Billing & Reimbursement | Revenue Cycle Management
TOP 8 METRICS
TO MAXIMIZE YOUR
PRACTICE’S
REVENUE
Billing and Reimbursement for Physician Offices, Ambulatory Surgery
Centers and Hospitals
Billings & Reimbursements
Revenue Cycle Management
“Top 8 Metrics
to Maximize Your
Practice’s Revenue”
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Contents
3 Verification of Benefits/Collecting co-payments s
4 Pre-Authorizations
4 Coding review and claim scrubbing
4 Clean claim submission rate
5 Denial rate
6 Your Adjusted Collection Rate
7 Reimbursement Ratio - Closed Claims vs. Overall
8 Negotiating Your Fee Schedule
TOP 8 METRICS TO MAXIMIZE YOUR PRACTICE’S REVENUE
Billing and Reimbursement for Physician Offices, Ambulatory Surgery Centers and Hospitals
The Top 8 Metrics
to Maximize Your Practice’s Revenue
At MediGain our primary purpose is to help practices optimize their reimbursements and maximize their revenue. As
a full-service, professional revenue cycle management company, we have spent years working with a wide range of
practices, specialties and hospitals. Here is what we find the most successful practices have in common.
1. Verification of Benefits/Collecting co-payments should be 100%.
Believe it or not, it all starts at your front desk. Your staff should be using an up-to-date, top tier, Practice Management
System (PMS). They should use iVerify, eEligibility or a similar system to automatically verify insurance coverage while
scheduling the appointment. Then they can use this online system to check/double check the patient’s deductible,
co-insurance, co-pay, etc. The key benefits from this best practice are to prevent lost/delayed revenue from billing the
wrong insurance, and to arm the front desk staff with the information they need at the time of the patient encounter to
maximize their cash collection of the patient’s responsible portion of their encounter.
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TOP 8 METRICS TO MAXIMIZE YOUR PRACTICE’S REVENUE
Billing and Reimbursement for Physician Offices, Ambulatory Surgery Centers and Hospitals
2. Pre-Authorizations should be 100%.
To prevent lost revenue from lack of prior authorization denials, it is essential that every procedure that requires
pre-authorization is in fact pre-authorized. The practice should utilize formal processes to ensure that all required
pre-authorizations are performed at least 72 hours in advance of the procedure, and that emergency procedures are
authorized within the required authorization window after the procedure.
3. Coding review and claim scrubbing should be 95% or greater.
Before submitting any claims, all procedure and diagnosis coding should be reviewed and “scrubbed.” Ensure that
the ICD-9CM, CPT, HCPCS codes and appropriate modifiers are billed. In October of 2015 you will have to take into
account the switch to ICD-10. This will reduce the percentage of claims that are denied, delayed, or partially paid, and
thus prevent lost revenue for the practice. Ideally, the coding review and scrubbing is performed by a combination of
highly experienced and certified coders and highly sophisticated coding and claims scrubber software. A professional,
full-service revenue cycle management company, like MediGain, has certified coders for specific specialties.
4. Clean claim submission rate
should be greater than 95+% (best = 98-99%).
Sending a claim which is complete and accurate the first time it is submitted is essential to increase cash flow, minimize
days in accounts receivable, and prevent lost revenue from denied, delayed, or partially paid claims. This will reduce
the number of times that the Billing staff touches the claim. When reviewing your internal team or looking to outsource
your billing, be sure to verify their clean claim submission rate.
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TOP 8 METRICS TO MAXIMIZE YOUR PRACTICE’S REVENUE
Billing and Reimbursement for Physician Offices, Ambulatory Surgery Centers and Hospitals
5. Denial rate should be less than 5%
Technically, denials are claims that are adjudicated and rejected by the payer. Although there are specialty specific
nuances, in general the best practices have an average of less than 5% denial rate when they submit their claims.
The denial rate is the percentage of claims denied by payers. (Some practices may measure this metric based on the
percentage of charge line items denied.)
The lower this number, the better a practice’s cash flow and the less staff a practice needs to maintain that cash flow.
Denied claims create the need for manual intervention, thus increasing practice costs, delaying payments and reducing
revenue from any claims for which the denials are not timely and effectively addressed. A common problem with many
busy practices is that many claim denials sit unworked since denials are usually the most difficult and time-consuming
work for billing staff. Your revenue cycle management company should have a dedicated team assigned to handling
denials and follow-up, follow-up, follow-up.
