the power of kpis
TRANSCRIPT
The Power of Key Performance Indicators
Know your KPIs
• Take a deep dive into your performance
– What are your Key Performance Indicators?
– Are you collecting every dime that is collectible?
– Are your payers slow to pay?
– What are your Days in A/R?
– What is your Average Reimbursement per encounter?
– What is your true Net Collection Rate?
• Compare to industry benchmarks for your specialty
• Compare to your running 6 month average for trending
• Identify the areas that need improvement
• Identify processes that need improvement
• Identify if money is leaking
“Less than excellence is not an option”
Assess Financial Performance – Measure KPIs
Why do you need to know your KPIs?
―What gets measured gets managed.‖
―What doesn’t get measured doesn’t get managed.‖
―What gets measured gets done.‖
―To measure is to know.‖
―If you can't measure it, you can't improve it.‖
- Peter Drucker
Reports Needed to Calculate KPIs
• Reimbursement Analysis – 12 month period
– By Date of Service ***
– By Payer Group (Financial Class)
• Transaction Summary Report – 12 month period
– By effective date ***
– By Payer Group (Financial Class)
• Accounts Receivable Aging
– Total A/R broken into aging buckets ***
– By Payer Group (Financial Class)
– By Responsibility (Insurance vs Patient)
*** minimum information needed for trending and benchmarks
What are Key Performance Indicators?
Key performance indicators (KPIs) – Definition
Metrics that can help you determine whether your revenue management cycle processes are efficient and effective
• A/R Over 120
– Total Accounts Receivable Over 120
– Patient A/R Over 120
• Days in A/R
• Reimbursement Rates
– Gross Collection Rate
– Net Collection Rate
– True Net Collection Rate
• Average Reimbursement per Encounter
• First Pass Resolution Rates
• Denial Rates
A/R > 120 - KPI
Definition - Total amount owed to practice for services rendered either
by 3rd party insurance or patients that is 120 days old or older.
• Accounts Receivable (A/R) is generally grouped into aging buckets based
on 30-day increments of elapsed time (30, 60, 90, 120 days).
• Total A/R that falls into the inclusive A/R>120 bucket.
• Benchmark: Less than 25% of your A/R should be in the >120 days bucket.
– Benchmarks exist per specialty
• The percentage of accounts receivable greater than 120 days old (A/R>120)
is a measure of a practice’s ability to obtain timely reimbursement.
• Identify what your 120+ is made up of.
– By Payer Group or Financial Class
– Uncollectable A/R?
• What are your write-off policies, insurance follow-up policies?
• What do your denials look like and the processes you follow to work denials?
– Patient responsibility?
• What are your processes for collecting co-pay, eligibility verification, pre-
authorization processes? Are you collecting amounts applied to deductible?
A/R > 120 - Calculating
• Calculation
Dollar Value of A/R >120 Days / Dollar Value of Total A/R
• Example:
• Total A/R = $538,874
• A/R > 120 Days = $266,275
• $266,275 / $538,874 = 49%
Practice A/R 0-120 Over 120 Balance
No Unapplied Amts $272,599.33 $266,275.16 $538,874.49
Percentages 50.6% 49.4% 100%
A/R 0-120 Over 120 Balance
Benchmark $425,710.85 $113,163.64 $538,874.49
Percentages 79.0% 21.0% 100%
$0$50,000
$100,000$150,000$200,000$250,000$300,000$350,000$400,000$450,000
A/R > 120 Days Compared to Benchmark
Practice A/R
Benchmark
Benchmarking on A/R > 120
A/R > 120 - Impact
• If the A/R over 120 is insurance
– Timely filing risk
– Indicates insurance is not being followed-up in timely manner
– Indicates insurance denials may not be worked effectively
• MGMA states 25% of denials and no-response claims are never
• If the A/R over 120 is patient – bad news
– Consider this – you have 21% chance of collecting money from patients if
you let the patient balance reach 120 days old
Impact of Patient A/R>120
Patient A/R Over 120 364,130.90$
Patient A/R 91-120 21,867.08$
Total 385,997.98$
Probable LEAK 302,970.37$
**79% of Patient A/R over 120 never collected
**70% of Patient A/R over 90 not likely to pay
Is money lost?
