January 11, 2023
8 minute read
Revenue Cycle Management

Revenue Cycle Metrics: 21 Best RCM KPIs

Rex H.
Rex H.
Blog Hero Background GraphicBlog Hero Background Graphic
Table of Contents
Table of Contents

Efficient revenue cycle management (RCM) is critical to the profitability of any healthcare practice. Not only does it ensure you collect accurate payment for the services you provided, but it also helps you provide transparency in billing, which patients love and several regulations require. Increasing your efficiency starts by understanding the different revenue cycle metrics that are cardinal to your practice and your organization's goals.

We have compiled the 21 important revenue cycle management metrics you should measure and improve on in your practice.

{{toc}}

21 Best Revenue Cycle Management KPIs to Track

The following revenue cycle metrics will help you get a grasp of the efficiency of your current revenue cycle management:

0-60 Percentage

Description

In healthcare, payments due are categorized according to how many days ago the service provided was billed. The 0-60 percentage is the projected cash inflow, that is, the percentage of the account receivables (A/R) in the two youngest aging buckets: 0-30 and 31-60 days.

How to Calculate 0-60 Percentage

To calculate the 0-60 percentage, divide the sum of A/R in the 0-30 bucket and 31-60 by your total account receivable.

0-60 Benchmark

The medical billing benchmark for account receivables for a practice that has adopted electronic billing is 20-35 days. Ideally, your A/R that is up to 60 days overdue should be less than 25%.

Aged Accounts Receivable (A/R) Rate

Description

Aged accounts receivables are long-standing medical bill payments that your practice has yet to receive from patients or insurance companies for whatever reason. Account receivables are grouped into different aging buckets: 0-30 days, 31-60 days, 61-90 days, 91-120 days, and 121 days or more. Aged accounts receivable rate is the percentage of your A/R that are over 90 days or 120 days, or any other bucket you select. You want your aged accounts receivables to be as low as possible.

How to Calculate Aged A/R Rate

An aging A/R report will break down your account receivables into different aging buckets. Your aged A/R rate is the percentage of account receivables over 90 days or 120 days.

Benchmark

The benchmark for aged A/R rate varies based on the practice area. Medical Group Management Association publishes an annual report that contains the A/R benchmark for different specialties.

Bad Debt Rate

Description

Bad debt rate is the percentage of account receivables that a practice has to write off because they would not be able to receive payment. They are essentially health care you have provided that you won’t get paid for. To run a profitable practice, it’s important that you keep your bad debt rate at a minimum.

How to Calculate Bad Debt Rate

You can calculate your bad debt in two ways: write them off as an expense or via the allowance method. The first is simple enough. If it becomes clear that a patient won’t pay, you can write it off individually. The second method requires some explanation.

The allowance method requires you to set out an amount of money you will draw from to cover your bad debt. But you will have to estimate how much you will likely incur as bad debt. The formula is Percentage of bad debt = Total bad debts / Total credit sales. When you get the figure, you can calculate your bad debt for the year against your projected sales.

Benchmark

The increase in out-of-pocket patient bills and health insurance deductibles has led to increasing bad debts. As of 2017, according to a report by Healthcare Financial Management Association for bad debt, the national benchmark was 2.02% of the hospital's revenue.

Cash Collections as a Percentage of Net Patient Service Revenue

Description

Net patient service revenue refers to the total amount of money a practice makes from the services it provides to patients, after any discounts or adjustments. Cash collection as a percentage of net patient service revenue is a revenue cycle management metric that helps you measure how efficient your practice is in collecting payments for the services you have provided.

How it’s calculated

You can calculate your cash collection percentage by dividing the total patient service cash your healthcare organization has collected by your average monthly net patient service revenue.

Benchmark

A high cash collection as a percentage of net patient service revenue shows that your practice effectively collects payments for the services you provide. Ideally, you want your cash collection as a percentage of net patient service revenue to be very close to 100. HFMA’s MAP Key Connect program can give you access to the industry benchmark.

Charge Lag

Description

Charge lag refers to any delay between when a practice provides a service and the actual date the charge is entered.

How to Calculate Charge Lag

You can calculate charge lag by the number of days from the date of service to the day your staff enters the charge.

Benchmark

Ideally, you should enter your charges within 24 hours of providing the service. However, in practice, a survey revealed that only 32% of respondents said their charges are recorded within 24 hours. About 35% said it takes them three to seven days to do so, and 6% said it takes them over a week.

Clean Claims Rate (CCR)

Description

Clean claim rate is the proportion of claims submitted without any additional edits. If your claims require manual intervention, it will cost you time and money.

How to Calculate Clean Claims Rate

To calculate your CCR, divide the number of claims that didn’t require any edits by the total number of claims you submitted.

Benchmark

The benchmark for clean claim rate is 98%.

Cost to Collect

Description

Cost to collect measures your organization’s productivity and efficiency. It is the expenses you incur to collect payment for the services you provided.

How to Calculate Cost to Collect

To get this KPI, divide the total revenue cost by the total cash you collected.

Benchmark

The current average cost to collect for most practices is 3%.

Days in Accounts Receivable (A/R)

Description

This is the average number of days it takes for your practice to receive payment for a claim. High days in A/R indicate that you experience delays in getting payment for the services you have rendered, which will negatively impact your cash flow.

How to Calculate Days in A/R

To calculate your days in A/R, take the total A/R and divide it by the average charges per day over the selected period.

Benchmark

According to the American Academy of Family Physicians (AAFP), a practice’s days in A/R should at least stay below 50 days. However, aim to have days in A/R of 30-40 days.

