My tenure in healthcare financial services has allowed me to witness some of the most tumultuous years in history for increasing provider regulation and decreasing reimbursement. For years, I’ve watched providers meticulously justify their decisions and treatment plans to obtain fair reimbursement, while payers continue to subject these providers to increasing scrutiny. I meet with clients every day and see the impact that this burden places on practices, providers and, eventually, patients.
In the last two decades, Medicare physician payments1 effectively declined 29%, according to the American Medical Association. The broader reimbursement environment has steadily devolved for providers, as well, requiring more documentation and more effort to secure their share of declining reimbursement. Recent data from the American Hospital Association show nearly 80% of provider organizations2 believe their experience working with commercial payers is deteriorating even further. Their sentiments are not surprising considering that providers managed four times more external payer audits3 in 2023, and that initial denial rates4 reached 14% in Q3 2023.
But while the deck has largely been stacked against providers through much of the regulatory and reimbursement evolution, they hold a powerful ace to stay ahead: their data. By analyzing their own reimbursement data along with benchmarking data, practices can build highly effective strategies to continue to streamline their revenue cycles, improve profitability and reduce re-work. A data-driven approach can proactively uncover and correct internal and external RCM issues that lead to claim denials, down-codes and underpayments, and other payment delays.
When I became CEO of Ventra Health in 2023, I focused on bringing together some of the industry’s leading experts in RCM and data analytics to give providers the tools not only to survive but to thrive. Sophisticated data and analytics systems track dozens of RCM metrics that identify potential trends or point to specific reimbursement challenges. However, they all back into five core metrics that we believe are the cornerstone of a successful data strategy. Together, they tell a complete story, measuring the overall health of the revenue cycle and providing actionable insights for mitigation and improvement.
We’ve spent the past year building the five core metrics into our data, reporting and surveillance structure, helping facility-based physician groups track their performance, mitigate risks, and better understand their payer landscapes. Data analysis doesn’t have to be overwhelming if you focus on the five core metrics that should really matter to facility-based physician practices.
1. Net Collection Rate (NCR)
Calculated by dividing total collections by the total allowed revenue, Net Collection Rate measures how much of the available revenue is successfully being collected. Presented as a percentage, it provides insight into the collections process itself, reflecting how effective a practice is at collecting what is genuinely owed to the group. Practices should utilize a 12-month lookback since this will allow for full maturity life cycle for patient accounts.
Payer mix can have a material impact on overall NCR, so it’s valuable to bifurcate insurance, patient balance after insurance, and true self-pay to better understand opportunities in each area as collection rates will vary materially for these segments. For example, the patient collection rate fell nationwide from 54.8% in 2021 to 47.8% in 2022 and 2023. NCR data analysis will uncover those trends and demonstrate how they are affecting reimbursement at the practice level. Insurance NCR will also highlight areas to focus on in terms of overall contract performance and areas of opportunity for negotiation with payers.
2. Net Cash Collections (NCC)
The foundation of effective RCM is the ability to manage consistent deposits, week over week, month over month, and year over year. The goal is to see smooth, stable collection patterns free from dips and spikes that likely point to internal process issues or poor payer behavior.
NCC reflects gross cash receipts less refunds during a specific reporting period, providing insights into a practice’s health and stability in resolving accounts receivable. NCC analysis can help uncover specific payer or process issues, such as a new payer requirement resulting in more denials or a coding error that is leading to underpayments. Drilling down to the payer level over a 13-month historical view can also identify broader payer trends that are impacting reimbursement.
3. Cash Per Unit (CPU)
Cash Per Unit is a volume-adjusted view of cash for a current period of time, as well as in aggregate over time, reflecting the average amount of cash collected per service unit. The specific unit measured will depend on the physician's specialty. For example, emergency medicine and hospital medicine measure cash per visit, anesthesia measures cash per case, and radiology measures cash per procedure.
Collections Per Unit calculates the end revenue generated for each patient seen. By matching collections to the originating patient services and comparing fixed run-out periods, practices get actionable, apples-to-apples comparisons. CPU is used to understand shifts in payer mix, payer contracting effectiveness, and overall rate and volume trends. By benchmarking CPU data, for example, providers may uncover opportunities to renegotiate their contracted payment rates.
4. Days in Accounts Receivable (AR)
Days in AR reflects the average number of days it takes to collect payments due. Lower Days in AR indicates higher cash velocity and more efficient AR performance.
This key metric helps practices focus on streamlining the billing process to shorten the revenue cycle. Days in AR can be heavily impacted by payer behavior, billing delays, and overall payer mix. Strategies for denials management, coding accuracy improvement, predictive modeling to identify high-risk claims, and high-touch interventions for slow-paying systems can significantly shorten the time it takes to resolve claims.
5. Percentage of Accounts Receivable > 120 Days
AR >120 represents the health of the overall accounts receivable velocity, measuring the percentage of receivables more than 120 days out from the original date of service. Total debits and credits outstanding more than 120 are divided by total accounts receivable.
The Medical Group Management Association (MGMA) recently reported an overall increase in AR>120 Days6 for many medical groups. However, practices that earned MGMA’s “Better Performer” designation were notably able to limit the impact. Better Performers reported 4% to 7% lower AR>120 Days7 compared to all practices.