Average performers have a denial rate of 5 to 10%. Poor performing practices may have more than 10% of their
claims denied on the first submission. To calculate your denial rate you should use a designated period of time (the last
month, the last quarter, etc.). Then total the dollar amount of claims denied by your payers and divide that figure by the
total dollar amount of claims submitted by your practice during that period of time. (Note: some use charge line items
denied divided by total charge line items submitted.) If you would like to get into greater detail, do a denial rate analysis
by payer, provider, remark code and/or category.
A professional full-service revenue cycle management company provides a dedicated team handling all the denials and
follow-up. Many in-house billing operations tend to lack the expertise, sophisticated processes and software, and time
to timely and effectively work all denials. In addition, many in-house billers tend to avoid the hassle of following up on
the smaller denials and only focus on the larger claims. However, if your in-house billing team does not follow-up on
several $20 claims each day, that equals a loss of over $10,000 from your bottom line each year.
In addition, mistakes can be made in coding and charge entry. If your in-house billers do not catch mistakes before they
go out the door, it is costing your practice money. Metric #3 stated that 100% of your claims should be reviewed for
proper coding and scrubbed to avoid denials. If your in-house billing team or your billing and reimbursement provider
do not review and scrub all your claims before they are submitted you should consider switching to a professional fullservice revenue cycle management provider. A professional full-service revenue cycle management company with a
dedicated denials team is a critical value-add to increase revenue and cash flow timeliness over most in-house billing
operations.
* Work denials before the EFT is posted to the system.
* Report on top denials and provide feedback to your staff and providers
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TOP 8 METRICS TO MAXIMIZE YOUR PRACTICE’S REVENUE
Billing and Reimbursement for Physician Offices, Ambulatory Surgery Centers and Hospitals
6. Your Adjusted Collection Rate should be 98%.
The adjusted (or net) collection rate is a measure of a practice’s effectiveness in collecting all legitimate reimbursement.
That is, it shows the percentage achieved out of the reimbursement allowed based on the practice’s contractual
obligations. This figure reveals how much revenue is lost due to factors such as uncollectible bad debt, untimely filing
and other non-contractual adjustments.
A firm patient financial policy and billing protocol
is necessary in order to achieve such a high net
collection rate across the practice. One can look
at just the insurance net collection rate, the patient
net collection rate or the combination, but in any
case there should be good patient billing practices
in place to ensure those monies are collected to the
fullest extent possible.
Divide payments (net of credits) by charges (net of
approved contractual adjustments) for a selected
time frame. This calculation should be based on
matching the payments to the charges that created
them. This way, the practice avoids comparing
charges generated in the current month with
payments and adjustments taken on claims from
many prior months (this can lead to great fluctuations
in the results for this calculation).
If your practice management system can’t match payments with their originating charges, you should perform this
calculation using aged data, typically from six months back, so it ensures a majority of the claims used for the calculation
have had ample time to clear.
To calculate the adjusted collection rate: divide payments net of credits by charges net of approved contractual
adjustments, then multiply by 100. The total adjusted collection rate comes to a percentage.
Additional caveats:
• Including inappropriate write-offs in the calculation of adjusted collection rate: Do not apply inappropriate
adjustments to charges when posting payments - such as combining non-contractual adjustments and contractual
adjustments together. Non-contractual adjustments must be appropriately designated, computed separately and
placed in applicable categories indicating the reason, such as “untimely filing,” “failure to obtain pre-authorization,”
and so forth. Tracking non-contractual adjustments based on their reasons will help reveal sources of errors and find
opportunities to improve revenue cycle performance.
• Not having access to your fee schedules or reimbursement schedules for each payer: Without this data,
you cannot truly know what you should have been paid. As a result, more inappropriate write-offs may go undetected.
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TOP 8 METRICS TO MAXIMIZE YOUR PRACTICE’S REVENUE
Billing and Reimbursement for Physician Offices, Ambulatory Surgery Centers and Hospitals
7. Reimbursement Ratio Closed Claims vs. Overall Claims should be equal
This a measurement of two different collections ratios versus corresponding charges.
A Closed Claim includes patient payment and full reimbursement from a Payor with any contractual adjustments made.
The Closed Claim Ratio compares the Payor reimbursement and patient payment from claims matched exactly to the
corresponding charges.
The Overall Claims Ratio is the percentage of Total Revenue to every claim submitted, Total Charges, including those
with any outstanding balance and all claims written off.