Discharged Not Final Billed (DNFB Rate)

Description

This important RCM metric refers to situations where a facility has discharged a patient, but they have not submitted the final bill for the services they provided.

How to Calculate DNFB Rate

To calculate the DNFB rate, divide the amount in the accounts not final billed by the average daily revenue.

Benchmark

Industry-acceptable number of days is five to seven days.

Discharged Not Submitted to Payer (DNSP)

Description

DNSP refers to when a practice has treated and discharged a patient but has not submitted the claim.

How to Calculate DNSP

To calculate, divide the total DNSP gross revenue by the average daily gross revenue.

Benchmark

The industry benchmark for DNSP is two days.

Denied Claims Rate

Description

Denial claims rate is the percentage of the claims you submitted within a given period that payers denied. Your denial claim rate indicates how efficient your revenue cycle management is, and you should aim to keep it as low as possible.

How to Calculate Denial Rate

To discover your denial rate, divide the total amount of claims payers denied in a given period by the total amount of claims you submitted within that same period.

Benchmark

According to the AAFP, the industry average denial rate is 5% to 10%. However, a below 5% denial claim rate is ideal. More organizations have seen increased claim denial in the last five years.

First Pass Yield

Description

First pass yield measures the percentage of claims paid correctly on the first submission. Prioritizing improving your first pass yield will help you reduce the denial rate, thereby improving your cash flow and RCM.

How to Calculate First Pass Rate

To discover your first pass yield rate, divide the number of claims paid on the first submission by the total number of claims submitted within a specified period.

Benchmark

Aim to keep your first pass yield at 95% and above, but at least it shouldn’t be below 90%.

Gross Collection Rate

Description

Gross collection rate is the total payment your practice receives in proportion to your total charges.

How to Calculate Gross Collection Rate

To calculate the KPI, divide the total payment you received by the total charges in a given period.

Benchmark

95% or higher is considered ideal.

Net Collection Rate (NCR)

Description

Your net collection rate is the percentage of payments you receive out of what insurance companies contractually owe you.

How to Calculate Net Collection Rate

Divide your cash collection in a given period with payment by your charges (after subtracting contractual adjustments).

Benchmark

According to the Medical Group Management Association (MGMA), the benchmark for net collection rate is over 95%. The AAFP lists the NCR range as 95% to 99%. If you have a low NCR, there are many ways you can increase your net collection rate.

Payment Accuracy

Description

This metric is used to measure whether a healthcare organization is paid accurately for the services it provided. In payment accuracy, you take note of any payment variance, which is both underpayments and overpayments.

How to Calculate Payment Accuracy

To calculate payment accuracy, divide the number of claims paid correctly by the number of claims.

Benchmark

The industry goal is for payment accuracy to be at 95%-97%.

Patient Payment Collection Rate

Description

Patient collection rate is the percentage of out-of-pocket patient charges a practice collect.

How to Calculate Patient Payment Collection Rate

To get your patient payment collection rate, divide the total patient collection by the total patient charges.

Benchmark

Crowe RCA Benchmarking Analysis report reveals that the self-pay-after-insurance collection rate decreased from 76% in 2020 to 54.8% in 2021.

Patient Schedule Occupied Rate

Description

Patient schedule occupied rate measures how much of a provider’s appointment schedule is taken up.

How to Calculate Patient Schedule Occupied Rate

To calculate it, divide the total number of patient appointments by the total number of available hours.

Benchmark

This benchmark varies depending on the practice area.

Point-of-Service and Upfront Collection Rate

Description

This RCM metric measures the percentage of payments your practice collects upfront rather than billing it to a payer or patient later.

How to Calculate POS Collection Rate

To calculate POS collection rate, divide the total POS payments by the total charges.

Benchmark

Several factors affect a practice's ability to collect POS payments. However, almost half of all practices have a POS collection method.

Resolve Rate

Description

The Resolve Rate KPI reveals the overall efficacy of your RCM process like eligibility, coding, and billing.

How to Calculate Resolve Rate

You can calculate it by dividing the total number of claims paid for in a given period by the total number of claims.

Benchmark

MGMA indicates a resolve rate of 96% or higher is considered great.

Revenue per Patient Visit/Encounter

Description

This measures the average revenue for every patient visit. You can use revenue per patient visit to monitor and estimate future revenue.

How to Calculate Revenue per Encounter

To calculate, divide total revenue by the number of office encounters.

Benchmark

Currently, there is no standard benchmark for this metric since there’s significant nuance depending on the practice type and other factors.

Revenue Realization Rate (RRR)

Description

This is the percentage of charges that were adjusted or collected.

How to Calculate Revenue Realization Rate

Take the sum of payments and adjustments and divide by total charges.

Benchmark

RRR should be 94% or higher.

How to Use Revenue Cycle KPIs to Improve Financial Performance

Tracking your revenue cycle metrics helps you understand your current revenue cycle management practices and reveals areas of weakness that can be improved on for a better RCM process. When you know your KPI metrics, you can measure them against industry benchmarks and set improvement goals in the areas your practice is performing at a subpar level.

Improve Your Revenue Cycle Metrics with MD Clarity

Automating your revenue cycle management will help you improve your processes and staff productivity. MD Clarity helps improve your organization’s revenue cycle metrics whether it's increasing your net collection and upfront collection with our patient cost estimate software or increasing your revenue realization from payers with our underpayment detection solution. Request a demo to see the difference we can make in your RCM KPIs.

Improve your financial performance while providing a more transparent patient experience

Request Demo
Full Page Background