Tracking this metric turns the challenge of aging AR into an opportunity, encouraging investigation into the obstacles that delay payment. Optimizations in billing, claims processing, denials management, and patient payments may all help lower the percentage. Reports that identify reimbursement opportunities by payer category, such as government payers and self-pay balances, can help focus resources in the right areas.
Expert Analysis
Together, these five core metrics paint an accurate picture of the overall financial health of a practice. The next step is to use the data to build an actionable strategy to improve performance.
How does practice data become truly actionable? Here is just one example.
After noticing a client’s decline in Cash Per Visit, we investigated further to uncover the root cause: A major payer had introduced a pre-payment audit on a particular procedure, which was now resulting in down-codes. In response, our teams collaborated across departments to quickly implement a process to deliver the additional required documentation, both retrospectively and on claims going forward.
With 50 years of legacy expertise in revenue cycle management for facility-based physician specialties, Ventra Health teams have witnessed firsthand the increasing challenges to provider reimbursement. Fortunately, we are now also seeing how a hyper-focus on performance data is helping providers optimize their RCM and improve profitability. We are partnering with clients, using data to:
- Support contract negotiations that achieve the most competitive market rates and terms
- Uncover internal and external issues that lead to denials, underpayments, and payment delays
- Deliver targeted Provider Education programs to improve and enhance physician documentation
- Improve functional RCM processes (provide enrollment, coding, AR follow) to optimize the revenue cycle
Following a data-driven approach, Ventra clients enjoy top-quartile Net Collection and Cash Per Unit rates compared to key industry benchmarks.
Outcomes like these reflect our commitment both to industry-leading data analysis and to delivering a high-touch, white-glove service experience. Our Service Delivery, Client Success, Payer Contracting & Strategy, and Provider Education teams are highly analytic partners with decades of RCM and subject matter expertise. They are guided by our Physician Strategic Advisors who draw on their experience running successful practices to help us develop the most effective strategies and solutions.
We empower these teams with a best-in-class Data & Analytics platform, built and continually optimized by data professionals who understand the nuances of our clients’ businesses. We also created a Performance Surveillance Team to focus solely on daily monitoring of more than 200+ daily audit controls, monitoring for issues that may impact performance and working cross-departmentally to address them proactively. With strong support from our private equity partner, Ventra has made meaningful investments in business intelligence technology and exceptional talent to help our clients get paid appropriately for the services they deliver to their hospitals and patients.
The five Metrics that Matter are the foundation of an effective data strategy. From there our goal is to help clients make sense of their data, using it proactively to succeed even in today’s complex market conditions.
Steven Huddleston, CEO of Ventra Health, has spent nearly three decades in healthcare finance and revenue cycle management, holding leadership positions at prominent technology and services companies, advisory consulting firms, and two of the largest for-profit health systems. He has extensive experience developing and executing business strategy and driving growth in healthcare SaaS, technology-enabled services, and advisory in both public and private equity-backed companies. He is deeply committed to building a cohesive business culture centered on excellence and transparency.
About Ventra Health
Ventra is a leading business solutions provider for facility-based physicians practicing Anesthesia, Emergency Medicine, Hospital Medicine, Radiology, and Pathology. Focused on Revenue Cycle Management and Advisory services, Ventra partners with private practices, hospitals, health systems, and ambulatory surgery centers to deliver transparent and data-driven solutions that solve the most complex revenue and reimbursement issues, enabling clinicians to focus on providing outstanding care to their patients and communities. Visit www.VentraHealth.com to learn more.
Resources
1 “Medicare physician pay has plummeted since 2001. Find out why.” American Medical Association, June 17, 2024. Accessed July 26, 2024, at https://www.ama-assn.org/practice-management/medicare-medicaid/medicare-physician-pay-has-plummeted-2001-find-out-why
2 “Addressing Commercial Health Plan Challenges to Ensure Fair Coverage for Patients and Providers.” American Hospital Association, November 2022. Accessed July 26, 2024, at https://www.aha.org/guidesreports/2022-11-01-addressing-commercial-health-plan-challenges-ensure-fair-coverage-patients-and-providers
3 “Providers See Fourfold Increase in External Payer Audits.” RevCycle Intelligence, December 8, 2023. Accessed July 26, 2024, at https://revcycleintelligence.com/news/providers-see-fourfold-increase-in-external-payer-audits
4 “Battle of the Bots: As payers use AI to drive denials higher, providers fight back.” Healthcare Financial Management Association, March 28, 2024. Accessed July 26, 2024, at https://www.hfma.org/revenue-cycle/denials-management/health-systems-start-to-fight-back-against-ai-powered-robots-driving-denial-rates-higher/
5 “Patient Collection Rate Falls to Nearly 48%.” RevCycle Intelligence, February 28, 2024. Accessed July 26, 2024, at https://revcycleintelligence.com/news/patient-collection-rate-falls-to-nearly-48
6 “Collection challenges growing for medical practices as inflation put pinch in patient finances.” Medical Group Management Association, August 11, 2022. Accessed July 26, 2024, at https://www.mgma.com/mgma-stats/collection-challenges-growing-for-medical-practices-as-inflation-puts-pinch-on-patient-finances
7 “Transparency and flexible payment options keep care within reach.” Medical Group Management Association, May 8, 2024. Accessed July 26, 2024, at https://www.mgma.com/mgma-stat/transparency-and-flexible-payment-options-keep-care-within-reach