August 11, 2023

9 Revenue Cycle Management KPIs to Track

Revenue cycle management (RCM) is the process of managing the financial aspects of a healthcare organization, from patient registration to payment collection. RCM involves various steps, such as coding, billing, claims submission, denial management, and collections. To measure the effectiveness and efficiency of RCM, healthcare organizations need to track key performance indicators (KPIs) that reflect the health of their revenue cycle.

KPIs are quantifiable metrics that help evaluate the performance of a process or a goal. They can help identify strengths, weaknesses, opportunities, and threats in the revenue cycle and provide insights for improvement. In this blog post, we will discuss 6 important KPIs that every healthcare organization should track to optimize their RCM.

Revenue Cycle Management KPIs

1. Days in Accounts Receivable (DAR)

Days in accounts receivable (DAR) is the average number of days it takes for a healthcare organization to collect payment from its patients or payers. It is calculated by dividing the total accounts receivable by the average daily net patient service revenue. A lower DAR indicates a faster and more efficient collection process, while a higher DAR indicates a slower and less efficient collection process.

DAR is influenced by several factors, such as billing accuracy, claim submission timeliness, payer contract terms, denial rate, and collection efforts. To reduce DAR, healthcare organizations should implement best practices such as verifying patient eligibility and benefits, submitting clean and accurate claims, following up on denials and appeals, and offering flexible payment options to patients.

2. Clean Claim Rate (CCR)

Clean claim rate (CCR) is the percentage of claims that are submitted without errors and are paid on the first submission. It is calculated by dividing the number of clean claims by the total number of claims submitted. A higher CCR indicates a higher quality of coding and billing, while a lower CCR indicates a higher risk of denials and rejections.

CCR is influenced by several factors, such as coding accuracy, documentation completeness, charge capture timeliness, and payer rules and regulations. To improve CCR, healthcare organizations should implement best practices such as using certified coders, conducting regular audits and feedback sessions, implementing charge capture software, and staying updated on payer policies and changes.

3. Denial Rate (DR)

Denial rate (DR) is the percentage of claims that are denied by payers for various reasons, such as coding errors, missing information, duplicate claims, or non-covered services. It is calculated by dividing the number of denied claims by the total number of claims submitted. A lower DR indicates a lower risk of revenue loss, while a higher DR indicates a higher risk of revenue loss.

DR is influenced by several factors, such as payer policies, coding guidelines, documentation standards, and claim submission timeliness. To reduce DR, healthcare organizations should implement best practices such as verifying patient eligibility and benefits, using appropriate modifiers and diagnosis codes, providing sufficient documentation to support medical necessity, and submitting claims within the payer deadlines.

4. Cost to Collect (CTC)

Cost to collect (CTC) is the ratio of the total cost of RCM activities to the total net patient service revenue. It is calculated by dividing the total RCM expenses by the total net patient service revenue. A lower CTC indicates a more efficient and profitable RCM process, while a higher CTC indicates a less efficient and profitable RCM process.

CTC is influenced by several factors, such as staff productivity, technology adoption, outsourcing decisions, and process improvement initiatives. To reduce CTC, healthcare organizations should implement best practices such as optimizing staff utilization, leveraging automation and analytics, outsourcing non-core functions, and streamlining workflows and policies.

5. Revenue per Encounter (RPE)

Revenue per encounter (RPE) is the average amount of revenue that a healthcare organization generates from each patient encounter. It is calculated by dividing the total net patient service revenue by the total number of encounters. An encounter is defined as any interaction between a patient and a healthcare provider that results in a charge or a claim. A higher RPE indicates a higher revenue potential, while a lower RPE indicates a lower revenue potential.

RPE is influenced by several factors, such as payer mix, service mix, charge capture accuracy, and reimbursement rates. To increase RPE, healthcare organizations should implement best practices such as diversifying their service offerings, capturing all charges for services rendered, and negotiating favorable reimbursement rates with payers.

6. Days in AR (DAR)

Days in AR (DAR) is the same as Days in Accounts Receivable (DAR) that we discussed earlier. It is the average number of days it takes for a healthcare organization to collect payment from its patients or payers. It is calculated by dividing the total accounts receivable by the average daily net patient service revenue. A lower DAR indicates a faster and more efficient collection process, while a higher DAR indicates a slower and less efficient collection process.

