Before an effective, clinically driven RCM strategy can be implemented, an understanding of current financial health must exist. Practices can leverage a number of best practice metrics to make this determination. [oc_spacer height=”10″]

WHY IS DAYS IN AR IMPORTANT?

When money is tied up with payers, practices lose momentum with cash flow as well as opportunities to invest and earn interest. Therefore, maintaining a low days-in-AR metric benefits a provider organization.[oc_spacer height=”10″]

Also, providers must often meet the parameters associated with timely filing limits — a deadline established by insurance carriers requiring that claims be filed within a certain period from the date the service was provided. Once this deadline has passed, it is often difficult to receive any payment for services rendered, making these deadlines much more favorable to insurance carriers than providers. [oc_spacer height=”10″]

It is not uncommon for commercial carriers to require that claims be filed within 90 days of the date of service. While that timeframe may seem ample, the nuances of a busy practice can make these parameters challenging, especially without a solid RCM strategy that addresses days in AR. [oc_spacer height=”10″]

A four-provider family practice started with 104 days in AR in August when they first adopted Unify Medical Billing. By December, it was down to 63 days, an improvement tied to the expert claims scrubbing provided by Unify’s RCM teams and proactive follow-ups with payers on outstanding claims to ensure practices are paid as quickly as possible. The days in accounts receivable (AR) measurement represents the length of time it takes on average for a claim to be paid. [oc_spacer height=”10″]

WHY SHOULD PRACTICES USE GROSS COLLECTIONS TO CALCULATE FINANCIAL METRICS?

Measurements that include all charges tend to be arbitrary in nature and are not a reflection of what a practice can actually receive in reimbursement. [oc_spacer height=”10″]

Internal UMB research found that 79 percent of providers are dealing with 10 or more payers. This makes it difficult — if not nearly impossible — for practices to track and manage all fee schedules effectively. For this reason, practices often set their own fees high enough to ensure the greatest capture of revenue while recognizing that real-world reimbursement from any given payer will be lower than what is reflected on the provider fee schedule. [oc_spacer height=”10″]

The metric that really matters is the net collection rate, because it is a reflection of the reimbursement a practice can actually receive. The total days in AR based on gross charges is always lower than total days in AR based on gross collections. As such, practices should avoid using this metric, as it will result in skewed, unrealistic expectations. [oc_spacer height=”10″]

CLEAN CLAIMS RATIO

Also known as the first pass ratio, the clean claims ratio is the percent of claims that are paid at first submission. A clean claim is the ultimate goal of any billing process. It has never been rejected, does not have a preventable denial, has not been filed more than once and contains no errors. [oc_spacer height=”10″]

Understanding the clean claims ratio is important, because the time a provider organization spends reworking denials can be extensive. Staff must review the original claim, identify the reasons for the denial and then rework the entire claim for resubmission. Once completed, the claim cycle must be restarted, delaying receipt of monies. In addition, some claims that are denied on first pass are never paid. [oc_spacer height=”10″]

As claims are denied over time, the billing staff needs to analyze where breakdowns occur, identify trends and implement new processes that will improve the outlook. Otherwise, a provider organization will continue to perpetuate its mistakes, reimbursements will fall short and the entire organization will suffer. [oc_spacer height=”10″]

USING THE CLEAN CLAIMS MEASUREMENT

A practice files 1,000 claims per month and maintains a 90 percent clean claims ratio. Of the claims filed, 91 percent were paid without any further action and 9 percent required rework. With this knowledge, a practice can:[oc_spacer height=”10″]

• Determine staffing needs: If a practice needs to rework 100 claims a month, a calculation can be made that considers the average number of claims a full-time employee can work a day (usually 50) to determine the number of employees needed. Foundationally, this determination can be made by factoring in the number of touches a claim requires during rework. These could include entering the rejection or denial, calling the payer for details, researching coding mistakes, refiling the claim or posting another denial.[oc_spacer height=”10″]

• Measure costs: If the average cost of rework is $25 per claim and 100 claims a month require rework, it costs a practice an average of $2,500 a month to work unclean claims. In addition to an employee’s hourly rate, a practice should factor in overhead costs such as benefits (30 percent of salary), facilities, hardware and electronic filing fees directly associated with unclean claims. [oc_spacer height=”10″]

NET COLLECTIONS RATIO

The net collections ratio is the percentage of total potential reimbursement collected out of the total allowed amount. Denial rates, unreimbursed visits and other factors affect the net collections ratio. Notably, statistics suggest that 65 percent of denials, nationally, are never reworked, negatively impacting this measurement of financial health for many practices.[oc_spacer height=”10″]

The net collections ratio is critical, because it represents the efficiency at which the revenue cycle is working for a practice and is the ultimate indicator of success with collections. Consider that an important component of net collections is bad debt and the ability to specifically manage patient collections. In most scenarios, patient net collections percent is lower than payer net collections percent.[oc_spacer height=”10″]

Patient deductibles are increasing. Because it is harder to collect money owed by a patient, practices will need to become more skilled and proactive in collections as the number of HDHPs continues to rise. [oc_spacer height=”10″]

PERCENTAGE OF CLAIMS BELOW 60 DAYS

Practices track the percentage of claims below 60 days for many of the same reasons they track days in AR. An important aspect of AR management, effective management of this metric recognizes that a dollar received today is more valuable than a dollar received in the future. [oc_spacer height=”10″]

The aging of AR is calculated by viewing an aged trial balance (ATB), which is a summary of all receivables by age and by percentage of total. For example, if an account has been outstanding for 34 days, it is part of the “31-60 day” category. Each category includes all accounts that have aged for a particular period of time and are typically categorized as 0-30 days, 31-60 days, 61-90 days, 91-120 days and more than 120 days. To arrive at the percentage of claims below 60 days, the total dollar of each category is tabulated along with the percentage of total accounts receivable outstanding. [oc_spacer height=”10″]