In the world of healthcare, we've all heard the grumbles — rising inflation, shrinking reimbursement rates, the perpetual staff shortage, and an ever-growing administrative mountain to climb. It's like trying to juggle too many balls at once.

Given this challenging landscape, it's high time we explore strategies that give medical practices a much-needed boost in profitability.

But what's the magic ingredient in this recipe for success?

Well... it's Key Performance Indicators (KPIs).

KPI measurement in practice management is a game-changer. It empowers practices to assess their performance, zoom in on areas ripe for improvement, and make informed, data-driven decisions. Whether you're managing a hospital, a medical practice, or any healthcare facility, comprehending and effectively implementing KPIs is pivotal to providing high-quality care while maintaining financial sustainability.

Let’s dissect the concept of KPIs, understand their significance, and uncover how to harness this magic ingredient to supercharge your medical practice performance.

Why RCM Key Performance Indicators (KPIs) Matter?

Why should anyone in healthcare practice bother with Key Performance Indicators (KPIs)?

Let's uncover the undeniable reasons why they're indispensable.

• Enhanced Financial Insight —These metrics act as your financial crystal ball, revealing revenue trends and inefficiencies, which can lead to increased income and reduced expenses.
• Streamlined Workflow — They serve as your workflow yardstick, identifying payment speed and bottlenecks for optimized revenue collection.
• Data-Driven Decisions — RCM KPIs provide solid data for informed decision-making, reducing risks associated with gut-feel choices.
• Compliance Assurance — They act as compliance watchdogs, ensuring adherence to healthcare regulations like HIPAA and CMS.
• Trust-Building Tools — They also double as communication aids, fostering trust and accountability when dealing with patients, insurers, and regulators.

Essential KPIs to Incorporate in Your Revenue Cycle Management

Key performance indicators play multifaceted roles. Some keep tabs on monthly strides toward specific targets, while others adopt a more extended outlook. Yet, what makes KPIs invaluable to physicians is their direct connection to the practice's overarching strategy. Failing to employ the right KPIs can leave physicians without vital clues for assessing performance and making critical decisions.

Here's a breakdown of essential Revenue Cycle Management (RCM) Key Performance Indicators (KPIs) and their benchmarks:

1. Days in Accounts Receivable (AR)

The average time it takes to receive reimbursements from the date of service. A lower number indicates better cash flow and efficiency. According to AAFP, practices should aim to keep this metric below 50 days, with 30 to 40 days as a preferable target.

2. Clean Claim Rate

The percentage of claims submitted without errors. A higher clean claim rate reduces claim denials and accelerates payment processing. Set a goal to maintain this rate greater than 95%.

3. Denial Rate

It measures the percentage of claims rejected or denied by payers. Keeping the claim denial rate below 5% is desirable, although the industry average is 5% to 10%. Monitoring and reducing denials are vital for boosting revenue.

4. Gross Collection Rate

Reflects the percentage of revenue collected from billed charges. An ideal benchmark is 90% or higher.

5. A/R >90

Measures the percentage of unpaid invoices (Accounts Receivable) that have been outstanding for 90 days or more. Aim to keep this metric below 10% to address overdue accounts more effectively.

6. Charge Entry Lag

Tracks the time taken to enter charges into the system after providing services. Ideally, charge lag should be 1-5 days, but target 24-hour charge processing for timely billing and revenue recognition.

7. Bad Debt Rate

Represents the amount of non-contractual charges written off. While insurance bad debt should ideally be 0%, patient bad debt can be kept below 5%.

8. Net Collection Rate (NCR)

The percentage of expected payments a healthcare provider receives after accounting for deductions and uncollectible amounts. The benchmark is over 95%, ranging from 95% to 99% — according to MGMA and AAFP. A low NCR signals room for improvement in revenue collection.

9. Cost to Collect

Measures the cost incurred to collect each dollar of revenue. It's calculated by dividing the total revenue cost by the total cash collected. Lowering this cost signifies more efficient RCM processes.

10. Patient Satisfaction and Net Promoter Score (NPS)

Although not purely financial, these metrics gauge patient satisfaction with billing processes, which can significantly impact revenue collection and patient retention.

These KPIs and their industry benchmarks serve as essential tools to measure the effectiveness of your RCM strategy, ensuring financial health and efficiency in healthcare operations.

How to Measure Your RCM KPIs?

To effectively measure your Revenue Cycle Management (RCM) Key Performance Indicators (KPIs), follow these consolidated steps:

• Step 1: Data Management
  • Gather data from various sources, like EHRs, billing systems, and payer portals
  • Integrate and centralize data for consistency — an integrated EMR and RCM system simplifies this process
  • Cleanse data to remove errors
• Step 2: KPI Establishment and Monitoring
  • Develop precise formulas or algorithms for each KPI, such as Accounts Receivable (AR) Days or Denial Rate
  • Regularly track and monitor KPIs
• Step 3: Analysis and Reporting
  • Analyze data to spot trends and changes
  • Present KPIs in clear reports for stakeholders, e.g., dashboards or spreadsheets
• Step 4: Actionable Insights
  • Take proactive action based on insights to enhance your revenue cycle performance

How to Leverage KPIs for Enhanced Practice Performance?

KPIs serve as the scorecard in a pivotal sports game, enabling you to monitor your practice's progress and evaluate your performance. Nonetheless, simply observing the score won't lead to victory; you must take action and develop a winning strategy based on your KPI analysis. Without proactive steps, measuring KPIs becomes a futile exercise.

To initiate significant enhancements, proceed with these step-by-step actions:

• Step 1: Spot the Weak Spots
  • Examine your revenue cycle KPIs
  • Identify areas that need improvement, like reducing denial rates or streamlining the charge capture process
• Step 2: Map Out Your Game Plan
  • Create a comprehensive plan
  • Define your goals, set timelines, and list the necessary resources to enhance these areas
• Step 3: Get Everyone on Board
  • Involve your team, patients, and stakeholders
  • Ensure alignment and enthusiasm for these changes
• Step 4: Time to Take Action
  • Implement your plan
  • Make process adjustments, consider tech upgrades, and provide staff training as needed
• Step 5: Keep a Close Eye
  • Continuously monitor the impact of changes on your KPIs
  • Ensure they're moving in the desired direction
• Step 6: Adjust as You Go
  • Modify your plan if needed
  • Make tweaks based on observed results to stay on course
• Step 7: Keep the Momentum
  • Establish a regular check-in routine
  • Monitor your practice's progress and the influence of changes
  • Maintain a commitment to improvement; it's an ongoing journey

Develop Your KPI Scorecard with Glenwood

KPIs provide a holistic performance snapshot. Analyzing your KPI metrics allows you to assess your performance, benchmark it against industry standards and set revenue goals. Armed with this valuable insight, you can boldly establish improvement objectives for any underperforming areas within your practice.

Glenwood's advanced software tools (GlaceEMR & GlaceRCM) are meticulously crafted to empower you throughout this journey. They streamline KPI measurement, providing profound insights.

Elevate your practice's performance with us, and let's embark on a journey toward success together. Take the first step—schedule a demo today!