No but possible
Is money lost?
No but probable
Impact of A/R over 120 Days
Current A/R Over 120 381,073.44$
Benchmark A/R >120 55,367.14$
Difference 325,706.30$
At NET 146,567.84$
Days in A/R - KPI
Definition – Average number of days it takes a practice to get paid.
• Days in accounts receivable (A/R) is perhaps the single most important revenue cycle metric because it tells a practice the number of days that money owed remains unpaid.
• The lower the number, the faster a practice is obtaining payment on average.
• Days in A/R should stay below 50 days at minimum, but should generally be more in the 30-40 day range
• Benchmarks for Specialty exist
• Caution: Low Days in A/R doesn’t necessarily mean you are collecting all collectible money. What if you are writing off collectible money because it went uncollected? Your Days in A/R may look great but did you collect everything that could have been collected?
Days in A/R - Calculating
Step 1: Determine your total current receivables, then subtract any credits. Credits are funds owed by the practice to others. They offset receivables; therefore, you must subtract credits from receivables.
Step 2: Determine your average daily charge amount by dividing total gross charges for the last 12 months by 365 days
Step 3: Divide the total from Step 1 (receivables) by the total from Step 2 (charge amount).
• Calculation:
Total Receivables ÷ (Average Daily Charge Amount) = Days in A/R
• Example:
• Total Billed Charges (12 months) = $18,000,000
• Total Accounts Receivable = $2,000,000
• $18,000,000 ÷ 365 = $49,315.10 - Avg Charges per day
• $2,000,000 ÷ $49,315.10 = 41 - Days in A/R
Days in A/R - Impact
• Delayed money in door
• Days in A/R by Payer can identify slow to pay carriers
• Indicates poor revenue cycle management processes overall
– Charge lag, timely filing, lack of follow-up, lack of front-end
processes to collect, verify, pre-cert., etc.
• Does this mean $202,629 from example is money that is lost? NO
• It means there is an opportunity to get $202,629 in the door much
faster and avoid putting that money at risk of not being collected in a
timely manner
Impact of Days in A/R
1 Day of charges $49,315.10
Days in A/R 41
Benchmark 31
Current A/R $2,000,000.00
Total A/R at Benchmark $1,528,768.10
Difference $471,231.90
At Net $202,629.72
Additional Tips on Days in A/R
• Collection accounts—Accounts sent to a collection agency are often
written off the current receivables. As a result, they are not part of
the days in A/R equation. Sending accounts to collections may
improve days in A/R, but camouflage deeper issues.
– Tip: Calculate days in A/R with and without accounts sent to
collections to see a true picture of the situation.
• Credit balances—They offset receivables; therefore, you must
subtract credits from receivables.
– Tip: Monitor these statistics separately.
Reimbursement Rates
• Reimbursement Analysis Report
– Run by DOS – Payment and Adjustments tied to charges
– Run for 12 month period going back at least 90 days
– Adjustments (Insurance Adjustments and Other Adjustments)
– Payments (Insurance Payments and Patient Payments)
– Number of Encounters
– Example: 02/01/2014 – 01/30/2015 (90 days back)
– Example: 01/01/2014 – 12/31/2014 (120 days back)
GCR (Gross Collection Rate) = Payments / Charges
NCR (Net Collection Rate) = Payments + Adjustments / Charges
NCR (True Net Collection Rate) = Payments / Charges - Contractual Adjustments
Reimbursement Analysis Report - EXAMPLE
DOS Encounters Billed Charges
Insurance
Payments
Patient
Payments Total Payments
Insurance
Adjustments
Patient
Adjustments
Total
Adjustments
2013-10 448 353,150.09$ 111,148.79$ 12,654.09$ 123,802.88$ 197,342.19$ 20,965.30$ 218,307.49$
2013-11 330 251,696.74$ 63,386.39$ 12,913.30$ 76,299.69$ 150,742.21$ 8,524.71$ 159,266.92$
