Maintaining your revenue integrity in a time of reduced revenue and shrinking margins has never been more important – or difficult. New reimbursement models, the cost shift to patients, a substantial increase in auditing from a greater number of agencies and continued merger and acquisition activities combine to put enormous stress on the financial condition of healthcare organizations.
Like most other things in business, ensuring revenue integrity comes down to managing the details. Monitoring and measuring day-to-day activity can be the best way to make sure your revenue cycle is operating smoothly and you are identifying, billing and collecting all the revenue you should be.
Developing appropriate Key Performance Indicators (KPI’s) can help guide the daily activities in your organization and keep your revenue cycle on track. Diligently monitoring KPI’s to improve performance becomes a critical task to helping you maintain your revenue integrity.
Here are four key areas on which to focus your KPI efforts.
Billing
Proper billing is the key to reduced denials and accelerated cash flow. There are several key metrics you can leverage to help manage the invoicing process.
The Cost/Revenue/Disbursement metric uses cost and payment data to determine a disbursement methodology. Some hospitals may disburse payments based on specific percentages of the full reimbursement amount while another may disburse based on cost/revenue, based on whether the physician is on staff or contracted.
Bundled payment and new payment methodologies require you to track and calculate cost/revenue/disbursement of payments. With more data and experience, you will be better equipped to disburse bundled payments internally.
Another key metric is calculating margins based on the cost/revenue compared to the disbursement to see if bundled payment really does reduce the cost of care and still provide a healthy margin to the provider.
Two KPI’s to track the effective use of staff resources are Billing (number of accounts/clean claims generated over a period) and Payment Posting (number of accounts manually posted over a period or number of edits corrected from electronic posting over a period). These metrics help allocate resources appropriately, offer potential training opportunities, and identify areas for assessment/reassessment of technology, staff or processes.
A Leakage KPI measures how often referrals and authorizations send patients to providers outside your network. It can be calculated differently depending on the organization since the data may be in different types of systems (e.g. patient accounting, practice management, referral/authorization system, etc.). Keeping patients within network should be a top priority.
Another key billing metric should focus on underpayments. Regularly review and compare actual paid claims versus contracted rates to ensure you are invoicing the exact amount allowed by contract.
Denials
According to some estimates, denials cost healthcare organizations nearly 3 percent of their net revenue annually. In recent years, denials have grown to encompass 15-20 percent of the billing value of total claims.[1] Several KPI’s can help you get a handle on soaring denials costs.
The Denials Appeals Rate KPI takes the total number of denials appealed divided by the total volume of denials. You can use either the claim or line item level for the calculation. If the percentage of appeals is not high then there is most likely an opportunity for automation to handle write-offs or adjustments. Another possibility is that staff is not focusing enough on denials.
Denial Appeal Success Rate (total volume of denials that are paid divided by the total volume of denials that get appealed) measures the volume of appealed denials that ultimately get paid. This metric provides a view into trends of your denials and appeals process. Tracking this measure shows if efforts to appeal are worthwhile and whether the solution to denials lie further upstream in your process.
The Initial Denial Rate is the percentage of claims denied initially by the payer – then appealed and paid. The Terminal Denial Rate is the percentage of denied claims never paid and written off. Many groups don’t track initial and terminal rates and many don’t even know the categories of denied claims. Simply tracking denials without accounting for those denials that are eventually overturned can give you a false picture of your overall denial situation.
Collections
U.S. hospitals provided $35.7 billion in uncompensated care in 2015, representing 4.2 percent of annual hospital expenses.[2] You can use several KPI’s to improve your collections performance.
Self-Pay Collections tracks the successful front end collections of patient self-pay charges and is calculated by taking the amount of patient responsibility collected divided by the total amount of patient responsibility collectibles. The shift to patient payment responsibility makes the self-pay portion of the A/R a more critical component of your cash flow.
First Pass Resolution Rate measures the percentage of claims that get paid on first submission and provides a view into the effectiveness of your revenue cycle management program. To show a high percentage, all processes need to be aligned, from pre-visit tasks like insurance verification and patient eligibility to post visit processes like proper coding and billing. A low percentage on this KPI can highlight potential areas that might need corrective action.
Clean Claim Rate is the percentage of claims that pass internal claim scrubber edits and EDI (claims clearinghouse edits) and go directly to the payer. Ensuring a high clean claim rates accelerates cash collection.
Coding
The implementation of ICD-10 has spurred the creation of new coding standards, management, and processes to improve productivity and quality. Proper coding continues to be a key factor in maintaining revenue integrity. You can track your coding effectiveness with these key KPI’s.
Missing charges are often overlooked as a key performance indicator. Track the number of incomplete or missing charges weekly or monthly to establish a trend line. Once missing charges are quantified and reported, you can begin to fix problems, introduce automation, and develop a set of published standards.
Charge Capture Lag Time is calculated by measuring the time of service to the point where the service has been coded. This KPI identifies weaknesses in documentation completion or the process of getting patient information to the coding staff. Identify broken charge capture workflows by tracking the medical record from initiation of visit to coder. This can highlight chart/documentation delays which result in increased charge lags.
Coding Turn Time measures the rate at which coding is completed. Track coding turnaround time and improve coding rates without sacrificing quality. Measure quality based on denied claim data. Set standards around the number of coded charts per hour that match industry standards. Measuring will improve outcomes while maintaining accuracy.
Compare E&M coding practices, by specialty, to industry coding bell curves for like specialties. This helps detect undercoding and overcoding and provides valuable information to implement improvements. It is imperative for physicians to understand how their coding trends compare to their peers in the industry to ensure they are in alignment with best practices.
Tracking key KPIs in these critical areas allows you to effectively report and communicate results to staff members best able to use them to affect performance. Closely tracking your important metrics is crucial to ensuring revenue integrity.
[1] Hospitals Denials Management…Insource, Outsource or Both, HumanArc White Paper 2013
[2] American Hospital Association, “Uncompensated Hospital Care Cost Fact Sheet,” December 2016
