To achieve revenue growth goals, practices should look at these five key areas and see where they currently stand.
Practices that struggle financially often have trouble figuring out why. According to practice management consultants, this is usually because they aren’t consistently measuring key processes and zeroing in on potential problems.
"It’s amazing how many people tell me that they do a great job of collecting at the front desk, but when I look at the numbers they aren’t very good, " said Reed Tinsley, a Houston-based healthcare accountant and business advisor. "You have to look at the numbers to know where the breakdowns in your process might be. "
David D’Silva, chief operating officer for Park Ridge, Ill.-based Healthcare Information Services, said reports on denials and aging accounts receivable (A/R) are the first things he asks for when consulting a new client. Although the client typically has access to those reports in its practice management system, the staff isn’t consistently running or monitoring them.
Those numbers give you a starting point for improvement, D’Silva said. You have to know where you are now and where you want to be in order to map out a growth strategy. "When we look at a practice, we give them information on where they should be based on industry norms or similar client experiences," he said. "That gives them an idea of what a successful practice looks like."
However, you don’t have to bury yourself in dozens of reports in order to keep on top of your financials, experts said. The following are five key areas to watch:
Front-desk collections: Tracking the percentage of patient copays and deductibles collected at the time of service tells you if your collection practices at the front desk are working. A low number might indicate a need for staff training, for example. "The hardest dollars to collect are those that the patient owes you after insurance is paid," said D’Silva, "So you have to make sure front-desk staff is trained appropriately to ask for money. "
Net collection percentage: This number represents the percentage of reimbursements collected from insurers versus the amount contractually allowed. If your percentage is lower than expected - you should strive for the high 90s - it may indicate problems such as late claim filings or uncollected payments in A/R.
Denial rate: Consultants view this as one of the most important indicators of a practice’s control over the revenue cycle, because failure to monitor denials is a red flag for other problems. If you don’t know your denial rate, then you’re probably not reviewing the most frequent reasons claims are being denied or taking any steps to fix them, said D’Silva. That can lead to repeated denials and a backlog of unpaid claims in A/R.
Days in accounts receivable: To calculate the average number of days it takes to collect payments, divide your total A/R over a specified period by your average daily charges. What percentage of your accounts are collected within 30 days or 45 days versus 60 days, 90 days or more? No more than 15 percent of A/R should be in the 90 days and over bucket, said Tinsley. He recommends reviewing A/R reports monthly.
Year-to-year comparisons: Every month, look at your actual revenue and expenses compared to the previous year, said Tinsley. Examining the reasons for differences in individual categories may provide some insight into why revenues dropped, plateaued, or rose since the year before.