5 Revenue Cycle Management Metrics You Need to Know

5 Revenue Cycle Management Metrics You Need to Know

Effective revenue realization—including an efficient and systematic approach to billing and collections—is one of the main tactics ambulatory surgery centers can pursue to enhance their profitability and financial stability. But many ASCs, particularly those that have just launched operations or initiated new partnerships, are still struggling to gain a clear understanding of the nuances of revenue cycle management (RCM) in the context of an ever-evolving health care delivery system.

To help ASCs address this challenge and target particular RCM measures to focus on, a recent article in Becker’s ASC Review outlines a number of important metrics for RCM success that ASCs should be tracking, and it identifies particular strategies ASCs can take to boost performance in those areas. These benchmarks include:

Days outstanding

calendarThe most commonly used benchmark, days outstanding tracks the amount of time it takes for each claim to be paid. Not only is this measure a good indicator of the overall health of an ASCs accounts receivable (AR) database, but it can also help detect and flag problems in billing or collections by highlighting any extreme variances in collections on a month-to-month basis.

For a days outstanding calculation, simply divide the AR total by the total charges taken over the last 90-day period. In general, experts recommend aiming for a standard of 30 days or less, but they emphasize that this standard can vary considerably depending on the population that the ASC serves. For example, a days outstanding measure in the 50s, though well above the ideal 30-day standard, could be consistent with a facility that is completely out-of-network or that serves a large workers compensation population. However, ASCs can still aim to improve this metric by implementing efforts to decrease their total AR.

Claim lag and charge lag

The charge lag refers to the number of days between the day of service and the day the charges are entered; the claim lag refers to the number of days between the day of service and the charge billing date. Essentially, this metric is all about how quickly charges are being sent; a factor that, in turn, has a significant impact on days outstanding.

As an ASC best practice, experts recommend that the claim lag and charge lag together should be no more than three days. Furthermore, it’s important that the two lags match up. If there is a discrepancy, it could indicate that the billing department is either holding claims or entering charges without sending them. Both of these actions can contribute to delayed reimbursement and an uncertain revenue cycle. To improve this metric, ASCs should ensure that charges are being entered as soon as they are coded, and that claims are likewise sent on that same day.

Percentage of claims outstanding beyond 90 days

This benchmark measures the AR greater than 90 days against the facility’s total AR amount; in other words, how much of the total AR is made up of claims that have been outstanding for 90 days or more. This percentage is a good indicator of persistent issues with insurance denials or difficulties with patient collections.

While the best practices standard recommended by experts is 15 percent or less, the types of payors that an ASC has contracts with can greatly influence this metric. For example, ASCs are much more likely to be in the 10 percent to 12 percent range if they are heavily contracted, while out-of-network centers could be as high as 15 percent to 20 percent. This metric can be improved through an increased focus on dealing with accounts over 30 days.

Net collection rate

Referring to the percentage of eligible money that the ASC has actually collected from its contractual payors, this is a highly useful metric because it gives a clear, black-and-white picture of an ASC’s success rate at collecting on contracted accounts.

Calculating the rate involves dividing total payments by total charges, once bad debts and refunds have been subtracted. The recommended standard is above 97 percent. To make improvements, ASCs need to be sure they are measuring the net collection rate frequently so that a falling percentage can be addressed before it drops too low. It’s also important for ASCs to outline a clear definition of bad debt in order to ensure that no inappropriate subtractions are being made from the total charges.

Percentage of clean claims and claims denied

Clean claims are claims sent without edits; claims denied are those claims that payors have rejected. A clean claims rate of 98 percent and a claims denied rate of less than 5 percent have been identified as the best practices standard. If an ASC finds that its clean claims rate is too low, there could be issues with either the biller or the ASC’s front office. Similarly, a claims denied rate that is too high may indicate persistent issues with certain payors. To address the first issue, ASCs can ensure that their billers are taking the time to properly prepare claims for sending, as a few extra minutes of attention on the front end can save weeks of hassle on the back end. For the second issue, ASCs can work to identify which payors are denying the most claims, and begin a dialogue around how to lower that rate.

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