Revenue Cycle

Tip: Choosing revenue cycle performance metrics

Patient Financial Services Weekly Advisor, August 20, 2004

Performance metrics are developed to measure the results of organizational policies, practices, and procedures, pointing to successes and areas needing improvement. Steven Berger, FHFMA, CPA, president of Healthcare Insights, LLC, discussed key metrics during HFMA's annual National Institute in June in Nashville.

Determining what metrics to track can be overwhelming. Berger provided a comprehensive list:

1. Registration

  • Number and dollars of inpatient and outpatient accounts on prebill edits
  • Items above as a percentage of total bills
  • Denied days of service
  • Denials trended by numbers and dollars
  • Patient satisfaction
  • Registration error rates

    2. Contract management

  • Identified underpayments
  • Collection of identified nonpayments or underpayments

    3. Billing, follow-up, and collections

  • Gross and net days outstanding
  • Percentage of clean claims submitted
  • Percentage of electronic claims submitted
  • Daily cash collections
  • Collections as a percentage of net revenues
  • Bad-debt write-offs
  • Bad-debt write-offs as a percentage of gross revenues
  • Bad-debt recoveries
  • Charity care write-offs as a percentage of gross revenues
  • Gross credit balance days outstanding
  • Percentage of claims denied
  • Cost-to-collect ratio

    Once you choose your metrics, it's crucial to set goals, Berger says. The metrics should be set by studying peer group benchmarks and trended values of your organization v. the peer group.

    Here's an example from Berger:

    Cost-to-collect ratio

    Examples Costs Total cash collections Cost to collect Budget Benchmark
    July 2003 $300,000 $10 million 3.0% 2.75% 2.0-3.0%
    August 2003 $300,000 $9 million 3.3% 2.75% 2.0-3.0%
    Sept. 2003 $300,000 $10.5 million 2.9% 2.75% 2.0-3.0%
    October 2003 $300,000 $10 million 3.0% 2.75% 2.0-3.0%

    Note: Costs are generally defined as all direct expenses for the patient billing, follow-up, and cash posting. They also include collection agency fees. They do not include the cost of patient access, medical records assembly, or coding.

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