5 must-track metrics for practice profitability
Tuesday, May 13, 2014
Today's healthcare landscape is complex and constantly changing.
Collecting data is essential for analyzing practice revenue and determining what changes can be made to increase profitability. The secret is to collect the right data to successfully determine what needs to be changed.
Here are five key metrics practices should follow to achieve financial success.
1. Successful revenue-cycle management processes
Ideally, the first time a practice submits a claim to an insurer, it should be paid. Realistically, that is not always going to happen.
If a practice is receiving 90 percent or more of its payments upon the first-claim submission, it is in good shape. If it is receiving less than 90 percent, the accounts receivable revenue-cycle management processes require overview.
Errors in billing practices — failure to obtain authorizations prior to treatment, failure to verify insurance eligibility, failure to use the proper coding and billing — are likely to blame. Submitting insurance claims right the first time is key to first time claim submission reimbursement.
2. Finding the Achilles' heel in a practice
Slow payment is the Achilles' heel of a practice. Ideally, claims should be paid between 30 and 40 days after submission. Up to 50 days is acceptable. Over 50 days, and there is a problem.
Consistently monitoring days in accounts receivable may help identify where the problem lies, allowing staff to resolve the problem. For example, a single payer may pay an average of 90 days after billing. Identifying which payers are responsible for slow payments gives the practice an opportunity to call and resolve the issue.
3. Securing reimbursements in a timely manner
Sometimes a single or even a few payers can't be singled out when it comes to days in accounts receivable. There may be multiple insurers paying a practice 60, 90 or 120 days after billing.
If this is the case, then it's time for the practice to take a look at how it is tracking payments. Are claim denials being handled promptly? Are aged claims being followed up on? If a high percentage of reimbursements are slow, these issues are probably not being handled in a timely manner.
4. Identifying missed revenue opportunities
To identify missed revenue opportunities, a practice should calculate its net collection rate. The net collection rate is the percentage of payments collected out of what could have been collected (gross rate minus contractual adjustments).
A practice's net collect rate should be above 95 percent. If it isn't, the practice is missing out on revenue. Billing practices should be optimized (outsourcing could help in this department), and bad debts should be sent to collections.
5. Finding areas of higher returns
A practice should divide its total reimbursements by number of patients seen or procedures performed. The answer provides the yield the practice is receiving per encounter.
If the result is lower than it should be, the following areas should be investigated to increase returns:
- Ensure a good payer mix. A large percentage of a practice's returns should not be coming from an insurer that has low reimbursement rates.
- Practices should discontinue accepting insurers that provide too low contractual reimbursement rates.
- Practices should check whether services are covered by insurers before performing them. The insurers may have changed their coverage options. Practices should collect cash payments from patients for uncovered services.
- Practices should check patient co-payment responsibilities with insurers and be sure to collect them.
- Review contract provider relationships. Are they providing the number of clients they promised? If not, the practice should give them a call to rectify the situation.
The healthcare landscape is constantly evolving. By calculating the above five metrics, a practice can ensure it maximizes its profits.
Consistently recalculating the data is essential for long-term practice profitability, allowing the opportunity for adjustments to billing models, insurer contracts and more as necessary.
- 17 of the most specific, bizarre ICD-10 codes
- Why telemedicine is the future of healthcare
- Nurses rally in DC to address staffing issues with Congress
- You cannot lead until you have their trust
- Impressive new smartphone apps in health and medicine
- What exactly is the job outlook for nurses?
- Nurses plan DC rally to promote proper staffing
- Apple attempts mobile health dominance with HealthKit app
- Is Texas hog poison drama finally kaput?
- New study examines why firefighters have higher risk for heart attack
- What does collaborative care look like in action?
- Q&A: Mac Thayer of the Junior Golf Scoreboard
- Imagining how hotels and restaurants are run in smart cities
See your work in future editions
Your content, Your Expertise,
Your Industry Needs YOUR Expert Voice & We've got the platform you needFind Out How