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How healthy is the revenue cycle of your healthcare practice?
No matter your answer, there is always space for improvement and optimizing inefficiencies. To get complete control over the money entering and exiting your healthcare facility, you must monitor a revenue cycle KPI dashboard and the metrics it includes.
But which revenue cycle KPIs are worth tracking? This article discusses 12 key ones for achieving a satisfactory financial position.
Let’s dive in.
Revenue cycle key performance indicators are quantifiable measures determining how financially viable a healthcare facility’s revenue cycle is. In other words, how well are they at managing all revenue inflows and cash outflows.
Measuring them over time gives valuable insights into operational efficiencies, revenue generation, and any repetitive losses incurred.
Related: What Is KPI Reporting? KPI Report Examples, Tips, and Best Practices
Operational metrics, customer satisfaction metrics, and now revenue cycle metrics – should you take on the extra load of work?
Monitoring revenue cycle management key performance indicators is not an option, but rather a necessity, as it can:
These are a few of the many benefits that monitoring healthcare revenue cycle KPIs brings over time. Let’s check out a few important metrics you should include in your revenue cycle KPI dashboard.
The key performance indicators for the healthcare revenue cycle can be as broad and narrow as you’d like them to be. However, to get a holistic overview of your revenue cycle, you must track a mix of them.
If you’re just starting out, the following list will put you on the right track. Let’s look into each of them in detail:
Related: 18 Key Performance Indicators to Include in a Healthcare KPI Dashboard
This metric measures the average number of days it takes healthcare facilities to receive payments from patients and insurance companies. Naturally, you’d want this figure to be shorter since that means your cash flow is healthy.
If you have to wait a considerably longer time to receive payments (50 days or more), it can contribute to problems in cashflows and meeting future expenses. To reduce account receivable days, implement stricter payment plans. You may also want to incentivize earlier payments by offering discounts.
To calculate days in accounts receivable, use the below formula:
Days in accounts receivable = (Total accounts receivable / Average daily revenue)
A similar metric you can track is the aged accounts receivable rate, which measures the aging of unpaid claims.
What differentiates it from the days in accounts receivable rate is that it considers different timeframes of unpaid claims, usually 0-30 days, 31-60 days, 61-90 days, and over 90 days.
A quick look at this metric helps to spot how long claims remain unpaid before they are finally paid. If unpaid claims take over 90 days to resolve, this means you seriously need to tweak your strategy and ensure you are paid in the first cohort, i.e., 0-30 days.
Refer to the below formula to find your healthcare practice’s aged accounts receivable rate.
Aged accounts receivable rate = (Outstanding claims in a timeframe / Total outstanding claims) * 100%
As the name suggests, this revenue cycle KPI tracks how many claims are “clean.” In other words, they’ve never been rejected, have no missing information, and do not include any errors.
A higher clean claim ratio means your billing and administrative efforts are working. Conversely, a lower number means your practices are inefficient and can contribute to failed reimbursements if strategic changes are not paid.
To improve the clean claims ratio, follow the below best practices;
Calculate the clean claim ratio through the below formula:
Clean claims rate = (Number of clean claims / Total number of claims) * 100%
One crucial KPI in our list of revenue cycle key performance indicators is the claim denial rate. It measures the number of claims that were denied by either the insurance company or patients. Claims denied are lost payments, provided the appeals were rejected (more on this later).
As one can imagine, a high denial rate causes an unhealthy revenue cycle. It may affect how the healthcare facility is operated, if expenses are met, and if patients are left satisfied.
Why may claims be denied? This can be because of coding errors, missing information, or issues with insurance coverage. Whatever the reason may be, you must continuously track this metric to identify and tackle any increases.
Track the claim denial rate through the below formula:
Claim denial rate = (Number of denied claims / Total number of claims) * 100%
Any claims denied can be appealed in hopes of overturning the decision. This is exactly what the claim appeal rate monitors.
A denied claim is not favorable, but you can still ensure payment for your services by appealing to the insurance company or payer. Whether you appeal every denied claim or only high-value ones depends entirely on you.
While it makes sense to appeal each claim denied in hopes of being reimbursed, appealing claims can take much of your workflow’s time and cost you extra money in the process.
If you want to find out the claim appeal rate of your healthcare practice, use the following formula:
Claim appeal rate = (Number of claims appealed / Total number of denied claims) * 100%
Next on our list of healthcare revenue cycle KPIs is the bad debt rate. The latter measures the percentage of accounts receivable that are left unpaid. In other words, these are uncollectable claims, and healthcare facilities have no option but to write them off in their books.
Since bad debts are lost money, you wouldn’t want more of them in your practice. A high rate means that the hospital/clinic administration needs to put in more effort to secure payments or create stricter collection processes.