2013-12 319 214,231.43$ 51,642.03$ 15,470.74$ 67,112.77$ 102,260.85$ 30,786.80$ 133,047.65$
2014-01 300 281,597.15$ 73,401.32$ 11,002.32$ 84,403.64$ 172,286.56$ 17,773.27$ 190,059.83$
2014-02 243 175,488.68$ 41,801.07$ 10,039.32$ 51,840.39$ 99,205.09$ 18,719.99$ 117,925.08$
2014-03 296 349,391.93$ 63,490.07$ 17,369.53$ 80,859.60$ 230,861.22$ 9,461.61$ 240,322.83$
2014-04 323 356,448.26$ 97,308.94$ 17,017.31$ 114,326.25$ 205,994.15$ 26,296.37$ 232,290.52$
2014-05 213 193,886.49$ 45,520.58$ 14,722.31$ 60,242.89$ 111,462.93$ 7,413.42$ 118,876.35$
2014-06 265 263,173.64$ 68,334.79$ 11,008.87$ 79,343.66$ 157,246.01$ 10,023.20$ 167,269.21$
2014-07 257 230,667.76$ 49,410.85$ 26,983.96$ 76,394.81$ 115,126.61$ 18,369.83$ 133,496.44$
2014-08 253 337,024.07$ 68,373.19$ 8,266.12$ 76,639.31$ 197,462.91$ 29,507.48$ 226,970.39$
2014-09 216 246,109.92$ 59,623.24$ 6,628.79$ 66,252.03$ 161,357.49$ 5,239.87$ 166,597.36$
Totals 3463 3,252,866.16$ 793,441.26$ 164,076.66$ 957,517.92$ 1,901,348.22$ 203,081.85$ 2,104,430.07$
• From this report
– Gross Collection Rates per month and average
– Net Collection Rate per month and average
– True Net Collection Rate per month and average
– Average Reimbursement per Encounter per month and average
Gross Collection Rate - KPI
Definition – Percentage of Gross Charges Collected
• There are benchmarks per specialty.
• Fee schedules can impact this greatly
– Very high fee schedules produce lower GCR
– Really low rates – fee schedules may need to be reviewed
• 120-130% of Medicare fee schedules?
– Really high rates – fee schedules may need to be reviewed
• Are you charging less than what is allowed?
– If high variance from benchmark – review GCR by payer
• Trending is good to look at GCR month after month
Indicator PSR Range **
Annual Gross Charges * $1,864,217 - 2,446,785
Gross Collections Percentage 45 - 49
Net Collection Percentage 98.6 - 99.6
Gross Collection Rate - Calculating
• Calculation
GCR (Gross Collection Rate) = Payments / Charges
• Example:
• Total Billed Charges (12 months) = $7,213,597
• Total Payments (12 months) = $3,168,150
• $3,168,150 / $7,213,597 = 43.92% Gross Collection Rate
Charges Total Payments Contractual Adj Manual Adj GCR
7,213,597.62$ 3,168,150.98$ 3,575,354.27$ 138,945.37$ 43.92%
January 2014 - December 2014
Net Collection Rate - KPI
Definition - Percentage of Charges that were collected or adjusted off
• Formula: Payments + Adjustments Divided by Charges
• Caution: If using ALL Adjustments in this formula
– If number is high - Ideal
• Practice is billing out timely
• Claims are adjudicated (contractual adjustments are made)
• Patient balances are all collected
– If number is high
• Practice is billing out timely
• Claims are adjudicated (contractual adjustments are made)
• Patient balances are NOT collected (other adjustments are made)
– If number is high
• Practice is billing out timely
• Claims are adjudicated and denied (contractual adjustments are
disguised or adjusted off due to uncollectible reasons)
• Patient balances are NOT collected (patient adjustments are made)
Net Collection Rate - Calculating
• Calculation
NCR (Net Collection Rate) = (Payments + Adjustments) / Charges
NCR (Net Collection Rate) = (Payments + Contractual Adj) / Charges
• Example:
• Total Billed Charges (12 months) = $7,213,597
• Total Adjustments (12 months) = $3,714,299
• Total Payments (12 months) = $3,168,150
• (3,168,150 + 3,714,299) / $7,213,597 = 95.41% NCR
Charges Payments Contractual Adj Manual Adj GCR NCR
$7,213,597.62 $3,168,150.98 $3,575,354.27 $138,945.37 43.92% 95.41%
January 2014 - December 2014
Adjusted Net Collection Rate - KPI
Definition – The adjusted collection rate represents the percentage of reimbursement collected from the total amount allowed based on contractual agreements and other payments,
i.e., what you collected versus what you could have/should have collected.
