Five Key Components You’ll Need to Maximize Your Revenue Cycle

Your practice may be struggling to collect the money it’s owed. Medical groups are losing 3% to 5% of their net revenue from inadequate RCM processes and procedures. According to MGMA, this is a growing problem, and could be due to a number of reasons but some of the most common may include:

However, having a solid revenue cycle plan in place will greatly improve your practice’s revenue and metrics.

How Are You Tracking Your Revenue Success?

The key components to a successful revenue cycle strategy begins with transparency, tracking, and benchmarking. Once your benchmarking work is done, you’ll use this measurable data to develop a plan of action based on your determined goals and objectives. To help you get there, we’ve compiled a list of metrics and calculations to keep your practice on track.

1. Days in Accounts Receivable

One of the most important key performance indicators used to grow a practice, and is also known as the average number of days it takes to collect payments due to the practice. The objective is minimizing the delay between claim submission and when the actual payment is received for those services.

Tip: To calculate, compute the average daily charges for the last 6 months, add up the charges posted in those months, and divide by the total number of days in those months. Next, divide the total accounts receivable by the average daily charges. Our team suggests that a healthy-days in A/R is about 40 days aged, however it is recommended to aim for about 35 days.

2. Accounts Receivable Over 90 Days

Or, the number of claims that have aged past the 90-day mark. Why is this important? United Healthcare has a 90-day timely filling limit and will deny claims after that timeframe. Other payers have 120-150 timely filling limits, but the longer a claim sits unpaid, the harder it is to collect. This attributes to the growing amount of medical debt across the United States.

Tip: To calculate A/R over 90 percentage, divide your total accounts receivable, without credits, by your total accounts receivable over 90 days. Our team recommends your percentage remain at or below 10%.

3. Clean Claim Rate

Tracking clean claim rates can help your practice identify gaps within your existing revenue cycle strategy, for both staff resources and technology. This measure tracks how successful your practice is in getting insurance claims processed and reimbursed the first time they are submitted. Simply put, a clean claim will be paid the first time around.

Tip: To calculate your clean claim rate, divide the number of claims that pass all edits (with no manual intervention) by the total # of claims accepted into the claims processing tool for billing. Implement a process to scrub claims before they leave your door. Scrubbing should include a mix of manual and automated rules engine reviews. Our team recommends your clean claim rate remain higher than 95%.

4. Denial Rate

Denial rates will always exist in healthcare, and rarely can a practice boast a 0% for this metric. The consequences of not tracking denial rates can prove to be costly to your revenue stream and staff resources. In fact, the average cost to rework one denied claim is $25 and 50% to 65% of denials are never reworked.

Tip: To calculate your denial rate, divide the total dollar amount of claims denied by payers within a certain period by the total dollar amount of claims submitted within a certain period. The industry average denial rate is 6%. Considering the time and cost to rework denied claims, our team suggests tracking this metric regularly to prevent a backlog in revenue and resources.

5. Net Collection Rate

This metric tracks how much your practice collected vs. how much you should have collected from a claim. Factors that may negatively impact your net collection may include non-collectable bad debt, untimely filing, failure to obtain prior authorization, and other non-contractual adjustments.

Tip: To calculate your net collection rate, divide the total amount of payments (net of all payments) for a certain period of time by charges for a certain period of time. We recommend aiming for 96% or higher in this metric.

How can you optimize your billing strategies?

Make sure to:

It’s crucial to establish open communication, necessary guidelines and expectations, especially if you are working with a third-party vendor or agency for additional revenue management assistance.

Find out how your practice matches up to these 5 metrics. Schedule a free consultation with our Revenue Cycle Management Team, and get your questions answered today.

Making Bank: Managing and Monitoring Your Revenue Cycle. (2018). MGMA.
Unlocking and Using Practice Performance Intelligence. (2018). MGMA
You might be losing thousands of dollars per month in “unclean” claims. (2014). MGMA.
Not-so-graceful aging: Half of practices saw days in A/R increase in 2021. MGMA.
Practice Finances. (2021). American Academy of Family Physicians.

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