By Jane Ehrhardt

“We often find that clients know how much money is going in the bank, but they don’t know how they’re doing,” says Philip Allen, director of revenue services with MediSYS. Following key performance indicators (KPI) offers a clearer look at reimbursement performance and can pinpoint where, within the cycle, adjustments need to be made or resources can best be allocated for solutions.

For example, collections will go up and down. “These metrics provide the information to look objectively at why things fluctuate,” Allen says. Reviewing these numbers can reveal that a drop in visits resulted from a doctor being at a conference or that because of flu season, the practice had shifted to primarily providing a type of service with a different level of reimbursement.

“A few indicators allow you to see whether your in-house billers or billing company is collecting everything that’s possible. Unlike overall revenue intake, the net collections percentage KPI compares net charges to net payments, which takes into consideration the insurance contractual deduction, usually around 20 percent. So if you collect 100 percent—which is almost impossible—then you know you’ve collected everything that insurance has allowed to be paid.”

The clean claim rate or first pass rate can expose faults within a reimbursement cycle. Both of these KPIs show what percent of claims go through without denials versus claims that need edits or additional information. The goal is greater than 95 percent. ”That should be pretty achievable, but numerous factors are going to affect that on an individual basis,” Allen says.

“You reach a point where you want to steer away from some payers if, for example, cumbersome payment methods outweigh the revenue,” he says. “The revenue per patient visit per payer KPI can help clarify the need for that decision. It provides the average reimbursement per payer, whether an insurance company, Medicare, or the patient. That displays the distribution of visits among payers and the proportion of patients by insurance companies. Look at the trends there. If it's changing—maybe Medicare is up and Blue Cross, which has higher reimbursements, is down—that makes a difference in your revenue.”

In the claim denials KPI, the primary reason for failure usually points to insurance eligibility problems, often in the status of a patient’s insurance coverage versus their eligibility for the treatment. This KPI should be below eight percent. If not, the solution lies with the front desk. Staff should ask about the patient’s insurance every time they come in because Medicare advantage plans can change.

When denials are at an unhealthy high rate or the first pass KPI is at an unhealthy low, then the outstanding accounts receivable KPI will also likely be over its target of remaining below 20 percent. “If it hits over 20 percent, then investigate,” Allen says. “Don’t wait to see if it goes down next month. Waiting means the problem, which usually lies with unpaid claims older than 90 days, grows and claims time out, leaving no hope of getting paid for work done.”

This is why key performance indicators are not about making progress, but reaching a target. They serve as alarm bells to problems and point the way toward solutions. For instance, the outstanding encounters KPI shows the number of visits not yet closed. “Some people think this would be common sense, since you aren’t going to get paid until it’s completed and closed,” Allen says, which is why as a potential unseen problem area, it needs to be monitored. For instance, at one clinic where revenues had fallen, the cause fell on one doctor not closing out more than 100 encounters.

The charge lag KPI can illuminate a multitude of potential bottlenecks in the cycle. It shows the number of days between the service provided and the submission of the claim. “You’re trying to reduce the time at each step of the process,” Allen says. “And there’s a lot to track through the process. For instance, outstanding revenue can appear as falsely high if it takes four or five days to post payments into the system.

“KPIs are a kind of thermostat. If you look at a trend and see something going the wrong way, it should prompt you to investigate and take action.”