If it can be Measured, it can be Managed

What does an efficient Revenue Cycle look like?

With hospital margins tighter than ever, intelligent revenue cycle management and efficient billing processes are critical. Benchmarking can show areas of underperformance and focus on opportunities for operational improvement.

The benchmarks below are industry standard and provide a guide to optimal performance within several areas of Revenue Cycle operations. Measured against these thresholds your organization can begin to see operational management and improvement opportunities revealed, allowing for identification and correction of root causes.

1. Best Practice for Patient Access

• Pre-Registration - (Excludes unscheduled visits such as emergency/urgent care cases)
Accurate completion of all patient data fields required for registration. 98%

• Insurance Verification –
(Includes non-scheduled encounters verified within one day of service or date of admission)
Scheduled encounters that have been verified prior to, or at time of service 98%

• Patient Collections - Collecting patient responsibility dollars for services rendered
Inpatient patient-pay balances prior to discharge > 65%
Outpatient patient-pay balances prior to service > 75%
ER patient-pay balances prior to departure > 50%

• Financial Counseling - Payment arrangements made for individuals prior to rendering service
Screening of uninsured IPs & high balance OPs for financial aid 98%
Payment arrangements for non-charity eligible IPs and high balance OPs 98%
Prompt-payment discount percentages 5% - 20%

2. Best Practice for Claim submission
Billing is one of the most crucial components in the healthcare business equation, requiring timely submission, corrections and consistent follow-up in order to receive timely payment for services rendered.

HIPAA-compliant electronic claim submission rate 100%
Discharged/Not Final-Billed (DNFB) backlog < 1 A/R Day
Medicare Secondaries and supplements billed following adjudication < 2 Business Days
Commercial COB billing following Primary payment < 2 Business Days
Medicare RTP (Return to Provider) rate < 3%

3. Best Practice for Error Reduction
An estimated $262 billion (9%) of the roughly $3 trillion in claims submitted by hospitals last year were initially denied. Opportunity for error in the billing process is astronomical. Many people are involved in a single patient's bill; some sources estimate up to 55% of all patient bills contain errors which may result in denials and up to 1 in 4 claims are denied, according to research from the Government Accountability Office (GAO).

Missing HCPCS or CPT-4 code 0 tolerance
Missing or Invalid CPT/HCPCS codes 0 tolerance
Missing/Invalid/Incorrect modifier 0 tolerance
Incorrect Item pricing 0 tolerance
Item description is “Miscellaneous” 0 tolerance

4. Best Practice for Denials Management
A vast majority of denied claims are recoverable (63%). However it still costs providers approximately $118 per claim on appeals, or as much as $8.6 billion in administrative costs nationwide. A typical health system can potentially lose as much as 3.3% of net patient revenue through denials.

Registration and Eligibility are cited as the leading causes of denials (23.9%) followed by Missing or Invalid Claim Data (14.6%). This combined 38.5% of denials are “Soft” denials, which can typically be paid upon correction. “Hard” denials (Non-Covered, Un-Timely Filing, etc.) must be written off.

Overall initial denials rate (% of gross revenue) < 4%
Clinical initial denials (i.e., Medical Necessity) rate (% of gross revenue) < 5%
Technical denials (fulfillment of requests by payer) rate (% of gross revenue) < 3%
Appealed denials overturned rate 40% to 60%
Underpayments additional collection rate < 75%

5. Best Practice for Accounts Receivable
Cash is the lifeblood of any business and healthcare services are no different. Maintaining a healthy accounts receivable (A/R) balance is essential to strong financial performance.

Insurance A/R > 90 days from service or discharge (percent of total Ins A/R) < 15% to 20%
Insurance A/R > 180 days from service or discharge (percent of total Ins A/R) < 5%
Insurance A/R > 365 days from service or discharge (percent of total Ins A/R) <2%
Bad debt write offs (as a percentage of gross revenue) < 3%
Charity write offs (as a percentage of gross revenue) < 3%
Net A/R Days < 50
Cost-to-Collect (as a percent of net patient revenue) < 3%

System reporting and analytics employed properly and consistently, are powerful tools in providing a comprehensive view of a hospital’s financial operations.

For a complete list of Revenue Cycle Key Performance Indicators, contact Medical Recovery Services at 816.229.4887 ext. 111.

Making Revenue Cycle Management Affordable

Medical Recovery Services is a full-service revenue cycle company assisting hospitals
and surgery centers to achieve their full earning potential for over 13 years.

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