5 Revenue Cycle Management Metrics Hospitals Should Monitor to Improve Cash Flow

July 26, 2021

Monitoring the metrics of healthcare revenue cycle management poses benefits to revenue stream.

Amid high-deductible health plans and healthcare consumerism, providers are experiencing changes in revenue sources. However, many of them still face challenges in cash flow and payment collection. According to one study, although hospital receiving offices collect from 35% of their patients, the total amount accounts for only 19% of patient financial responsibility. One way to keep the cash flowing is to monitor various revenue cycle management metrics that exist within health systems. With regular monitoring, healthcare organizations can work to get the most reimbursement possible and improve the functionality of their billing departments. These metrics should be carefully selected and tracked to inform providers of where funding currently stands and whether they are heading in the right direction, based on their goals and objectives. Here are five RCM metrics and key performance indicators (KPIs) that hospitals and healthcare organizations can track to improve their cash flow.

1. Rate of First Pass Payment Recovery

Ideally, hospitals would receive the correct amount of reimbursement from patients and payers during the “first pass”, or the first time they bill the insurance provider or patient. This is also known as a clean claims ratio (CCR), the rate at which billing claims are confirmed and paid without denials. Experts say that healthcare organizations should be receiving a first pass recovery rate of at least 80% in order to ensure that they are able to close accounts accurately and on time. Monitoring this metric allows providers to determine the efficacy of their billing processes and their ability to obtain full payment for insurance claims the first time. Submitting claims a second or even third time wastes precious time and money, so it’s essential that hospitals strive to collect on the initial submission. This involves keeping medical billing and coding processes accurate and efficient and routinely checking on claims to ensure they’re processed quickly and closed on time. Some indicators of how healthy this process is include:

  • Tracking the average number of days it a claim is in Accounts Receivable (i.e. how long it takes for a claim to be paid)
  • How quickly and regularly claim follow-ups occur
  • Claim denial rate
  • Common mistakes or miscommunications that cause denials
  • The percentage of the time that claims become write-offs, allowing bad debt to pile up

2. Net Collection Rate

Healthcare organization staff should keep regular track of the organization’s ability to collect reimbursements. A good collection rate ranges from 98.5% to 99%, which indicates that the organization is proficiently mitigating bad debt and missed payments for services provided to its patients. Accounts receivable departments should be keeping track of these metrics, so it’s a good idea to regularly check up on them to see if these workers need assistance. Healthcare organizations’ ability to submit clean claims and communicate well with insurance payers and patients alike is key to maximizing the net collection rate.

3. Collection Cost

How much is your healthcare organization spending on collection processes? How much is it investing in vendors, internal staff, facility, and overhead costs? Monitoring collection expenses can prove crucial to improving the overall profitability of the organization. If hospitals are able to close claims fast and seek timely payment for services, they can keep up with the competitive healthcare industry. Also, continuing to make services as cost-effective as possible will allow organizations to focus their investment in other key areas, such as in-office infrastructure, improving the patient experience, and building quality physician-patient relationships.

Monitoring collection expenses can prove crucial to
improving the overall profitability of the organization

4. Over-the-Counter and Self-Pay Collections

When patients better understand their financial responsibility and how to navigate the payment process, the chances that they’ll pay on time rise. Because of this, hospitals and healthcare providers must promote efficient and transparent over-the-counter (OTC) and self-pay collections. This can include clear interpretation of bills and the ability to take multiple forms of payment. Hospital staff can also accomplish a transparent collections system by helping patients understand their responsibility and discussing such obligations with the patient prior to the provision of services. This helps prevent any surprises that patients sometimes encounter when they receive a bill that’s more expensive than expected.

Patients who are aware of all the billing information upfront are more likely to pay in full and on time, thereby increasing the hospital’s cash flow. Moreover, this metric helps ensure patient satisfaction and overall experience. Keep in mind that patients suffering from any disease may also be financially burdened, and going through an efficient and straightforward collection process could ease their stress.

5. Referral Rates

A healthcare organization’s pattern of referrals is an indicator of how well it’s doing in terms of service provision. While providers can predict the services and budgets necessary to determine the volume of patient need and intake, such projections sometimes aren’t entirely accurate. This can happen when providers stop referring patients to other physicians. Tracking referrals and new patient intake, on the other hand, can help organizations determine where the glitch in volume trends is emanating from. Referral rates can indicate opportunities to improve service lines, and increase cash.

Referral rates can indicate opportunities
to improve service lines, and increase cash.

How DECO Can Help

These metrics and KPIs are essential in maintaining optimal cash flow, high financial performance, and an improved bottom line within healthcare organizations. Some should be looked at every day, while others should be checked monthly or quarterly. This can consume a lot of time and effort, but healthcare organizations can seek the help of revenue cycle management and eligibility experts who can make sure an organization’s profitability isn’t compromised and that patients receive excellent care.

At DECO, this is what we do. We partner with healthcare organizations to address any problems they’re experiencing and help them improve their cash flow so they can focus more on providing care for patients. To learn more about how we operate, check out the other resources on our website.

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