Top 10 Medical Billing KPIs Your Practice Should Be Tracking and Why
If you don’t know what’s happening inside your practice in the back office in terms of billing and accounts receivable, how can you expect to determine the status of your organization? Are you meeting your financial goals or falling short? And depending on whether the answer is “yes” or “no,” how will you make a plan to either continue with the improvements or to stop a downward trend in profits?
Your accounting team will be happy to tell you that the more measurements you have about the state of your billing, the better. This is why so many practices will focus on tracking key performance indicators for medical billing.
What follows are the most important billing and collections key performance indicators (KPIs). By looking at each stage of the revenue cycle, you can easily spot where you need help the most.
1. Keep an Eye On Bad Debt Rate, one of the More Important Medical Billing KPIs
Not all of your patients will be able to pay their bills on time, and surely you have taken this into account as you review all revenue coming into your practice. But bad debt rate, expressed as a percentage, is one of the essential medical billing KPIs you will want to be tracking. You calculate this percentage by dividing allowed charges by bad debt write-offs.
2. Gross Collection Rate
Another important KPI, you calculate the gross collection rate by dividing money from payments by the billed charges. It’s a useful measurement to make comparisons of your organization’s cash flow. By studying the fluctuations, you can get a better idea of what future collections will be like. Changes in patient population, fees, and insurance providers will always affect the gross collection rate.
3. Net Collection Rate
To discover how much revenue your practice is collecting out of all bills you are eligible to be paid for, you will work out the net collection rate. It’s determined by dividing payments by all allowed charges. With the net collection rate, you can compare different groups in your company, observing demographic changes affecting the percentages your teams collect.
4. Average (and Median) Price Per Accession
What exactly are the average charges for each accession or test you conduct? Knowing this information will help you predict future costs, which is instrumental in forecasting commissions, profits, and costs of running your practice. You may track this figure according to test classifications per each accession.
5. Resolve Rate
Learning how effective your practice’s resolve rate is will show you how disciplined your staff is in managing the flow of revenue. You calculate this by dividing the number of claims in a given period by the total claims paid in that same span. Larger percentages indicate a better rate. If you come up with a lower rate than you prefer, it might be time to consult with professionals to see if there are issues with how your staff verifies patient eligibility or if you are making errors in coding.
6. Denial Rate
A high denial rate can be a disaster for your practice. Dividing the number of claims denied by the number of claims remitted will give you this rate, which tends to range from about 5 to 10 percent in the healthcare industry in the U.S. For many organizations, manual collections are the bottleneck, with a solution being to automate your collections processes.
7. How Many Days in Account Receivable?
For many practices, some of the most important medical billing KPIs have to do with how many days the bills have been spending in accounts receivable. After dividing your ending accounts receivable by your average daily charge, you’ll have this KPI to examine and improve.
8. Unbilled Claims Percentage
A wide range of errors can lead to your practice seeing a higher unbilled claims percentage. Get a handle on this key performance indicator by calculating the number of claims divided by unclaimed ones rejected because of faulty or missing information. Details such as incorrect doctor’s orders, failing to include DX codes (or using the wrong ones), and mistakes in patient demographic information can all lead to a higher KPI for unbilled claims.
9. Month-Over-Month Revenue
To get a better idea of where your profits are coming from, you use month-over-month revenue to track funds according to payors, tests, and clients. Perhaps the lab you use is struggling to work efficiently. You may want to compare which are the most profitable clients. This KPI also helps you identify which tests are causing the most problems in getting reimbursed, such as disputes over their medical necessity.
10. Operating Margin
Gaining a better understanding of your medical billing situation is much easier when you make a habit of tracking key performance indicators. Once you begin systematically collecting details on what you’re being paid and when, and who is not paying ,and how these trends develop, you can develop solutions to improve these statistics.
To help you do better with billing and collections, check out our free and informative medical billing services guide.
- Medical practices need to pay close attention to the details when it comes to billing. Ideally, you will track key performance indicators in medical billing.
- Tracking medical billing KPIs will help you stay aware of measurements to improve, such as the bad debt rate.
- Dedicated software to help you monitor information such as accounts receivable and the rate of denials or unbilled claims can mean the difference between profitability or having to lay off staff.
- Compare fluctuations in daily cash receipts with other factors, such as fluctuating patient volume or the addition of new employees to your team.
- You’ll examine KPIs for daily activities as well as weekly performance, monthly trends, and quarterly updates to see how reimbursements are flowing.
About Gene Spirito, MBA
Gene has been involved in sales and deploying well over 1,000 revenue cycle management and billing solutions for medical practices, groups, networks, and laboratories of every specialty. With more than 25 years’ experience, Gene has guided so many ADS clients toward the configuration that would work best for them such as services through MedicsRCM, or in-house automation with the MedicsCloud Suite. Gene has an undergraduate from Villanova University, and an MBA from Temple University. Not surprisingly, Gene’s an avid Wildcats fan (the VU basketball team).