Healthcare Revenue Cycle Management is crucial in analyzing the financial health status of an enterprise or business venture. It was found that broader use of such quantitative measures as KPIs or Key Performance Indicators might improve their specific revenue cycle character, curtail losses, and augment general efficiency.
The Top 8 KPIs
A list of the top KPIs for Healthcare RCM is presented below. It contains the formulas, benchmarks, and a cheat sheet for quick reference.
1. Days in Accounts Receivable (AR)
Accounts Receivable days or Days in AR quantifies the number of days it takes to receive payments.
- Formula: Days in AR = (Accounts receivable/Annual revenue) x Number of days in the year
- Benchmark: 30-40 days
2. Clean Claim Rate
The more a health facility records a high clean claim rate, the fewer claims will be rejected or denied. This will result in quick repayments. The expected filling rate today should be 95 % and above.
- Formula: Clean Claim Rate=(Number of claims accepted by insurance without changes / Total number of claims)×100
- Benchmark: 98% or higher
3. Denial Rate
It is basically the number of denied claims. Holding this rate under 5% highlights the efficiency of the claims process flow.
- Formula: Denial Rate=( Number of Denied Claims/Total Claims Submitted)×100
- Benchmark: 5% or lower
4. Net Collection Rate
Net collection rate indicates the amount of earned revenues that was actually collected. A rate of 95% and above can, therefore, suggest that you are doing well with your technique of finding and recovering revenues.
- Formula: Net Collection Rate={Payments/(Adjustments + Charges)}×100
- Benchmark: 95% or higher
5. First Pass Resolution Rate (FPRR)
It shows the number of claims that have been submitted and resolved at the first submission. It is ideal to operate at least 85% or more; ideally, some levels above that.
- Formula: FPRR=( Claims Paid on First Submission/ Total Claims)×100
- Benchmark: 85% or higher
6. Cost to Collect
This KPI deals with the cost of recovering the payments made for products or services. Maintaining this cost between 2 and 3 % makes the collection efforts efficient.
- Formula: Cost to Collect=(Total Cost of Collections/Total Collections)×100
- Benchmark: 2-3%
7. Bad Debt Rate
The bad debt rate gives the percentage of sales that cannot be collected. It further ensures that the rate is maintained between 2% and 5%. This can help reduce financial loss.
- Formula: Bad Debt Rate=(Bad Debt Write-Offs/Total Charges)×100
- Benchmark: 2-5%
8. Claim Processing Time
This one shows an organization’s efficiency level, revealing the average time it takes to process a claim. Processing as short as 10-15 days guarantees timely submission and reimbursement.
- Formula: Claim Processing Time=Sum of Processing Times for All Claims/Total Number of Claims
- Benchmark: 10-15 days
Cheat Sheet Summary
Below is a brief cheat sheet summary of the Healthcare Revenue Cycle Management KPIs.
- Days in AR: Optimum 30-40 days
- Clean Claim Rate: One should try to get a percentage of 95 or higher.
- Denial Rate: It is recommended that it should be below 5%.
- Net Collection Rate: Make it your goal to get as close to 95% or above.
- First Pass Resolution Rate: Try to get at least 85 or more on the four tests.
- Cost to Collect: The money amount should be between 2% and 3%
- Bad Debt Rate: The fluctuation should be between 2% to 5%.
- Claim Processing Time: Specific goal of the treatment: 10-15 days
Conclusion
Simply put, successful healthcare revenue cycle management is dependent on the ability to monitor specific Key Performance Indicators. It also assists healthcare organizations in keeping the revenue cycle in check and reducing the number of denials. That is why it also helps to augment the income generation stream.
If you are seeking comprehensive Healthcare Revenue Cycle Management services, then OutsourceRCM is the place for you. This is a prolific organization with exceptional understanding and know-how in reshaping the healthcare sector. Their services are accompanied by professional specialists who can always ensure the optimal result.