Some bad debts are inevitable. However, when they are realized, efforts should be made to properly analyze why they occurred and create SOPs to avoid similar instances in the future.
Find out your healthcare facility’s bad debt rate using the formula below:
Bad debt rate = (Total write-offs / Total accounts receivable) * 100%
One metric that has a great impact on the financial performance of any healthcare facility is the gross collection rate. It measures the total money received against the charges billed. In other words, this KPI monitors how effective a hospital/clinic is at securing payments.
One thing to note is that since this is a gross figure, it doesn’t account for any bad debts/write-offs, discounts, taxes, etc.
This is a rather generic metric compared to the other revenue cycle KPIs we’ve discussed. It’s better to calculate this metric in conjunction with others for a better analysis of a facility’s financial performance.
Use the below formula to calculate the gross collection rate:
Gross collection rate = (Total payments received / Total charges) * 100%
One critical revenue cycle metric that every healthcare practice must track is the net collection rate. It measures how much money is collected from the total allowed amount.
In simpler words, how much money a hospital/clinic receives from what is owed by insurance companies/payers. The net collection rate also accounts for any bad debts or discounts. Hence, showing you the true position of your revenue cycle.
The gross collection rate will always be more than the net collection rate. If there is an abnormal difference between the two, then you must analyze where the hospital is losing money.
For instance, if one is experiencing a low net collection rate because of high bad debts, strategies should be adopted to lower write-offs.
You can calculate the net collection rate through the below formula:
Net collection rate = (Total payments received / Total allowed amount) * 100%
Collecting money up-front from patients is a great way to improve the financial health of your healthcare practice. You’re essentially saving yourself from bad debts as well as the cost of collecting claims from insurance companies.
If you cater to the Point of Service Collection (POS) transactions, then you need to monitor the POS collection rate.
Not all medical treatments, especially expensive ones, can be paid upfront. However, wherever possible, hospitals/clinics should encourage patients to pay for the services before receiving them.
The hospital staff should be trained to provide all payment plans to patients and, possibly, incentivize paying up front. You must also invest in robust software that lets you verify a patient’s insurance coverage in real-time and enables you to process the payment smoothly.
Calculate the POS collection rate through the below formula:
POS collection rate = Total POS payments / Total self-pay cash collected
How many days does it take for a service to be billed and charged after it has been provided? This is exactly what the charge lag finds out, i.e., any delays in billing once the medical service has been given.
You may think that charges are documented in the first 24 hours. However, that’s not always the case. Interestingly, charges are captured within 24 hours for only 32% of healthcare providers.
While it is normal for some charges to take a week before they are billed, your aim should be to code them in your system as soon as possible. Delays in documenting charges will only prolong when you get paid for your services.
If you want to calculate the charge lag for your practice, consider using the below formula:
Charge lag = Date of charges billed – Date of service
As the name suggests, this key metric finds how much cost you pay to receive the payment for your services.
Monitoring this metric over time can help identify any inefficiencies costing you money. You can point out recurring expenses and find cheaper solutions to them. What costs can be realized when collecting payments for services provided? These can be staffing, administrative, and technology costs, among others.
How much are you spending to collect your due payments? Find out by using the below formula:
Cost to Collect = Total costs / Total payment collected
The final metric in our list of key performance indicators for healthcare revenue cycle is the revenue per patient visit. As the name implies, it tracks how much you make on average from each patient visit.
Tracking this KPI helps to forecast revenue for the future. Additionally, you can monitor the revenue per patient visit for different months of the year to identify good months as well as slow ones. For the latter, you can take preventive measures to avoid any cash flow problems.
Calculate this important metric using the below formula:
Revenue per patient = Total revenue generated per patient visit / Total number of patients
Tracking revenue cycle management key performance indicators is crucial for ensuring the financial viability of your healthcare practice.
However, to drive the most benefit from them, you must visualize them on a single screen to immediately identify any abnormal patterns. Displaying them on an attractive revenue cycle KPI dashboard is the way forward.
There are many dashboard tools in the market, but most have unattractive dashboard templates, are a hassle to customize, and don’t update in real-time. Databox, on the other hand, stands miles apart.
Edit predesigned dashboards with the power of drag and drop or create one from scratch – whatever floats your boat. You can track hundreds of metrics and monitor them in real time. And that’s not even the best part yet.
If you’re a busy hospital manager or a beginner just starting out with revenue cycle tracking, the team at Databox will create a free, personalized revenue cycle dashboard for your healthcare business. Just state what you want to track, and we’ll create a powerful dashboard within 24 hours.
Interested in what you’re reading? Sign up for our free dashboard setup service now.
Saffa is a freelance content writer for SaaS and B2B businesses. Besides writing, she enjoys indulging in the occasional Netflix binge, hanging out with friends, and cooking up a storm in the kitchen.