Revenue Cycle

What are the most appropriate AR performance indicators that PFS managers should rely on to monitor their department's AR health? And of those indicators, what is the optimal or target that we should strive to obtain for each performance indicator?

Patient Financial Services Weekly Advisor, March 19, 2004

Issues caused by various functions or constraints in the revenue cycle are more than likely to be discovered in the PFS department if they are discovered at all. That's because all of the tentacles of the revenue cycle converge at the PFS department and feedback about issues usually arrives here first in the form of billing delays, missed edits, denials, and low collection rates.

Because of this expanded view of the revenue cycle, the traditional role of the PFS director is evolving into one that more closely reflects a revenue cycle executive. PFS directors are now being held accountable for any indicators and measures for any area in the revenue cycle that affect the ability to collect.

A brief survey of CFOs and PFS directors confirmed this list of the most common indicators:

INDICATOR TARGET
Net AR Days 45-70 days
Percent of AR Greater Than 90 Days Less than 15-20%
Insurance Verification Denials None (Less Than 1%)
Timely Filing Denials None
Inpatient Only Procedure Denials Billed As Outpatient None
Medical Necessity Denials None (Less Than 1%)
Daily Cash Deposits From $50,000 per day for small stand-alone facilities to greater than $200,000 per day for larger facilities
Bill Hold Days 2.5 to 5 days
Cash as a Percent of Net Patient Revenue 100% (adjusted to include bad debt)
Percent of Collections Net revenue of two months prior
Accuracy of Demographic and Financial Information Greater than 95% for each registration person and each department

*Note: The targets listed above are broad and are inclusive of general acute and specialty hospitals and surgery centers. General acute facilities would more than likely be targeting the lower end of the range, while specialty facilities would be more likely to be found at the higher end of the range. Facility size and location are also considerations in determining what your organization's target should be.

The number of front-end and payer-related performance indicators support the evolution of the role of the traditional PFS director. Indicators, such as insurance verification denials, inpatient-only procedure denials billed as outpatient, accuracy of demographic and financial information, and medical necessity denials, are all front-end processes that the PFS director is now accountable for monitoring - because the director has a definite impact on the collection efforts and cash flow of the organization.

This question was answered by PFS Advisor editorial advisory board member Amy Hartt, MBA, senior manager, revenue cycle services, CampbellWilson, LLP.

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