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ASC revenue cycle key performance indicators to monitor (Part I)

How can you gain better control over your ASC's revenue cycle performance? By monitoring key performance indicators (KPIs).

This first in a two-part series identifies more than 15 ASC revenue cycle KPIs worth tracking. It explains the importance of monitoring each KPI, offers target benchmarks (where applicable), and identifies warning signs to watch for that may indicate a KPI is moving in the wrong direction. Part two will share common problems that can contribute to poor KPI performance, describe solutions to help address obstacles to success, and provide guidance for effectively analyzing trends.

Days to Bill/Charge Lag

Why monitor: Monitoring the average days to bill each month helps ensure cases are billed promptly and, in turn, payments are received in a timely manner. Higher or inconsistent lag days make it more difficult to ascertain revenue estimation. Lengthy delays could lead to denials, lost payments, and increased days sales outstanding (discussed below).

Benchmark: The standard benchmark is less than two days (48 hours).

Warning signs: A deviation from this benchmark signifies a delay in billing that must be addressed before other metrics are impacted.

Days to Pay

Why monitor: This KPI indicates how long it takes to receive primary insurance payments. As with days to bill, payment delays can negatively impact the bottom line. Trend this metric by payer or financial class.

Benchmark: Since days to pay varies by payer, the benchmark will vary by ASC. A "sweet spot" to target is 45 days overall, 18 days for Medicare, and up to 55 days for workers' compensation.

Warning signs: An increase in this KPI compared to the benchmark means an ASC is likely dealing with payer delays, billing issues, and/or denials. Such a trend should be examined further to determine the cause(s).

Specialty Volume Trending

Why monitor: Trending the case volume of each specialty will help determine potential scheduling issues and future (projected) revenue. A center may be in line with its total projected monthly volume, but if the volume of a higher paying specialty is lower than projected, net revenue will be impacted. Note: This KPI will not apply to single-specialty ASCs.

Benchmark: Since specialty types vary by center, so will the benchmarks.

Warning signs: Trend the percent of total billed charges to each specialty and compare this to the percent of revenue for each specialty. If charges are high and revenue is lower than normal, this may indicate an issue.

Consider an ASC performing orthopedic and pain management cases, with a typical monthly volume split of 80% orthopedic, which tends to be higher paying, and 20% pain management, which tends to be lower paying. If that volume split shifts to 50% orthopedic and 50% pain management on a given month, net revenue for that month will likely decline. If this specialty split trend continues, it can have a long-term, significant financial impact.

Payer Volume Trending

Why monitor: Trending the volume of each payer or financial class will help determine potential scheduling issues and future revenue. A center may be in line with its total monthly payer volume, but if the volume of a higher reimbursing payer is lower than projected, net revenue will be impacted.

Benchmark: Since payer types vary by center, so will the benchmark(s).

Warning signs: Trend the percent of total billed charges to each payer or financial class and compare it to the percent of revenue for each. If charges are high and revenue is lower than normal, this may indicate an issue.

Consider an ASC typically performing 80% commercial cases and 20% Medicare cases each month. If that split shifts to 50% commercial, which tends to be higher paying, and 50% Medicare, which tends to be lower paying, on a given month, net revenue for that month will likely decline. As with specialty trending, if this payer or financial split trend continues, this can have significant financial implications.

AR > 90

Why monitor: Tracking accounts receivable (AR) greater than 90 days is a powerful means of helping with early identification of payer issues.

Benchmark: The total AR percentage over 90 days should be below 15% of AR. Break this benchmark down by financial class at a minimum or go deeper and segment it by specific payer. Omit personal injury and litigation cases from this percentage as such cases can take years to resolve and would significantly influence the figure.

Warning signs: When AR percentage over 90 days hits and exceeds 15%, this indicates revenue cycle problems. Review the offending financial class for issues immediately.

Days in AR (i.e., Days Sales Outstanding)

Why monitor: Tracking days in AR is an effective means of identifying potential revenue cycle issues. This KPI may be confused with "days to pay," but the two figures are distinct and serve unique purposes in the monitoring and maintenance of a healthy revenue cycle.

