Using Benchmarks to Grow Your Bottom Line

Many medical billing benchmarks offer a broad overview of the revenue cycle health of a practice. Key performance indicators like days in AR, net collection percentage, bad debt percentage, and AR less than and greater than 90 days, especially when compared to regional or national averages, can give administrators and physician leaders a quick snapshot of how well the billing process is going.

But benchmarks often fail to highlight pesky problem areas in an otherwise healthy practice, and they speak very little about how to tackle larger issues when the big picture isn’t so rosy. So beyond just tracking benchmarks, how can practices use key performance indicators or other financial benchmarks to move the needle toward more effective revenue cycle management?

Take Time for Financial Reporting

First, take the time to regularly review any financial reports you receive from your billing department or billing company. According to Nick Fabrizio, PhD, principal consultant at MGMA Health Care Consulting Group, “Without understanding information from financial reports, you might be missing key metrics that can lead to bad business decisions and result in the closing of your practice.”

If you don’t already receive monthly, quarterly, and annual financial reports, ask your billing company or billing department to start with some of the basics. In the Physicians Practice article “7 Financial Reports Your Practice Needs to Run,” Fabrizio and others recommend that every practice begin with these seven reports:

Appointment analysis
Profit and loss statement
Balance sheet
Accounts receivable aging
Provider productivity
Claim denials
Value-based reporting

CIPROMS also recommends tracking days in AR, gross and net collection percentages, bad debt write-off percentage, denial rates, and AR less than and greater than 90 days.

Drill Down by Payer

Another important way to narrow in on revenue cycle problems and potential solutions is to drill down to the payer level as you analyze your practice’s billing metrics. In a recent study by consulting firm Crowe Horvath, researchers found “an alarming disparity of performance across five major national commercial managed care payers in key performance indicators (KPIs) for the revenue cycle such as accounts receivable (AR) and denials.”

By looking at KPIs for individual payer classes or networks, especially denial rates and aging AR, you can begin to identify and address specific issues that will impact your bottom line.

Also, by breaking down your financial data by payer, it’s easy to separate claims sitting at patient responsibility that have a revenue cycle all their own. Having a good picture of how much of your receivable is outstanding with patients may help you make better decisions about how often to mail or email statements, whether to collect payments at point-of-service, when to take bad debt write-offs, and even how quickly to place outstanding bills with a collection agency.

Take an Integrated Approach

Next, don’t look at individual benchmarks in isolation. Instead, integrate multiple KPIs into your analysis.

For instance, who cares if your AR in the greater-than-90-day bucket is low and on target if your bad debt write-off percentage or denial rate is unusually high? You may be missing out on revenue by writing off money too soon or not challenging payers on appeal. Have you ever wondered why your days in AR have gone up? First, look at an aged receivable report broken down by payer and by aging buckets of 30-day intervals. Then look for the outlying bulge in the older buckets. Can’t find any unusually large aging or payer issues? Then perhaps a denial affecting many payers has held up money in appeals and is spread throughout your AR. Look for any spikes in your denial rates, or better yet, drill down into your denials to see which codes in particular have had a recent uptick.

Dig As Far Down As It Takes

Then, don’t be afraid to dig all the way down to claims-level data to find revenue cycle problems. As you look at benchmarks by payer, and then analyse multiple benchmarks together, you’ll eventually stumble on smaller sets of claims that have at least one—and often several—things in common. Has a single payer denied multiple claims with the same procedure codes because of a policy change? Have your self-pay or Marketplace encounters increased recently because a large employer left your community? Did a Medicare fee schedule update not get applied to your practice management system and cause an increase in contractual write-offs? The answers to these questions usually lie somewhere beneath the high-level dashboards or even an initial drill-down by payer.

Use the Data to Negotiate Contracts

Finally, use benchmarks and KPIs to help with payer contract negotiations. If you’re tracking data by payer anyway, why not use the information to arm yourself when you next negotiate fee schedules with payers. For instance, know how the payer in question compares with other payers on denial rates, speed of claims adjudication, and gross payment rates. Also, don’t forget to look at the “no-pay rate” by payer. By tracking your percentage of patient encounters for which you receive no payment (from the payer or the patient), you can better understand the true cost of entering into or continuing a contract with that payer. (And don’t forget to regularly compare actual reimbursement with your contracted rates, so you don’t waste the time spent on negotiations in the first place.)

For more information about how CIPROMS helps clients use benchmarks to grow their bottom line, visit our business analytics page. Also, learn more about the Medical Group Management Association’s DataDive Cost and Revenue Data platform that allows users to see how their “organization’s financial and staffing metrics compare to others in the industry.”