The Basics of Revenue Cycle KPIs

By: Briauna Driggers

The Medical Revenue Cycle is integral to any hospital or free-standing practice. We've discussed before how important accurate medical coding is and the impact it has on the Revenue Cycle, but what else impacts the success of revenue cycle management (RCM)? Let's talk about Key Performance Indicators (KPIs) and how they contribute to an efficient and effective revenue cycle.

Image based on HFMA. "Claim Integrity Task Force: Standardizing denial metrics for revenue cycle benchmarking and process improvement."

The revenue cycle covers all processes from the moment a patient's information is captured to the final bill and payment being received. "Oftentimes, we see revenue cycle treated as a department that sits on the back end with billing," said Melissa Scott, director of advisory services at the healthcare technology company Change Healthcare.

"The problem with this is that everything should be done accurately and efficiently prior to claim generation to get the claim out the door and paid on the first submission. Errors in front-end processes such as registration, patient demographics, insurance verification, and eligibility can cause all the things done right after that point to be thwarted and result in a denial. Every person that touches data that ends up on a claim, or aids in the care and documentation process that support billing and reimbursement, needs to understand they are part of revenue cycle and how they impact the organization's KPIs," said Scott. 

The Journal of AHIMA calls attention to the impact remote work has had on managing the revenue cycle.  As a result of recent widespread adaptation of remote work, RCM managers have to rely on data and dashboards to monitor productivity. They can no longer walk the floor, chat with team members, and keep tabs on the work everyone is doing. 
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What are Key Performance Indicators (KPIs)?

Key performance indicators (KPIs) are critical indicators of progress toward an intended result. They provide an evidence-based focus for operational and strategic improvements. (KPIs will showcase the success and efficiency or call attention to areas of concern.

Having and monitoring KPIs is a great way to keep up with your RCM. KPIs will showcase the success and efficiency or call attention to areas of concern. Reviewing revenue cycle KPIs frequently will help determine if your revenue cycle has the opportunity for improvement and if it's time to invest in education for your team or seek revenue cycle management services.
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Where to Utilize Healthcare Revenue Cycle KPIs

Code and Charge Accuracy

Medical coding is a vital part of healthcare, ensuring that patients’ conditions are accurately reflected in the medical code and that the care they received was properly documented. Coding accuracy considers any extra information that may be captured beyond DRG codes, such as the physician and date of service information, also known as the superbill. The superbill is an important document detailing patient care that goes to billing later in the process.
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Medical compliance efforts look at every aspect of how charges are made to ensure accuracy and prevent any fraudulent activity. Some of the most important KPIs to track in order to monitor this closely include: 

Medical Coding Accuracy
Coding managers or designees should aim to achieve an accuracy rate of 95% when coding individual records. Higher accuracy rates are typically expected when coding DRGs. Poor coding accuracy can lead to failed audits.

Missed Charges
Revenue cycle managers should investigate any missed charge patterns to ensure that you are receiving the money you deserve. Errors can occur for a variety of reasons, but most often they are caused by human error or technology gaps. By catching these issues early, businesses can avoid losing payments and maintain trust with their customers.

Code and Charge Productivity

To ensure that revenue is accurately recorded and paid, coding and charging managers must keep an eye out for coding and billing errors. Additionally, they must make sure claims are filed as soon as possible to avoid long delays in payment or billing. Two KPIs that revenue integrity managers should monitor for code and charge productivity include the following:

Discharged, Not Final Billed (DNFB)
A revenue integrity manager can track the number and dollar amount of DNFB files to diagnose and solve specific workflow issues. This information is important for both billing and coding, as it can help ensure that the hospital is receiving the correct amount of reimbursement. A significant number of claims that have not yet been filed or are waiting for coding/billing work are a cause for concern.
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Coding Productivity 
Revenue cycle managers should aim for coding productivity of 95% or higher. This means no more than 5% of the coding load should be in the queue at any given moment. The volume of coding will not be reduced simply by adding more coders to the mix if the underlying problem is with process or technology. 

Revenue Reconciliation

Three KPIs you should gather insights on when it comes to revenue reconciliation are denial volume, avoidable write-offs, and underpayment recoveries. By understanding how these numbers are changing over time, you can identify areas where improvement is needed and make the necessary changes to ensure that revenue is not lost.

Denial Volume
To uncover process problems that lead to claim denial, analysts look at denial percentages and the dollar amounts from denied claims. Denial rates typically range from 5% to 10%, with 2% to On average. 3% considered successful. By analyzing denial patterns, workflows can be improved which will ultimately lead to a higher approval rate for claims.

Avoidable Write-Off as a Percentage of Revenue 
Facilities track their write-offs as a percentage of revenue generated from gross and net patient revenue. In a successful revenue cycle, you should aim to keep write-offs below 2% to 5% of net patient revenue, depending on the specific industry.

Underpayment Recoveries
Becker's Hospital CFO Report estimates that hospitals are underpaid 2% to 5% of net patient revenue. Revenue cycle managers must monitor underpayments and measure the success of efforts to recover those dollars.

To ensure that your business is performing as expected and revenue leakage is minimal, it's important to monitor a range of metrics related to revenue integrity. These metrics can help identify areas where compliance risks are high and payment processing is low. By fixing these problems, you can improve your company's overall performance.

Revenue Cycle Management and KPI Assistance

Some of the benefits of having an optimized revenue cycle include increased cash flow, reduced cost-to-collect, greater point-of-service cash collections, and fewer denials. The revenue cycle must be efficient and effective from start to finish. Otherwise, you risk revenue leakage.

Executives faceincredible challenges when it comes to managing a revenue cycle. Sometimes, all of the variables and contributing factors affecting your revenue cycle become overwhelming. How do you know when it's time to seek assistance?

Scott advises that it may be time to hire some revenue cycle assistance if underperforming KPIs include bad debt, charity, cash-to-net revenue, credit balance AR, billing turnaround and the percentage of claims paid on the first pass. Relias offers arobust library of quality online courses that allow you to invest in your staff's coding education, which can in turn impact your overall revenue cycle. 
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If you've determined you need additional assistance, RCCS offers expert revenue cycle assessment and optimization.