Hospitals and health systems continuously monitor revenue cycle management metrics, as they play a key role in helping organizations receive maximum reimbursement and an accurate assessment of their billing department.
However, to maintain profitability, organizations must select and track metrics that push them to surpass expectations.
"Understand where you are today and have goals of where you want to go. Looking at how you're summarizing the information, looking at how you're tracking and trending the information, looking at how you're budgeting and trending for that information is very important," says Nicole Davis, senior vice president of channel management at IKS Health, which manages RCM functions for health systems and large physician groups.
"Some metrics you'll want to look at on a daily basis, while others you'll look at from an operational standpoint and others from a quarterly or monthly perspective to get a better understanding of holistically are we moving in the direction we want to go," she added.
Ms. Davis recently spoke with Becker's Hospital Review about which specific metrics to focus on to improve cash flow. Below, she provides five metrics for hospitals and health systems to continuously monitor.
1. First pass payment recovery rate. This metric is important for hospitals and health system leaders to track, as it shows how successful they are at receiving full payment for insurance claims the first time they are submitted. Ms. Davis says hospitals and health systems should focus on if the claim went out cleanly, and if it was paid on time and closed. "I think when you look at profitability and you're trying to understand how well you're doing, the more you can do to ensure a claim goes out cleanly and you don't have to send it a second time, not only are you going to expedite the collections you're going to receive but you're going to reduce the amount of time and cost you're going to have to spend collecting the proper payment for that claim," she says.
Ms. Davis recommends organizations look at this metric monthly or quarterly to see where they stand with payment rates and submissions. She says healthcare organizations should strive for a first pass recovery rate of 80 percent or greater. Unlike simply measuring clean claim percentages, this metric ensures that proper payment was received timely and accurately to fully close out the receivable.
2. Net collection rate. Net collection rate measures a healthcare organization's effectiveness in collecting reimbursement. With this, organizations should strive for a rate of 98.5 to 99 percent, according to Ms. Davis. "So lots of focus again on making sure you're doing everything possible to avoid bad debt and not lose out on payment for services that were provided," she says.
3. Cost to collect. Cost to collect is also an important metric to monitor for overall profitability. In today's competitive healthcare environment, there is an increased focus on what it costs organizations to get claims out the door and ensure proper payment for services rendered, Ms. Davis notes. For optimal profitability, she believes organizations should look for ways to be more cost-effective with services so they can invest in other areas like infrastructure, quality or physician engagement. "It's important to look at cost to collect as a component of your overall profitability. If you thoroughly understand what you're paying your internal team, your vendors, your facility and overhead costs, you can then maximize what you're getting for that dollar," she added.
4. Over-the-counter and self-pay collections. When looking at patient pay, hospitals and health systems need to focus on understanding patient responsibility, and work with patients to identify and collect payment prior to service, according to Ms. Davis. More than ever, organizations can't afford to lose the patient co-pay. What was once a $10 loss to the organization can now be upwards of $50 or more. Therefore, she recommends organizations focus on engaging patients so they understand their financial responsibility. When patients have that understanding, they are not surprised later on and are more likely to pay for their care in a proper and timely manner, she says. "This not only ensures that the provider gets the full payment as quickly as possible but also that the patient has a better overall experience," she added.
Ms. Davis notes it's critical to consider collections as a portion of the overall patient experience. "Patient engagement and satisfaction is critical. Regardless of what your budget projects should be, there's a real cost to collecting at the sacrifice of the patients' satisfaction," she says.
5. Referral patterns. Providers may predict services and budget for volume, but sometimes the forecasted volume doesn't occur as forecasted. Therefore, Ms. Davis recommends providers, particularly specialty providers, track referral patterns. "Is a provider no longer referring? Make sure you're understanding where you're seeing negative volume trends and being proactive as far as how you can resolve it," she says.