In revenue cycle management for healthcare organizations, there are specific benchmarks you should be shooting for. These benchmarks can indicate whether your practice or RCM service is performing efficiently to collect all of the money your hard work has earned. The Medical Group Management Association, or MGMA, has key performance indicators, or KPIs, that everyone involved in RCM should be either hitting or exceeding. In knowing where you measure up, you can get a good idea of how well your organization is performing.
Key Performance Indicators & Improving Your RCM Services
Many metrics have to do with your AR and the number of days it takes either the insurance company or patient to pay your practice. According to the MGMA, less than 25% of your AR should be older than 120 days. That means most accounts should be paying you for services rendered before the 120-day mark.
The lower your AR number, the faster your practice is getting paid. This number should stay below 40 days, at minimum, with the ideal being 30-35 days. If you can get paid quicker with your AR being even lower, that’s great and means your practice or RCM service is efficient at obtaining payment.
First pass resolve rate is also a critical industry indicator for your RCM service. This term refers to the percentage of claims your RCM service resolves successfully on the first submission. According to MGMA, this rate should be 96% or higher. Any lower, and your practice is incurring undue delays and claim denials that prevent you or your employees from receiving a fair and well-deserved wage.
Net collection rate, or the rate of your effectiveness in collecting reimbursements based on the total amount allowed, is another KPI from the MGMA to measure your RCM service against. If this number is high, it means your practice is sending out bills on time, claims are adjudicated, and all patient balances are collected. This is what you want and should be your ultimate goal.
Finally, the denial rate for your claims is another KPI that can tell you how you measure up to industry averages in RCM. This average is 5-10%; however, the lower this percentage, the better. A lower rate means insurance providers deny fewer claims, and your staff doesn’t have to spend time reworking denials. As a result, there’s a healthy flow of revenue from patients and their insurance providers to your practice and the people providing these essential healthcare services.
What to Do If Your RCM Isn’t Efficient
With these extensive performance indicators, it can be challenging to figure out what to do if your practice or healthcare RCM company isn’t performing to industry standards.
The first step is looking at whether or not you use a dedicated RCM service or if in-house staff is performing these duties. While having your team multitask may seem like a clever idea, it can cause human-made errors that lead to undercoding, overcoding, or claim denials. However, if you use an RCM service whose only job is to handle the billing, it can cut back on these errors and ensure money is paid for services rendered.
From here, making sure your KPIs compare to industry averages is as simple as evaluating each key metric. For example, if your days in AR or percentage of AR over 120 days are both high, determining the individual payers or providers who are slower to pay can help you create a strategy to address the issue.
It’s all about being proactive and not letting the numbers pass you by. The sooner you start deciding on solutions for improving your billing and collections, the better off your RCM will be — and your practice, as a result.
How to Exceed Industry Standards
While evaluating your practice against industry averages is crucial in determining how efficiently you are obtaining payment, it can be a hassle and cause undue stress on your current staff. A dedicated healthcare RCM company can shoulder that responsibility so you can focus on what matters most: your patients. Set up a consultation with our team today to discover how we can help maximize your practice’s revenue and success.