Billing services are experiencing unprecedented demand. According to a recent report, the aging population, expansions in government coverage eligibility and an influx of routine care post-COVID-19 are all contributing to an increasing number of claims and other electronic transactions processed in the US. These increases have sparked the likelihood of new entrants into the industry, increasing competition among organizations and creating high demand for experienced billing staff.
Keeping your organization running smoothly requires close monitoring and early intervention of key performance indicators (KPIs) across all billing customers. Managing operations for tens, hundreds or thousands of customers can be extremely time-consuming (and often inaccurate).
Let’s dive into some of the most common billing service pain points and strategies to solve them.
Three key performance indicators
KPI: days in accounts receivable
Formula: total AR ÷ average daily charges
Days in accounts receivable, also known as days in AR, is a measure of how long it takes for a claim to be paid. Waiting for payments from both payers and patients decreases an organization’s cash flow. The longer it takes, the bigger the impact on your bottom line. Ideally, your days in AR should be fewer than 45.
KPI: net collection rate
Formula: cash collections ÷ net charges
Some industry experts would say net collection rate is your organization’s most important KPI. Understanding collection rate helps you understand how successful your organization is at collecting the maximum amount of reimbursement allowable. A net collection rated at less than 95% could indicate process inefficiencies such as late filings, claim underpayments, poor patient collection processes or coding errors.
KPI: first-pass resolve rate
Formula: total claims submitted first pass ÷ total claims paid
Knowing your first-pass resolve rate (or conversely, denial rate of claims submitted) provides visibility into staff efficiency. According to MGMA, the fewer denied claims, the less time staff spend on follow-up and appeals. Your organization should aim for a minimum 95% of claims accepted on first pass. Per those same findings, up to 25% of denials are not followed up on at all, resulting in lost revenue and increases in bad-debt write-offs. Multiply that by the charges on denied claims and it can add up—fast.
KPIs and these formulas based on material supplied by MGMA.
Next steps: monitor and take action
Chances are you’ll find some room for improvement. Or, like some billing services, there’s a different process and system for obtaining KPI information for each practice you work with. Disparate sources of information can make identifying and correcting claim issues next to impossible. However the right analytics and reporting solution can make the impossible, possible.
Jonathan Ferrel of New Bedford Corporation, a medical billing service in Virginia, and a Waystar customer said:
“Having a separate reporting system for clients like we did previously made it a challenge to look at all clients in one view to search for trends. It was hard to get denial and charge level data together. Waystar gives great insight into individual client denial rate trends, specialty denial rate trends, plus benchmarking against other orgs.”
With insight comes the ability to act. Common issues around AR days and net collections often stem from denials and patient responsibility.
The good news is this: it’s estimated up to 90% of denials are preventable. Often the culprit is inaccurate demographic information.
Four key strategies for managing denials:
- Verify eligibility early and often, ideally through automation
- Use a claim submission solution with constantly updated payer edits and rules
- Monitor claims and correct pended claims as soon as possible
- Invest in technology to automate routing of workable denials and make appeals easy and fast
Relieving the pain of patient payments
Believe it or not, collecting from patients can be an easy, pleasant process. Giving patients detailed information about their responsibility and flexible payment options not only increases your bottom line, but also improves patient satisfaction for your clients.
According to a Waystar consumer survey, nearly half of consumers have paid medical bills late because of financial limitations or a misunderstanding about insurance coverage and the amount owed. Even fewer respondents said they fully understood their recent medical bill. Consider offering patients:
- A detailed estimate of what insurance should pay and what the patient will owe
- Electronic or text statements
- Flexible payment options
And if your clients have high numbers of self-pay, uninsured or dually eligible patients, consider a coverage detection tool to uncover billable insurance prior to surprising the patient with a ‘sticker price’ medical bill.
Wrapping it up: unlocking the optimal revenue cycle
“The revenue cycle contains countless touchpoints for operational and performance improvement, however, gaining accurate and reliable information from vast amounts of siloed data is an obstacle to data-driven decision making.”
-VP of Revenue Cycle
Your customer’s financial health relies on the services you provide. Reliable cash flow and minimal bad debt keeps your customer’s practices healthy and helps you grow your business.
Find this post helpful? Check out overcoming the five biggest billing service hurdles.