Key RCM Metrics

Here are 5 quick ways to assess the health of your private practice’s revenue. In truth, these are the same key performance indicators that you should be asking about regardless of whether you are in private practice or are an employed physician. These key metrics are essential indicators in assessing your practice’s health.

1. AR Days

Why monitor?  Days in Accounts Receivable (AR) measures the amount of time it takes to receive payment on a claim. This metric helps you to identify potential revenue cycle issues and measure the efficiency of your billing team.

How to calculate – Total Account Receivable/ (12 months of gross charges/365)

Target Benchmarks – The industry standard is 35 days. AR Days above 60 is a red flag.

A high number of days in AR days should sound a clear warning alarm.

Ways to improve your days in AR-

• Submit claims daily
• Collect co-pays, coinsurance, and deductibles upfront
• Choose electronic billing options
• Enroll in the electronic payment option
• Prompt follow-up of aging claims
• Post payments with no delay
• Simplify the bills so easily understood by patients

2. Percentage of AR Greater than 90 Days 

Why monitor?  This is an essential indicator of whether your patients and insurers are paying you promptly. Often practices and billing companies choose not to pursue collections for outstanding AR cases greater than 60/90 days because it involves an enormous amount of labor-intensive work.

How to calculate – AR > 90 days/ Total AR

Target Benchmark – You should strive to keep 90 AR Days below 10%. Anything higher is a sign of an inefficient payment process.

3. First Pass Acceptance Rate 

Why monitor?  First Pass Acceptance Rate (FPAR) or First Pass Clean Claim Rate (FPCCR) can uncover problems and inefficiencies in your claim submission and processing. If your FPAR or FPCCR is low, it reflects the inefficiency of your claims processing team. 

You want to use the First Pass Acceptance Rate (FPAR) because it only calculates acceptance based on the first submission of the claims. You don’t want to use the Claims Acceptance Rate (CCR) because it’s the total rate of all claims submitted, even if they are initially rejected.

Improving FPAR results in lower AR days and quicker payments. Errors, oversights, and inefficient billing processes are common causes of a low FPAR. And, more often than not, this is an issue with your front office processes.

How to calculate – # of claims paid on first pass/ total # of claims submitted in a time frame

Target Benchmark – The industry target is 98%. An efficient, well-run physician practice should be more than 90%.

4. Net Collection Rate 

Why monitor? Net Collection Rate (NCR) measures how much you are supposed to collect from both patients and their insurance companies. A high NCR reflects timely billing, adjudicated claims, and patient balances are all being collected. Gross charges (what you bill) do not provide any meaningful information. On the other hand, net collections represent what you realistically can expect to collect. It reflects how denial rates, unreimbursed visits, and other factors affect revenue.

How to calculate – (Payments/(Charges-Contractual Adjustments)* 100%

Target Benchmark – If your NCR is lower than 90-100% after write-offs, you need to audit of billing practices.

5. Denial Rate 

Why monitor? The denial rate is the percentage of claims denied by payers and helps measure your revenue cycle management processes’ effectiveness. A low denial rate indicates healthy cash flow and provides insights into how efficiently your claims are processed.

If your denial rate is not addressed, it will negatively affect your other key performance indicators (KPIs.)

How to calculate – Total # of claims denied/ Total # of claims submitted (for a specific period).

Target Benchmark – Your denial rate should be less than 10%.

Here are the most common causes of high denial rates:

• Missing information. A required field left blank on a claim form or incorrectly entered patient information can result in the claim being denied. 
• Duplicate claim or service. These are claims resubmitted for a single visit with one provider.
• The payer doesn’t cover service. Health insurance plans usually don’t cover all procedures. You must know what is and isn’t covered BEFORE you perform the service.
• Improper or lack of coding. Code claims to the fullest level of specificity possible with all identifiers and modifiers included every time. Learn to code. Most physicians only need to know 15-20 codes/identifiers/modifiers. Do not rely on your billing folks to code for you.
• The patient is ineligible for services. To make sure your patient is covered by insurance, double-check their insurance information at the start of each visit.
• The claim is missing authorizations. If proper authorization for a service is not obtained before the patient receives service, the claim will likely be denied. 
• The time limit for filing has expired. Most payers require claims submission within a specific time window, even for complex claims. 
• The service has already been adjudicated. A specific medical service was already included in a claim for another service or procedure already adjudicated by the payer.