Are you confused about how to evaluate your medical billing workflow performance? Key performance indicators (KPIs) for medical billing are the solution you are looking for! These metrics can help you identify areas of improvement and optimize your process for optimal results. The next question that pops into your mind must be, HOW?
Don’t worry! We will discuss all the significant key performance indicators (KPIs) for claim submission, management, and collection. However, before starting with it, let’s first understand the characteristics of effective KPIs.
Characteristics of Effective Medical Billing KPIs
Your healthcare facility’s financial performance will only be as good as you monitor it. However, you cannot just randomly pick medical billing KPIs.
If you were planning to play a blind game, stop now! Selecting appropriate KPIs requires having a solid grasp of what factors matter for your medical practice. Thus, you must ask yourself the following questions to shortlist relevant KPIs :
- What is your desired outcome at each phase of your medical billing process?
- Can you easily qualify this metric?
- Why is reaching this goal integral for your practice?
- What information do you need to quantify this metric?
- How often should you measure this metric?
- How will you use the results?
- What should you do to improve this metric?
Medical Billing KPIs for Creating Claims
While creating claims, you should measure the following key performance indicators for medical billing:
Charge Lag
This KPI calculates how many days it takes you to submit the claims from the date of rendered care services. We recommend limiting this value to two days (48 hours) for timely claim submission.
In-office Payments
In-office payments refer to the percentage of patients charged upfront for some or all of the rendered care services. We recommend keeping this benchmark to 90% for a healthier revenue cycle.
Eligibility
It is another important KPI for submitting claims and increasing your chances of claim first pass rate. It calculates the percentage of patients whose insurance eligibility was verified before the encounter. You should keep this value to 100%.
Clean Claim Rate
It measures the percentage of insurance claims submitted and successfully reimbursed on the first attempt. Achieving a score of 95% or above should be the goal of your practice.
A high clean claim rate (CCR) translates into reduced time in accounts receivable and better cash flow. Contrarily, a low CCR indicates that modifying and resubmitting the claim will take more time for your personnel.
Using accurate coding and modifiers, providing adequate supporting documentation, and prior authorization are some best practices you can implement to improve this medical billing KPI.
Medical Billing KPIs for Managing Claims
After claim submission, you should proactively manage claims for higher reimbursements. Following are some KPIs for managing claims effectively:
Denial Rate
Another significant KPI metric for medical billing is the denial rate. It calculates the percentage of denied claims by the insurance company out of the total submitted claims. Monitoring this KPI enables practices to identify issues in the claim submission and billing processes and optimize them for seamless revenue cycle management (RCM).
The formula for calculating the denial rate is the number of denied claims divided by the total number of submitted claims multiplied by 100. As per the industry standard, we recommend you limit this value to 5%.
Related Post: Denial Management in Healthcare
Unexplained Denials
Here’s another important medical billing KPI that will help you spot changes in insurance payer rules or trends. If your claims are rejected or denied, but you cannot figure out why, it’s time to take a step back and ensure you are current on the changing medical billing rules and regulations. We also recommend you aim for 0% uninvestigated denials as they offer insights into your billing performance.
Missed Filing Deadlines
You should also measure this KPI if you want effective claim management. If your practice is continuously missing claim filing deadlines, you should be worried because it will strain your practice’s finances and make it difficult to continue your operations.
One key reason behind missed deadlines can be a shortage of staff. If it is true, hire additional resources or outsource your medical billing operations. Since missing a deadline is the worst kind of negligence on your end, we recommend you limit this core to 0%.
Medical Billing KPIs for Collections
Your collections are what make your practice’s revenue! So, how can we forget to share medical billing KPIs for collections? Check out the significant collection KPIs below:
Net Collection Rate
The net collection rate (NCR) refers to the amount you actually received divided by the amount you expected to receive. You should aim for a 95% or higher net collection rate. Besides, if you want to calculate the expected revenue, use the allowable rate in your contracts with the payer, rather than what you billed.
This KPI reflects on your healthcare facility’s total billing performance. A high score reflects timely billing, proactively adjudicating unpaid claims, and efficiently receiving outstanding balances. Contrarily, a low NCR indicates poor performance and may require intervention.
Days in Account Receivables
This medical billing KPI calculates the time it takes for your healthcare facility to get reimbursements. So, how long it takes to get paid after you submit the claim? Does it take 60 days, 90 days, 120 days, or even more? The longer it takes to reimburse, the less likely it becomes to get paid.
As per the industry benchmark, the average days in A/R should be 35 days or less. You can improve this value by regularly monitoring and following up with your insurance payers for all pending claims.
Besides, we recommend you limit the A/R outstanding after 90 days to 8% and the A/R outstanding after 120 days to 5% to ensure a steady cash flow.
Bad Debt
Another KPI that you should measure is bad debt. Healthcare facilities incur it when they fail to get paid for their rendered care services. The acceptable level of bad debt varies depending on the type of healthcare facility. For example, hospitals tend to report higher levels than medical offices. The reason is simple, patients who are underinsured or not insured often show up at the hospital or emergency room.
However, we recommend you aim for a bad debt score of 5%. You can calculate bad debt by dividing total bad debt by total service revenue.
Importance of Tracking Medical Billing KPIs
We often forget that to manage something effectively, we must be able to measure it first. The same applies to medical billing and revenue cycle management (RCM).
Optimizing revenue and expenses is necessary for optimum profitability and smooth operations of a healthcare facility. Medical billing KPIs enable a better understanding of the financial standing of your practice. Besides, it serves as the key to improving your revenue cycle performance.
Additionally, KPIs serve as an early warning system, facilitating key insights that you can utilize to make data-driven decisions.
Bottom Line
Processes like claim submission, management, and collection, require their own medical billing KPIs. You can look for some characteristics such as the measurability of a metric and the end goal that you want to achieve to define KPIs for your healthcare facility.
The KPIs listed above will help you effectively monitor every step of your medical billing and in turn, improve your revenue cycle. However, if you don’t know how to do so much by yourself while providing patient care, we have you covered! MediBill MD provides professional Revenue Cycle Management services to practices of all sizes and specialties.
