What are Key Performance Indicators (KPI) and Why Do They Matter? Part 3

To quantify the financial health of a practice, Key Performance Indicators (KPIs) should be tracked and monitored on a regular basis. By keeping an eye on these essential markers, a practice can ensure that denial rates are low while collections are high – keeping the cash flow optimized, and staff productivity high.


In the first part of this series, we looked at Days in Accounts Receivable (A/R) and Clean Claims Ratio (CCR).  In our second installment, we examined Denial Rate and Net Collection Rate.


In this article, we’ll cover the last two of the most crucial measurements that your practice should be tracking regularly:  Bad Debt Ratio and Receivables Outstanding Over 90 Days.


Bad Debt Ratio
Every practice has bad debt – it’s just a cost of doing business. But some practices are quick to write off amounts that could potentially be collected.


How much does your practice write off as bad debt? To measure the bad debt ratio, take the dollar amount written off/total revenue over a period of time (such as 12 months).
The Benchmark Metric for this KPI is 4%.


Receivables Outstanding over 90 days
This KPI is an excellent indicator of whether your patients and payers are paying promptly. This KPI will also pinpoint timeliness issues for claim denials as well as effectiveness on follow up. This is an incredibly important KPI, as patient responsibility is drastically increasing. Ensure you have a solid Financial Navigation Process in place to assist patients with their out of pocket expenditures. To calculate this, KPI takes the total A/R over 90 days/Total A/R.
The Benchmark Metric for this KPI is less than 15%.


How does your practice measure up?  If you’re not hitting the benchmarks for any of the six KPI’s that we covered, give us a call!  Radiation Business Solutions can provide an objective third-party review of your process and give you the tools and resources you need to improve the efficiency and effectiveness of your practice. Email me directly at Elaine@RadiationBusiness.com for more information.