7. Discharges Not Fully Billed (DNFB)

Discharges not fully billed (DNFB) is the percentage of discharged patients whose bills have not been completed and submitted to payers. It is calculated by dividing the number of discharged patients with incomplete bills by the total number of discharged patients. A lower DNFB indicates a shorter billing cycle and a lower risk of delayed or lost revenue, while a higher DNFB indicates a longer billing cycle and a higher risk of delayed or lost revenue.

DNFB is influenced by several factors, such as coding timeliness, documentation completeness, charge capture accuracy, and billing system efficiency. To reduce DNFB, healthcare organizations should implement best practices such as coding within 24 hours of discharge, ensuring complete and accurate documentation, capturing all charges for services rendered, and using automated billing software.

8. POS (Place of Service) Cash Collections

POS (place of service) cash collections is the amount of cash that a healthcare organization collects from patients at the point of service. It includes copayments, deductibles, coinsurance, and self-pay amounts. It is calculated by dividing the total POS cash collections by the total patient responsibility. A higher POS cash collection indicates a higher level of patient payment compliance and a lower risk of bad debt, while a lower POS cash collection indicates a lower level of patient payment compliance and a higher risk of bad debt.

POS cash collections are influenced by several factors, such as patient education, payment policies, payment methods, and collection staff training. To increase POS cash collections, healthcare organizations should implement best practices such as educating patients about their financial obligations, enforcing clear and consistent payment policies, offering multiple and convenient payment methods, and training collection staff on effective communication skills.

9. Patient Satisfaction (PS)

Patient satisfaction (PS) is the degree to which patients are satisfied with the quality of care and service they receive from a healthcare organization. It is measured by various methods, such as surveys, ratings, reviews, and feedback. A higher PS indicates a higher level of patient loyalty and retention, while a lower PS indicates a lower level of patient loyalty and retention.

PS is influenced by several factors, such as clinical outcomes, communication skills, wait times, billing transparency, and payment convenience. To improve PS, healthcare organizations should implement best practices such as providing patient-centered care, enhancing patient education and engagement, reducing wait times and no-shows, providing clear and accurate billing statements, and offering multiple payment channels.

Conclusion

RCM is a vital function for any healthcare organization that aims to maximize its revenue and profitability. By tracking these 6 KPIs, healthcare organizations can monitor their RCM performance and identify areas for improvement. By implementing best practices and leveraging technology solutions, healthcare organizations can optimize their RCM process and enhance their financial health.

FAQs

What is revenue cycle management (RCM)?

Revenue cycle management (RCM) is the process of managing the financial aspects of a healthcare organization, from patient registration to payment collection. RCM involves various steps, such as coding, billing, claims submission, denial management, and collections.

Why is RCM important for healthcare organizations?

RCM is important for healthcare organizations because it affects their revenue and profitability, as well as their patient satisfaction and retention. By optimizing their RCM process, healthcare organizations can improve their cash flow, reduce their costs, increase their efficiency, and enhance their quality of care and service.

How can healthcare organizations measure their RCM performance?

Healthcare organizations can measure their RCM performance by tracking key performance indicators (KPIs) that reflect the health of their revenue cycle. Some of the common KPIs are days in accounts receivable (DAR), clean claim rate (CCR), denial rate (DR), net collection rate (NCR), cost to collect (CTC), and patient satisfaction (PS).

What are some of the best practices for improving RCM?

Some of the best practices for improving RCM are:

• Verifying patient eligibility and benefits before providing services
• Using certified coders and ensuring coding accuracy and compliance
• Submitting clean and accurate claims within the payer deadlines
• Following up on denials and appeals promptly and effectively
• Offering flexible payment options and discounts to patients
• Negotiating favorable contract terms and reimbursement rates with payers
• Leveraging automation and analytics to streamline workflows and reduce errors
• Outsourcing non-core functions to reduce overhead and improve quality
• Conducting regular audits and feedback sessions to identify and correct issues
• Educating and engaging patients about their financial obligations and rights.

What are some of the challenges and trends in RCM?

Some of the challenges and trends in RCM are:

• Increasing complexity and variability of payer policies and regulations
• Rising patient responsibility and consumerism in healthcare
• Growing competition and consolidation in the healthcare market
• Shifting from fee-for-service to value-based payment models
• Adopting new technologies such as artificial intelligence, blockchain, and telehealth