When managing revenue cycle, proper analysis and application of benchmarks is essential to maximize revenue and increase cash flow.
In addition to financial improvement, the use of benchmarking can increase the overall efficiency and success of an ambulatory surgery center. While, the day-to day use of financial metrics in an ASC setting can be challenging, determining which metrics to evaluate and how they affect net revenue is the key to success. Walter Groszewski, Vice-President of Professional Services for SourceMed explains how focusing on benchmarks can address operational gaps and improve profitability in a center.
Where is your money in the collections process?
"Many metrics can be used to define the success of an organization. When we work with clients, there are specific metrics we start with to evaluate the financial health of an ASC. The first metric we look at is A/R (accounts receivable) over 90 days. Where is your money in the collections process? It's important that your team is focused on understanding why claims are sitting in A/R rather than being paid." According to industry standards, over 50% of A/R should age between 0 and 30 days. It is recommended that no more than 20% of a center's A/R should reach an age of 90 days or more. As A/R ages, it becomes increasingly difficult to collect on, and the chance of receiving payment becomes progressively slimmer.
What is preventing claims from being paid?
If an ASC finds that too great a portion of their A/R is falling outside of the 0 to 30 day range, the next question that should be asked is "what is preventing claims from being paid?" A crucial benchmark in answering this query is claim submission speed. Are claims being submitted in a timely manner, or is the claim already many days old before it ever reaches the payment stage? Groszewski recommends that 95% of claims be submitted within the first five days following the performance of a procedure. Despite the importance of this benchmark, Groszewski says few ASCs monitor claim submission speed. "Many ASCs do not have easy access to this metric and therefore aren't measuring it. They do not realize what a significant impact it has on their cash flow," he explains.
How often are teams following up on claims?
Once a claim has been submitted, the next stage requiring evaluation is claim follow-up. How often are teams following up on claims falling between 30 and 60 days in age? How about claims 60 to 90 days old? Over 90? It is important that collections teams are diligent in monitoring claims and ensuring any issues are addressed, so payment may be received. 90% of claims over the age of 90 days need to be worked by collections. When 90+ day claims aren't being properly followed up, money is being left on the table. "Monitoring the quantity and quality of collections can have a huge, positive impact on an ASC's financial health." However Groszewski clarifies, "It's important to look at your entire revenue cycle process, not just collections. It starts with insurance verification and ends once you have collected everything owed from both the patient and the payor."
Benchmarks Matter
Why do all of these benchmarks matter? How can knowing these figures and statistics really help you to improve outcomes in your ASC? The overall health and success of a business is measured by its profit. Key financial benchmarks like these allow you to evaluate the achievements and shortcomings of each unique center in a more clear-cut, defined, and objective way. Using this information, one can begin to identify areas in need of improvement. As you look to isolate issues, try asking the following questions:
• Are there specific payors in which I am not performing as well as I should be?
• Where in the claims process am I seeing the most backlog?
• Do certain procedures pose more difficulties for my center than others?
• What is my case mix?
Understanding factors, like the breakdown of your case mix, can help you make informed business decisions. For example, knowing which procedures are the most profitable can allow you to make a wise investment- such as hiring a surgeon who focuses on the cases which bringing in the highest reimbursements leading to increased net revenue.
If properly analyzed, metrics allow administrators to gain a better big-picture understanding of the general health of their ASC. Benchmarking sheds light on whether a center is meeting industry standards for success. If there is an area in which an ASC is consistently falling short, measures should be taken to determine the source of the issue, and procedures implemented to solve the problem.
In light of the changes in today's healthcare industry, actions should be taken to ensure a solid groundwork is laid for the future. The importance of understanding what benchmarks should be measured and evaluated, their impact on the success of your ASC, and how the data they provide improves center outcomes is amplified as the need for outpatient services grows. Groszewski summarizes this healthcare transformation saying, "There is incredible pressure with the increasing trends of declining reimbursements and bundling of services. As larger players in the industry focus their strategies on the outpatient space; the foundation for the future of your ASC is to have a clear understanding of your financial health."