Consider an ASC that performs procedures exclusively on Medicare patients. While days to pay and days in AR both monitor how quickly Medicare pays for these procedures, days to pay is the indicator of how quickly the center receives the initial insurance payment. Days in AR indicates how long it takes for the center to entirely resolve the case from its AR, which includes any secondary insurance and patient billing.

Benchmark: The industry standard is 35 days. However, this figure will be center specific as it is dependent upon multiple factors, including payer mix, percentage of out-of-network claims, outstanding litigation cases, and billing/collections staff performance. Track the days in AR by financial class as this will support efforts to be proactive in identifying issues.

Warning signs: An increase in days in AR, barring any major changes to the factors influencing the benchmark, points to developing issues. If a center is receiving insurance payments but the figure continues to rise, there is likely an internal problem keeping cases open.

Days to Dictate

Why monitor: Tracking this KPI helps determine whether providers are completing their dictation in a timely manner. Identification of slow dictation completion time will necessitate a discussion with the responsible provider about what is required for a timelier dictation.

Benchmark: The standard benchmark is one day, with dictation preferably completed the same day as the case is performed.

Warning signs: If a provider's days to dictate is consistently greater than one day, this signifies a problem. It is typically an indication of a provider who falls behind on dictation and may then struggle to catch up, potentially leading to days or even weeks passing between case completion and dictation. Such delays will then delay completion of claims submission, which will then delay receipt of payment. If dictation delays become significant, a center can risk losing payment due to timely filing deadlines.

Denial Rate

Why monitor: If denials are not addressed in a timely fashion, they will negatively affect the majority of a center's KPIs.

Benchmark: The standard benchmark is less than 5%, although a rate as low as 1% is achievable.

Warning signs: A high denial rate percentage indicates a center has one or more problems, which can include coding issues, billing issues, documentation/dictation issues, and performing cases without proper medical necessity approvals.

Denial Reason Trending

Why monitor: Equally as important as monitoring denial rate, tracking denial reasons will help a center identify whether it is experiencing an issue with a single claim or a possible trend that can contribute to ongoing denials.

Warning signs: Be aware of continuous denials by a specific payer, for a specific case/specialty, for a specific code(s), and/or associated with a specific provider or business office team member. This indicates a breakdown in one or more revenue cycle components.

Clean Claim Percentage

Why monitor: Calculated by measuring the percentage of payers' rejections of claims, submission of clean claims reduces the denial rate and ensures timely payment.

Benchmark: The industry standard is 98%.

Warning signs: A high volume of rejections that leads to a drop in the clean claim percentage indicates an ongoing claims or clearinghouse issue.

Percentage of Collections for Cases > 90 days

Why monitor: While not a typical KPI tracked by ASCs, this metric has great value. Many centers (and even some billing companies) will choose not to pursue collections for cases with outstanding payments greater than 90 days because of the labor-intensive work often involved in achieving successful collections of such payments. If collections are still outstanding 90 days after completion of a case, there are one or more factors contributing to the ongoing delay in payment. Rather than continuing to work to address these factors and secure payment, it can be easier to ignore this collections bucket and focus on easier collections. Doing so leaves potential cash that could be captured sitting on the table.

Benchmark: 25% or above is a worthwhile target.

Warning signs: A declining percentage of collections for cases greater than 90 days indicates older AR is not receiving the appropriate attention it deserves. As this percentage rises, AR greater than 90 will also increase.

Year-Over-Year Changes

Why monitor: This KPI compares performance of areas including charges, case volume, payments, and AR for one period to the same period the previous year. The period can be for an entire year (e.g., 2019 vs. 2018), quarter (3Q2019 vs. 3Q2018) or month (October 2019 vs. October 2018). It is a high-level view of performance that can provide value, but only if the KPI is carefully understood.

The potential shortcoming of this KPI is that there are numerous factors that can impact areas of revenue cycle performance over a year's time. These include changes in payers/payer types, providers, specialties, case types, case volume, staff, managed care contracts, billing companies, and clearinghouse. While tracking this KPI may not help pinpoint specific issues, it may inform leadership that their ASC is performing better or worse in an area when compared to the previous period and can guide discussions concerning what has changed over that time.

Warning signs: If year-over-year performance changes in an undesirable and unexpected manner, this indicates a concerning performance issue in a specific area(s). Research is warranted if it is not immediately understood what has contributed to the change in performance.

