92% of consumers want to know payment responsibility prior to a provider visit (MedData)
An important aspect of running a medical practice is ensuring that it’s performing efficiently and, of course, that it’s profitable. While there are a number of metrics that can determine whether this is true about a practice, there are two important factors to consider when it comes to revenue cycle management. First, is the predictability of future trends and performance; and second is accurate evaluation of current and past performance. In a medical landscape that is ever-changing, it’s possible this is more important now than ever before. Every medical practice should be equipped to examine these metrics and estimate future financial performance, under any given set of circumstances.
RCM Tip #1: Determine, Calculate and Evaluate Key Financial Metrics
There are several key metrics that every physician in private practice should be skilled at calculating and monitoring. Perhaps, the most important of these is accounts receivable (A/R). However – while they are very important, accurate A/R calculations cannot provide the full picture of a practice’s financial performance. It’s also important to manage aging accounts – the ones that are in excess of 90 to 120 past due. Accounts that remain on the books unpaid must be addressed quickly and efficiently. Also important (if not more so) is the adjusted collection rate – also called the denial rate. This is the percentage of claims patients deny through non-payment over a specified period of time. Of course, the goal for any practice is to receive payment on as many claims as possible. Therefore, you can see how important proper management of this metric is.
Once you’ve determined which key metrics you will be evaluating, the next step is to determine how to evaluate them. We offer a deep dive explanation of how to evaluate these key metrics, in our eBook, “Everything You Need to Know about Using your PM Software like a RCM Tool”, which explores this process in much greater detail. Suffice it to say, these metrics are extremely easy to calculate, as long as the appropriate data is available to do the calculations.
RCM Tip #2: Identify Trends in Your Financial Metrics to Predict Future Performance
With these two more basic steps out of the way, the big hurdle is figuring out how to trend these metrics as a way to predict future performance. Contrary to the implication of the word “predicting,” the trends themselves don’t actually predict anything. Rather, they demonstrate the overall action of these metrics over a given period of time in the past, such that a pattern emerges. For example, if your A/R in excess of 120 days has gone up for the last several months, then some factor in your practice has likely had an influence over this. From this, you can determine what that factor is, and rectify the issue – provided it don’t cause any significant financial damage to your practice.
RCM Tip #3: Benchmark Financial Performance
In short, bench-marking financial performance involves using the standard financial performance of other practices in your field as a way to set a goal for your own. For example, if the average time spent in A/R for other practices in your specialty is approximately 35 days and your practice trends between 50 and 60 days, your new goal should be to hit, at most, 35 days spent in A/R for your practice. Building these benchmarks into your revenue cycle process can be an effective way to monitor what could be considered acceptable ranges for these metrics, and therefore, determine when your own practice deviates too much from them. Once this happens it is important to figure out what is causing the deviation and fix it. Also, if you look closer at your practice’s average trend of days spent in A/R for the last six months (for example), and notice that, while still in the acceptable range, your practice begins to deviate away from what’s acceptable, over the course of time, you can again work towards correcting this before it moves too far from the average.
As always, this information is objective, but its use within your practice is based on the unique set of factors that contribute to your metrics and functionality. It is important to understand this and use the information above only as it pertains to your medical practice.