These ratios when compared to each other should be as close to the same number as possible. A very well run
practice may only have a difference of 1 deviation or less in this metric. 39% Closed Claims % vs. 38.5% Overall
Reimbursement Ratio would mean that the practice receives almost all of their monies fully from Patients and Payors.
A/R outstanding would be very low.
If your Closed Claim Reimbursement Ratio is 39% and your Overall Reimbursement Ratio is 35%, the practice has
4% room for improvement of the Total Charges. This gives an improvement target for reimbursement overall at the
practice.
8. Negotiating fee schedule – 100% Optimization.
Of course you want to negotiate the best reimbursement rates because your time and skills are valuable.
Here are four points to consider when negotiating your new contracts and help you get the contract rates you deserve:
• Average Paid Percent: Compute by dividing the sum of your payments by the sum of your submitted charges. This
is just a gross collection rate that doesn’t account for what the billed charge is or back out contractual adjustments.
If you look at a gross collection rate, it will be greatly influenced by the billed charge amount. For example, a billed
charge set at 200% of the Medicare allowable is quite different than one set at 300% of the Medicare allowable. The
higher the billed charge is from the actual payment amount, the lower the gross collection rate. If a billed charge is set
too low (such as 100% or even 125% of the Medicare allowable), the gross collection rate will look fantastic as it would
be close to 100% when in fact they may be leaving money on the table if the billed charge is set below some carrier
allowables. It would also depend on the payer mix.
In an ideal world, every claim you submit for payment would be paid at 100 percent. However, there are many reasons
why this is not the case. Some examples include claim specific negotiated discounts, payment bundling, capitation,
bad debt (ideally this would be below three percent) and previous payment discrepancies.
For an average practice, the paid percent will be between 35 and 40 percent. The higher the percentage, the better
your revenue will be. This depends heavily on the payer mix and fee schedule, since a good payer mix or low fee
schedule will cause the paid percent to be higher, but the practice could still be losing a lot of obtainable revenue/
reimbursement.
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TOP 8 METRICS TO MAXIMIZE YOUR PRACTICE’S REVENUE
Billing and Reimbursement for Physician Offices, Ambulatory Surgery Centers and Hospitals
(NOTE: You could use a net collection rate vs a gross collection rate as it negates the impact of carrier mix or
billed charge amount - it boils it down to what percentage of the allowed amounts are being collected.)
• Medicare Allowable: You could use a percentage of Medicare allowable to compare the fees of different payers
for different procedures to guide the identification of which payers and procedures to focus on for payer contract
negotiations.
• Compensation for Top Procedures: This metric builds on average paid percent. Since you know the overall
paid percent for each payer, you should consider how those payers are compensating you for your top procedures.
If at all possible, sort your payments by procedure and by payer simultaneously. This will allow you to look at the
top procedures for each payer and what their paid percent is for those procedures. This allows you to compare
individual procedure payment rates between different payers.
• Average Reductions Percent: A payer’s average reductions percent is the sum of the payer’s contractual
and other reductions divided by the sum of your submitted charges. This metric lets you determine which payers
are consistently shifting more dollars than normal out of your payments and into contractual or other reductions
(excluding patient responsibility).
For the average practice, this figure is typically in the 47 to 53 percent range, but the lower the better. Again, this
depends heavily on the payer mix and fee schedule, since a good payer mix or low fee schedule will cause the paid
percent to be higher, but the practice could still be losing a lot of obtainable revenue/reimbursement.
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TOP 8 METRICS TO MAXIMIZE YOUR PRACTICE’S REVENUE
Billing and Reimbursement for Physician Offices, Ambulatory Surgery Centers and Hospitals
About MediGain Services, Inc.
MediGain is a global full-service revenue cycle management and healthcare analytics company
devoted to improving billing, collections, and outcomes for healthcare providers and the patients
they serve. With over 1,000 employees, MediGain provides solutions for thousands of physicians
in groups, provider networks, ambulatory surgery centers and hospitals enabling them to reach
their maximum potential through improved operational, financial, and clinical outcomes. For more
information on how MediGain can maximize revenue, reduce expenses and allow you to spend more
time on providing your patients with quality healthcare, visit www.MediGain.com, call us at
888-244-4754 or email [email protected].
2800 Dallas Parkway, #200
Plano, Texas 75093
www.MediGain.com | 888-244-4754