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5 Key Metrics to Assess Financial Health of Medical Practice

November 26, 2021

As healthcare professionals, we are getting good at collecting reams of relevant data, but how can all of that information be leveraged with the right benchmarks, metrics, and best practices to improve your Revenue Cycle Management (RCM)? This blog discusses several proven ways to keep your AR department on track with fewer denials, data, managing aged accounts, reducing uncollectable bad debt, as well as the role of patient advocates when working with lower-income self-pay patients.

Decisions Based on Data Analytics

More medical practices have asked their employees, including billing and accounting personnel, to work from home with mixed results, which in turn has contributed to the delay of thousands of dollars of receivables daily. While struggling with AR is nothing new for practitioners, and other organizations, the COVID-19 pandemic has highlighted the weaknesses in the system.

At the same time, providers have access to more advanced data than ever in making medical and administrative decisions. Without contextual references, including benchmarks and best practices, the best-collected data is meaningless. Knowing what benchmarks to use can enable you to more accurately determine your organization’s financial health. Doing so will enable your organization to:

  • Plan for contingencies and potential disruptions, such as experienced by the pandemic
  • Harness available data to make better-informed medical and administrative decisions
  • Give priority to areas offering maximized collections and minimizing revenue losses

5 Key Metrics to Consider When Assessing the Financial Health of Medical Practice

Putting these proven suggestions to work can help reduce AR pileups while speeding up slow revenues and boosting your RCM:

1. Days Discharged That Haven’t Been Billed (DNFB): “Discharged Not Final Billed” (DNFB) is one metric that not only indicates revenue cycle performance but helps identify issues within the receivables process. Mismanagement of DNFB can lead to increased time in AR and disrupted cash flow. Most practices try to keep DNFB within the parameters of best practice, so ideally, this would be between 3 – 5 days. If consistently over 5 days, that’s a red flag indicating issues within your system, such as in the coding and billing areas.

2. Net Days in AR: Possibly the most important determinant of an organization’s financial health is the number of net days in AR. The average number of days needed to collect payments due for rendered services needs to be monitored monthly, with 35 – 40 days considered acceptable and indicating an effective collections process. Closely monitor your AR for financial class issues, such as self-pay, MVA, WC, and VA, and this should indicate if and where the problems are.

3. Percentage of Aged AR Out of Total AR: As you may know, the longer a claim languishes in AR, the less likely it that the full amount due will be collectible.

Most healthcare organizations monitor AR in 30-day increments, with 90 days being a best-practice benchmark on collectability. Anything under that number stands a good chance, while over that number will be less likely to be paid in full, if at all. Ideally, if your patient mix tends to more complex claims with a higher denial rate, no more than 25% of 90-day old claims should be in AR. If your patient mix is less complicated, then that number drops to 15%.

Coordinate collection efforts on accounts as they approach that 90day mark, and remember that denials are a major reason for aged AR. If denials were due to technical matters, such as coding issues, you’ll need to address your practice’s coding and billing processes.

4. Bad Debt: This term refers to patient debt considered unrecoverable, and indicates the organization’s ability to collect on accounts and identify payer sources for those unable to pay their bills. To reduce bad debt by financial class, learn to predict and hone in on problem areas by financial class and utilize targeted collection strategies.

With the uninsured and underinsured populations growing, and millions who lost or are losing employer-paid health insurance due to COVID-19, having on-site patient advocates can be invaluable to both patients and providers by helping patients determine if they qualify for Medicaid or other assistance. A recent survey showed that 40% of respondents receiving assistance indicated that they probably wouldn’t have found it on their own without outside help, underscoring the need for more patient advocacy in helping those seeking assistance.

Another 12% reported trying to find help for enrollment but didn’t receive it, highlighting healthcare organizations’ need to recognize unmet financial needs and improve patient engagement when seeking to reduce bad debt.

5. Number of “Touches” for Each Claim: payment depends on your department’s efforts to coordinate claim follow-up and move along in the billing cycle. To test the efficiency of the revenue processes, you’ll need to monitor the number of touches on successfully adjudicated claims to get an average benchmark. Claims untouched for over 30 days should make up less than 5% of your total claims. As a performance indicator, this is critical to collecting payments and reducing aged AR.

Reduce Denials, Payment Delays, and Mounting AR: Partner with a Medical Billing Service

In the post-pandemic world, we’ll need to do medicine and business differently. We have the technology, and the will, to become more efficient and nimble in adapting to new RCM policies and practices. Having a partnership with a reputable medical billing and practice management company, such as M-Scribe Technologies, will help your AR department reduce the coding and billing workload while ensuring that claims sent will be clean and accurate.

Revenues stand a better chance of being collected in a timely manner when you trust your RCM to a leader in the medical practice management industry. M-Scribe has helped thousands of practices and organizations of all sizes and specialties take control over their coding, billing, collections, and related practice management requirements.

Contact one of our expert consultants at 770-666-0470 or email for more information on how to reduce wasted personnel time and dollars while increasing your RCM to its optimum levels.

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