oversees the daily billing operations of revenue services for customers, ensures compliance with divisional established policies and protocols, adheres to government and insurance payer policies and assures customer conflict are resolved. In addition to his daily responsibilities, he also leads the patient call center and patient accounts receivable teams at Greenway. Martin has more than 13 years of experience in the ambulatory EHR and practice management market.