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Health Systems + Hospitals, Physician + Specialty Practices

Develop a data-rich dashboard: Which medical billing metrics matter?

Develop a data-rich dashboard: Which medical billing metrics matter?


This is the eighth and final post in a new Waystar blog series: 7 steps to sharpen your healthcare revenue cycle.

Don’t want to go blog-by-blog? Download the eBook to learn 7 steps for maximizing your healthcare RCM software

Seven steps for better healthcare revenue cycle optimization – four facts to know before you start

When you’re managing a rev cycle, medical billing metrics matter.  

Seasoned RCM pros know that a revenue cycle doesn’t end until you report on it, and that means using key performance indicators (KPIs). 

While KPI reporting can be complex, the essential steps remain the same:  

  1. Decide on a set of medical billing metrics to report on (KPIs) 
  2. Add these to your RCM dashboard 
  3. Monitor and report on key metrics each month 
  4. Pull out actionable insights and make changes 

So, knowing that, which metrics should you start with?  

Pick the right KPIs: 4 medical billing metrics that matter 

medical billing metriC:

1. Days in receivables outstanding (DRO)

DRO is arguably the best overall indicator for how quickly your organization turns receivables into cash. 

To calculate it: 

  • Divide total current receivables by the average daily charge 
  • Remove your credit balance (which only offsets and, thus, distorts receivables; track those separately)   
  • Calculate your average daily charge based on the past 90 days (ex. 90 days’ worth of gross charges divided by 90) or another period.  

Whether you choose 90, 120, or 365 days, make the choice and apply it consistently. 

medical billing metriC:

2. Percent of receivables over 120 days 

Observe your aged trial balance, and focus on receivables over 120 days.

Aged receivables are more costly to collect, and the probability of collection dips. The fewer receivables you have in this category, the better off you are.  

  • Monitor the percentage of receivables over 120 days carefully.  
  • Watch for consistency or, ideally, a reduction 

Remember: receivables can simply be written off the books to make this metric more favorable. A complete review should include a count of the write-offs. 

medical billing metriC:

3. Adjusted collection rate 

Because contractual adjustments apply to most insured patients, collecting the full charge isn’t a possibility. To capture your adjusted or net collections rate, measure what is collected, divided by what should have been collected.  

medical billing metric formula: what is collected divided by what should have been collected

Unless you track each line item — paid versus allowed — you’ll need to rely on your systems. Those will need to be loaded with your fee schedule for each payer by procedure code to accurately report this indicator. 

medical billing metriC:

4. Denial rate

The denial rate is the percentage of claims denied by payers (though some may measure the rate based on the percentage of charge line items denied). The lower your number is, the better your cash flow will be — and the fewer staff you’ll need to maintain it. That’s because staff doesn’t have to intervene on clean, paid claims — only on denied. 

Remember, though, that numbers can be misleading:  

  • Writing off accounts makes some of the indicators, such as DRO, appear more favorable by reducing the total collectable receivables. 
  • Re-aging accounts by transferring financially responsible parties can make aged accounts appear younger.  
  • Perhaps most importantly, payers exact a significant influence over performance — or the lack thereof.  

Remember to consider external influences

Once you’ve got your medical billing metrics set, don’t view them in a vacuum. It’s critical not to discipline your RCM leaders for poor performance without fully understanding the influences of your environment.  

Be sure to add net revenue to your dashboard and monitor it with scrutiny. Also, add patient volume, work RVUs, or some other gauge of productivity to make sure that collections are tracking at a level commensurate with services. When it comes to actionable insights, remember: perspective is key. 

Want to know more about sharpening your rev cycle?  

Seven steps for better healthcare revenue cycle optimization – four facts to know before you start

Wonder how we can help you track your medical billing metrics?

Schedule a demo 

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