Your medical billing performance is one of the most important metrics to measure your practice’s overall financial health. Unfortunately, in many practices, very little if any attention is given to billing and collections performance metrics numbers like revenue and provider productivity.
Since collections numbers show you how effective your billing department is in getting you reimbursed for the services your practice provides, you should be looking at them on a monthly basis. Whether you manage billing in house or contract it out to a service, here’s what you should be doing to assess your billing performance and audit your collections efforts.
Collect the Right Data
To really understand your billing performance, you need to get accurate data points for the following:
- Total charges
- Contractual adjustments
- Total collections
- Average Days Receivable (ADR)
- Total Accounts Receivable
- A/R aging (0-30, 31-60, 61-90, 91-120, and more than 120 days)
- Patient encounters
Collect the information for a 12-month period so you can better identify trends and spot potential trouble areas.
Create a Visual Roadmap
Choose your favorite analytics tool; in many cases, a simple spreadsheet program does the job well. You need a way to visualize your data so it tells a “story” all your stakeholders can understand. Review important ratios and metrics to help drill down into your financial data. You can plug these formulas into your spreadsheet to come up with benchmark data you can use to compare your practice to national averages. This lets you easily find variance from healthy ranges and identify opportunities for improvement.
For example, national benchmarks for Dermatology show that total A/R should be less than 100% of monthly charges; if your practice metrics are significantly higher than industry benchmarks for this marker, it points to a problem with collections.
Compare Your Performance with Industry Benchmarks
Most medical billing services maintain data on key performance indicators by medical specialty; if you are working with one, or considering outsourcing your medical billing, you should ask for information about how your practice KPIs compare. If you don’t currently use a service, you can check with professional practice management associations such as the Medical Group Management Association (MGMA) for industry benchmark reports to get an idea of your group’s financial health.
For example, if your ADR is hovering at 35 days or more, you may have a problem with your electronic claims and your follow up. Best on class industry benchmarks are more in the 25 to 27 day range.
Understand What the Data Shows
Pulling your data and comparing your performance to industry benchmarks is only useful if you know what the data means. For example, if your practice has gross charges of $6 million, but you’re writing off $3 million and the industry benchmark for your specialty is about 35%, it suggests one of the following may be an issue:
- Coding or documentation issues leading to incorrect adjustments.
- Too many write-offs for unpaid claims or uncollected coinsurance.
In this same scenario, what if your collection ratio after adjustments was just 50% or 60%? Besides pointing to a whole lot of money left on the table, data like this point to real problems with your billing department, such as:
- Failing to process claims in a timely manner
- Lack of resources to follow up on claims and collections.
- Failing to collect copayments and coinsurance at the time of service.
If you’re not sure how your billing department or service is performing, or want more information on how to audit your collections, Health 1 today for a free Centricity Medical Billing Analysis. We can help you improve your practice KPIs with good revenue cycle management policies.