• Cash collections divided by net charges (charge value)
– Net charges are the difference between gross charges and required government and third party adjustments.
• This is using Contractual Adjustments only
• If number is high
– Practice is billing out timely
– Claims are adjudicated (contractual adjustments are made)
– Patient balances are all collected (not a lot of non-contractual adjustments)
• If number is low
– Practice is not billing out timely and/or claims are not being followed-up
– Balances are not being collected after payer adjudication
– Money is not being collected
– Caution: All contractual adjustments may not be in system – (Back up 90 days) – all claims should be adjudicated by then. Compare Contractual Adjustment percentages to fee schedules. Key is getting Allowable Amounts for your charge value. Check your Contractual Adjustments and if you are in line – this represents the REAL NUMBER.
Adjusted Net Collection Rate - Calculating
• Calculation
Adjusted NCR (True Net Collections) = Payments / Charges - Contractual Adj.
• Example:
• Total Payments (12 months) = $3,168,150
• Total Billed Charges (12 months) = $7,213,597
• Total Contractual Adj. (12 months) = $3,575,354
• $3,168,150 / ($7,213,597-$3,575,354) = 87.08% Adj. Net Collections
Charges Payments Contractual Adj Manual Adj GCR NCR True NCR
$7,213,597.62 $3,168,150.98 $3,575,354.27 $138,945.37 43.92% 95.41% 87.08%
January 2014 - December 2014
Average Reimbursement per Encounter - KPI
Definition - This is the average amount a practice collects per
encounter.
• When benchmarked within a specialty, this metric gives practices a
sense of whether they’re performing well or could realistically be
bringing in more money. When tracked over time and compared with
historical practice results, it provides a simple, yet powerful gauge of
whether your practice is trending in a positive or negative direction,
so if negative, your practice must take steps to get back on track
– Examples:
– Diversifying your patient or payer mix
– Improving collections – assess your current performance
– E&M Utilization review – assess your current performance
– Review fee schedules
Average Reimbursement Encounter - Calculating
• Calculation
Total Encounters (12 months) / Total Payments (12 months)
• Example:
• Total Payments (12 months) = $957,517
• Total Encounters (12 months) = 3463
• Average Reimbursement per Encounter = $276.50
• $957,517 / 3463 = $276.50 Avg Reimbursement per Encounter
Benchmarking on Average
Reimbursement per Encounter
First Pass Resolve Rate - KPI
Definition - Percent of claims that are successfully resolved on the initial
submission (e.g., paid or transferred to patient responsibility).
• Calculation
Total claims submitted first pass / Total claims paid
• Practice wants this to be high. Less deals to work and less deals to follow
up on if paid first time. 95% or higher is great
• Most systems don’t track this
• MGMA states 25% of all claims not paid are never followed up on
• Why are they not getting paid?
– What are the denial reasons and categories?
• What are your processes?
– How do you follow up on delinquent claims?
– How do you check for under-payments even if you got paid?
– Who on your staff handles the follow-up process?
Denial Rate - KPI
Definition - Percent of claims (both pended and denied) that require the practice to perform back-end rework.
• Practice wants this to be low. Less denials to work. 4% or lower is great (benchmarks are available)
• MGMA states 25% of denials are never paid.
• MGMA states cost to work denial is $49/claim.
• Why are they getting denied?
– What are the denial reasons and categories?
• Eligibility Verification
• Authorizations
• Coding
• Enrollment/Credentialing
• Process questions
– How do you work denied claims?
– Who on your staff works denials?
– How do you verify eligibility?
– Check-in processes?
Benchmarking on Denials
0.00%
5.00%
10.00%
15.00%
201
4-1
2
201
4-1
0
201
4-0
8
201
4-0
6
201
4-0
4
201
4-0
2
Den
ial R
ate
Denial Rate
Benchmark
Financial Impact of Denials and No-
Response
Impact of Denied and No-Response Claims
Charges Denied/No-response $834,600.00
25% (MGMA *RISK) 208,650.00$
Amount at RISK At Net 93,892.50$
GCR used to calculate At Net