How to Use KPIs to Improve Your Revenue Cycle
By Robert Hague, Associate Director, and Deborah Parker, Director, Medic Management Group, LLC.
As payment models change and patients are becoming more responsible for larger portions of their medical expenses, measuring an accurate revenue cycle for physicians’ offices becomes ever more important. Defining which key performance indicators (KPIs) influence revenue cycles is crucial.
Though many hospitals and practices have invested significantly in data acquisition platforms, which gather immense amounts of information, it can be easy to become overwhelmed by the amount of data. It’s important to identify which KPIs are most important to focus on so that you can use them to improve the revenue cycle.
Not All Data Are Created Equal
To improve the revenue of a practice, the education of the frontline staff is critical. Depending on the information technology (IT) solution they have at their fingertips, they could be flooded with unnecessary data that they don’t need to heed.
Instead of putting the focus on all the information they have, it’s important to help them understand exactly what information moves the practice forward. Pick the most important KPIs that help improve the practice’s revenue cycle and spend most of your time focusing on those. A revenue cycle analysis, either with your internal staff or with the help of a management service organization (MSO), can help identify which KPIs are most important to helping you maximize revenue.
What Are the Three Most Important KPIs?
Though each practice or hospital will have different KPIs that they will focus on, there are three that unite most practices. They include:
- Preventable Denials
The first KPI that all practices should focus on is lowering the number of preventable denials they have. There are usually two reasons that claims get denied:
- Is your frontline staff submitting insurance claims in a timely fashion? And if not, why not?
- Did your team apply for the proper prior authorizations before the patient came to the practice for services? Again, if not, why not?
There may be simple procedural roadblocks getting in the way of these simple functions that are leading to denials. Focusing on lowering that number—and figuring out why it’s on the high end to begin with—can have a significant impact on your practice’s profitability.
- Upfront Payments
In an era of ever-increasing price transparency, it’s important for your front-desk personnel to understand what the patient portion of their bill for any professional service is. This often requires an education process and calculations on the part of the practice, but it is essential to undertake these efforts.
Once the front desk personnel are armed with this information, they can then accurately collect as much of the patient portion of the bill as possible. This will improve cash flow within the practice and make it a much more predictable part of the office’s operating expenses. It will also cut down on the amount of time it takes to collect money from patients. Which leads to:
- Patient A/R Over 90 Days
Another KPI that bears close watching is whether you’re collecting the patient portion of services rendered within 90 days. This is a common length of time to collect medical debt, but the longer it stays out there, the less valuable it becomes to the practice.
In addition, once a debt reaches the 90-day limit, the less likely it is that you will collect it at all. Lack of collections leads to obvious cash flow problems, so the office staff needs to understand how to collect debt before it reaches that 90-day limit. Removing roadblocks to having that done is mission-critical to any physician practice.
Start with an Analysis
To determine what the most important KPIs are for your practice, start with an in-depth analysis of what is currently affecting your cash flow the most. Identify long-term trends and turn them into actionable, practical steps that will improve the practice’s revenue cycle.
Identifying KPIs and making sure they are monitored properly will significantly improve the performance of your practice’s cash flow. What should you do if you don’t have the internal staff to handle such an analysis? Consider partnering with an advisory firm that has the appropriate experience in this complicated area of the healthcare field.