What are Key Performance Indicators (KPI) and Why Do They Matter? Part 2

In the last article, we covered two of the most important Key Performance Indicators (KPIs) that every practice should measure to ensure the health of the revenue cycle: Days in Accounts Receivable (A/R) and Clean Claims Ratio (CCR).

In this article, we’ll cover two more crucial measurements that your practice should be tracking on a monthly basis:   Denial Rate and Net Collection Rate.

Denial Rate

The Denial Rate is very comparative to the CCR, but these 2 KPI may not add up to exactly 100%.  The Denial Rate is the number of claims denied on the first submission. Some claims may not be paid for various reasons, but that does not automatically mean it is denied.

The formula to measure this KPI is # of claims denied/# of claims submitted.  Another formula to use for this KPI is dollar amount denied/total dollar amount billed.  The second formula is the formula RBS uses as best practice and maybe a better indicator for looking at monetary denials as compared to the %.

If high dollar claims are being denied, but your denial rate is adequate, further drill down is necessary. The issue could be a particular payer or a specific drug or modality of treatment that is holding up payment and lowering cash flow. RBS can produce reports showing 60+ days of outstanding claim dollars denied.

The Benchmark Metric for Denial Rate is 4%.

 Net Collection Rate

The Net Collection Rate measures the efficiency of the Revenue Cycle. This KPI lets you understand how much you are collecting out of what you are eligible to collect.  When payers leave some line items unpaid, it is time-consuming to research and frustrating to ensure these claims get paid. Did a payer not pay a line item that is contractually owed?  Ensuring you are collecting every line item that is contractually obligated to be paid allows the practice to fully understand the revenue expected to be paid.

The Benchmark Metric for this KPI is 96%.

 Are you meeting the benchmarks for Denial Rate and Net Collection Rate?   If your practice is not measuring up, we can help!   Contact me at Elaine@RadiationBusiness.com to learn more about our consulting services and see how we can help you to improve the efficiency of your practice, and the health of your revenue cycle.

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