In a recent survey of hospital CEOs, the American College of Healthcare Executives reports that CEOs ranked financial challenges as the number one issue facing hospitals. Some of the top financial challenges these CEOs identified include Medicaid reimbursement, revenue cycle management, managed care and commercial insurance payments, and reducing operating costs.
It’s clear hospitals should track specific financial key performance indicators (KPIs) to monitor and evaluate financial health and profitability. But at every turn, hospitals are expected to measure and deliver indicators – from quality to financial to clinical to operational. With so many required indicators to report, it may feel overwhelming for hospital leaders to know exactly which financial KPIs they should track. Our hospital revenue cycle experts at eSolutions have created a list of the top 5 financial metrics any hospital should closely watch.
#1 Days in Accounts Receivable
Days in accounts receivable (A/R) measures the amount of time between patient discharge and when payment is made. Days in A/R directly impacts a hospital’s cash flow and is a key indicator in the overall health of a hospital’s revenue cycle.
How do you know what’s good? Medicare typically pays a claim about 14 days after its receipt, while commercial payers have differing payment schedules. Here are the hospital days in A/R performance guidelines:
- 30 days or less = High performing
- 45-50 days = Average
- 60+ days = Below average
A hospital billing team’s ultimate goal is to minimize the time between claim submission and when payment it received. This makes submitting the cleanest, most accurate claim possible to the payer near the time of discharge imperative to improving this metric.
You may decide to track other variables as part of days in A/R, such as:
- Percentage of days in A/R > 90
- Staff processing time vs. Payer processing time
Computing days in A/R may take some time but will prove a useful exercise for identifying red flags in your revenue cycle. You should include monthly calculation of days in A/R into your process so you’re able to compare those metrics to the previous years’ time period.
#2 Readmission Rates
Readmission rates track the number of patients who are admitted into the same or different hospital within 30 days of discharge for the same condition or a complication from the original episode.
The Centers for Medicare and Medicaid Services (CMS) factors readmission rates into hospital reimbursement, meaning readmission rates can negatively impact a hospital’s financials. Hospitals with higher than normal readmission rates may be financially penalized by Medicare.
Readmission rates also are important because they’re an indicator of care quality. Medicare publicly reports readmission rates, which means patients doing their homework when choosing a hospital may steer clear of a hospital with high admission rates, correlating them to poor care quality.
#3 Timely Filing
Submitting claims on time to payers prevents billing delays and denials. Most health plans require hospitals to bill claims within 90-180 days of the date of service. Medicare gives hospitals up to a year to submit claims.
Missing a claim filing deadline by even one day means your hospital runs the risk of a denial. Most payers won’t allow hospitals to appeal a late claim. Hospitals should employ processes that carefully monitor timely filing. The major key is knowing exactly what the filing deadlines are, by payer.
Be sure to employ technology that helps you manage timely filing and clearly documents and tracks that the claim was indeed sent AND accepted by the payer.
#4 Error Claim Rate
Error claim rate tracks all claims that resulted in an error such as a denial, rejection and in Medicare’s case, a return to provider (RTP) claim. Managing denied, rejected and RTP claims is costly, both in staff time and money.
What are some common causes of hospital claim errors?
- Registration Errors and Improper Eligibility Verification
- Invalid or Missing Claim Data
- Absence of Prior Authorization
- Medical Coding Errors
- Poor or Insufficient Documentation
- Lack of Medical Necessity
- Untimely Filing
Tracking and managing your claims post submission is imperative to a hospital’s bottom line. Does your hospital effectively track error claim rates and reason codes? If so, do you know where these errors are occurring and how to fix issues proactively so claims aren’t rejected, denied or go into RTP status? If you’re billing team can’t answer yes to these questions, it’s time to evaluate your revenue cycle tools and processes. Efforts to improve process and workflows and implement proven tools will ultimately provide a return on investment.
With proactive measures and proper tracking at the front and middle of your billing process, your team can minimize denied, rejected and RTP claims. This means less time in the tedious denial appeals process, handling RTP claims and reworking rejected claims. And reducing these staff activities equals more revenue for your hospital.
#5 Cost to Collect
As patient payment responsibility continues to rise, hospitals are feeling increased pressured to collect every dollar owed for care. Hospitals are throwing more resources and staff time to collect payment, adding to the overall cost to collect.
HFMA’s MAP Keys recommends that any expenses associated with functions like eligibility verification, transcription and coding, and clinical documentation improvement should be considered when calculating cost to collect.
It may be difficult for hospitals to accurately measure the cost to collect, especially since costs per claim can change over the life of an unpaid claim – costs that include rework and retouch costs. Manual claim statusing can also increase this metric.
If your cost to collect is high, you can address process issues in the front, middle and back end of the revenue cycle. This includes thorough communication with patients at intake, automating claims submission and management, and utilizing denial management and workflow solutions.
Visit the eSolutions’ Resource Center to see how eSolutions helps hospitals like yours.