Top five metrics for hospitals to monitor to improve cash flow.
The Healthcare Financial Management Association recommends 29 strategic-level metrics for long-term trending and general oversight. These are known as MAP Keys or KPIs, and they are lumped into three categories – accuracy, productivity, and reconciliation. The usefulness of these metrics will differ for each organization, depending on their needs and priorities.
To decide which metrics healthcare organization staff will spend their limited time tracking, each metric needs to be thoroughly understood in the context of organizational goals. First, know that no one metric tells the entire picture, and when you improve one, another one may suffer.
Interviewed for Becker’s Hospital CFO Report, Nicole Davis, senior vice-president of channel management at IKS Health, states:
“Some metrics you’ll want to look at on a daily basis, while others you’ll look at from an operational standpoint and others from a quarterly or monthly perspective to get a better understanding of holistically are we moving in the direction we want to go.”
Kaufman Hall recently released their most recent National Hospital Flash Report, touting 2022 as the hardest year financially of the entire pandemic. Cash flow is king – and for hospitals, it is measured in 24-hour periods, not 30 days. Revenues across the country are largely in the red, and labor shortages paired with increased costs and lower reimbursement have added even more pressure.
The following are the top five RCM metrics to monitor to improve cash flow:
First-pass payment recovery rate
This is important because it shows how successful a health system is at avoiding denials and claims rework. The focus should be on if the claim went out cleanly if it was paid on time, reconciled, and closed. This metric encompasses a bit more than just clean claim percentages, as it takes into account on-time payments. If this isn’t tracked, a system may not realize how much daily cash flow they are losing to late payments from insurance companies – something that has been in the news quite a lot lately with various major payers.
Net collection rate
This measures a healthcare organization’s effectiveness in collecting reimbursement. From all payers – including self-pay. As payer dynamics are changing and more consumers are selecting high-deductible plans, this metric has been changing for everyone. Patient responsibility portions are difficult to collect, especially during tough economic times. This measure helps determine overall trends and effectiveness of collection strategies – especially important if the system is using a third-party collections partner.
Cost to collect
This metric goes hand-in-hand with the net collection rate to monitor overall profitability. As insurance companies add more layers of complexity and requirements to submit claims, the cost to get the claim out the door goes up. Also, the more difficult and the longer it takes to collect money owed, the more revenue is used up. Outsourcing the collections portion of the revenue cycle is a strategy that is becoming more popular among healthcare organizations, as they search for ways to reduce the costs to collect.
Over-the-counter and self-pay collections
This is a more specific metric, drilling down to patient responsibility – notoriously the most difficult and expensive amounts to collect. A thorough analysis of processes used in clinics and registration to collect copays can reveal process issues and missed opportunities. Organizations should focus on engaging patients so that they understand their financial responsibility, preferably at the time of scheduling a test or appointment. When patients are prepared and don’t get a surprise bill, payment is more likely at the time of service.
One strategy some organizations are using is a “payment method on file”, meaning that patients can approve the use of this method at registration, making payment simple and easy. Another is to send an SMS with a link to the payment portal, prior to the appointment – sometimes in combination with pre-registration paperwork. This reduces wait times and administrative costs as well since those items are completed ahead of time.
This is a good way to analyze and surveil trends of “revenue leakage” or referrals outside the system. If a PCP is referring to specialists outside the system, the organization should find out why, and if anything can be done to increase confidence and reverse that trend. Understanding negative volume trends at a granular level and being proactive about resolving them can help organizations remain sustainable.
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