Write-Off Percentages (Bad Debt, Denials, Timely Filing)

Why monitor: This KPI provides a means of identifying write-offs due to bad debt, denials, timely filing, and other adjustments that were not identified at the time of billing.

Benchmark: Bad debt and denial write-off percentages should remain low, but consistent. The timely filing write-off percentage should be zero.

Warning signs: For bad debt and denial write-off percentages, watch for spikes that may indicate a new problem contributing to the issue. Timely filing write-offs should never occur as these are caused by a breakdown in one or more parts of the revenue cycle process that resulted in the failed submission of a claim or appeal before its filing deadline.

Revenue Per Case

Why monitor: This KPI should be trended by specialty and payer to help identify potential issues that can lead to a growing loss of revenue. The metric can also be trended by provider if physicians are interested in comparing their performance to other physicians at the ASC. This can motivate physicians to support efforts to improve their individual revenue per case.

Benchmark: Since case types vary by center, so will the benchmark(s).

Warning signs: A decline in revenue per case can signify any number of problems, including a contract issue, missed coding opportunity, and missed implant billing opportunity. An unexpected increase in revenue may also be a warning sign worth researching as it can indicate a concerning issue such as upcoding.

Credit Balance, Refund Trends, and Collection Agency Referrals

Why monitor: These KPIs are typically overlooked. Monitoring credit balances and refunds can provide insight into the performance of an ASC's insurance verification team and whether staff are calculating patient responsibility accurately. It also is essential to monitor these metrics to ensure patients and government payers are refunded timely. Collection agency referrals should be tracked to ensure they are referred in a timely manner to avoid increasing specific AR metrics.

Benchmark: These processes should be consistently performed on a monthly or bi-monthly (every other month) basis.

Warning signs: If collection agency referrals are not handled in a timely manner, this will have a negative impact on an ASC's days in AR. If refunds are not handled in a timely manner, this may result in payer audits, loss of contracts, and upset patients.

Supply Cost vs. Reimbursement

Why monitor: While not a revenue cycle management KPI per se, tracking this metric can help a center identify when a procedure is costing the center money or not earning the center as much profit as expected.

Warning signs: If supply costs exceed reimbursement or if the difference between supply costs and reimbursement is not as wide as anticipated, consider this a warning sign. Contributing factors can include performing a non-covered procedure, failing to receive coverage for/reimbursement of an implant, or a provider opting to use a more expensive supply or device.

Cases in AR

Why monitor: This KPI tracks how many cases are in the collections process. It is a metric that should generally remain consistent, taking into consideration influencing factors such as seasonal swings in volume.

The figure has taken on greater importance in recent years as patient financial responsibility has increased. A higher number of cases in AR may indicate successful collection from payers but not patients. In the past, when patient financial responsibility was lower, failing to collect from patients had less of a significant impact on the profitability of a case. Now, failing to collect in full from patients can greatly reduce profitability and even turn a profitable procedure into one that costs an ASC money.

Benchmark: Since the number of cases performed varies by center, so will the benchmark.

Warning signs: An increase in this metric when not accompanied by a corresponding increase in case volume is an indication that the center is failing to close out its cases and leaving money on the table.

Patient Balances

Why monitor: Collecting what patients owe for their care was always an important aspect of maintaining an ASC's solvency and profitability. As patient financial responsibility has increased, success in this area has taken on greater significance. The patient balances KPI informs a center of the number of patients who must still pay for their care and the amount they owe.

Warning signs: An increasing figure indicates that the number of patients with balances ¬is growing and may require additional attention.

Take Control of Your Data

Understanding the importance of monitoring revenue cycle KPIs, benchmarks to strive for, and warning signs that may indicate suffering KPI performance is vital to ensuring a highly productive revenue cycle. The second article in this two-part series will share common KPI performance problems, solutions to help overcome obstacles, and guidance for analyzing trends.

Angela Mattioda (amattioda@surgicalnotes.com) is vice president of revenue cycle management services for Surgical Notes. Surgical Notes is a nationwide provider of revenue cycle solutions, including, transcription, coding, revenue cycle management (RCM), and document management applications for the ASC and surgical hospital markets. Mattioda oversees the SNBilling RCM service, the fastest-growing component of Surgical Notes' complete end-to-end revenue cycle solution offering.

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