Total Adjustments as a Percentage of Gross Revenue is a key metric used in healthcare revenue cycle management to measure the amount of revenue that is lost due to adjustments made to patient accounts. Adjustments can include contractual adjustments, bad debt write-offs, and charity care write-offs. To calculate Total Adjustments as a Percentage of Gross Revenue, you would divide the total amount of adjustments made during a specific period by the total gross revenue generated during that same period. The resulting percentage provides insight into the effectiveness of a healthcare organization's revenue cycle management processes and can help identify areas for improvement.
A high percentage of total adjustments as a percentage of gross revenue may indicate issues with billing and coding accuracy, denials management, or patient collections. On the other hand, a low percentage may suggest that the organization is effectively managing its revenue cycle and minimizing revenue loss due to adjustments.
Overall, Total Adjustments as a Percentage of Gross Revenue is a critical metric for healthcare organizations to monitor and analyze regularly to ensure optimal revenue cycle performance.
Total Adjustments as a Percentage of Gross Revenue is calculated by dividing the total amount of adjustments made during a specific period by the total gross revenue generated during the same period, and then multiplying the result by 100 to express it as a percentage.
The formula for calculating Total Adjustments as a Percentage of Gross Revenue is as follows: (Total Adjustments / Gross Revenue) x 100 = Total Adjustments as a Percentage of Gross Revenue
For example, if a healthcare organization had $10 million in gross revenue and made $1 million in adjustments during a specific period, the calculation would be:($1,000,000 / $10,000,000) x 100 = 10%
Therefore, the Total Adjustments as a Percentage of Gross Revenue for that period would be 10%. This metric is important because it helps healthcare organizations understand the amount of revenue that is being adjusted or written off due to contractual allowances, bad debt, or other factors. By monitoring this metric over time, organizations can identify trends and take action to improve their revenue cycle management processes.
Best practices to improve Total Adjustments as a Percentage of Gross Revenue are:
1. Analyze the root cause of adjustments: It is essential to identify the reasons for adjustments and address them to reduce the number of adjustments. Analyzing the root cause can help in identifying the areas that need improvement, such as coding errors, denials, or incorrect billing.
2. Implement a denial management program: A denial management program can help in reducing the number of denied claims, which can lead to fewer adjustments. The program should include identifying the reasons for denials, tracking and trending denials, and implementing corrective actions to prevent future denials.
3. Improve coding accuracy: Accurate coding is crucial to ensure that claims are paid correctly the first time. Improving coding accuracy can reduce the number of adjustments due to coding errors, which can lead to a decrease in Total Adjustments as a Percentage of Gross Revenue.
4. Train staff on billing and coding: Providing training to staff on billing and coding can help in reducing errors and improving accuracy. Staff should be trained on the latest coding guidelines, billing regulations, and payer requirements.
5. Monitor and track adjustments: It is essential to monitor and track adjustments regularly to identify trends and patterns. This can help in identifying areas that need improvement and implementing corrective actions.
6. Implement technology solutions: Technology solutions like revenue cycle management software can help in automating processes, reducing errors, and improving accuracy. These solutions can also provide real-time data and analytics, which can help in identifying areas that need improvement.
By implementing these best practices, healthcare organizations can improve Total Adjustments as a Percentage of Gross Revenue, which can lead to increased revenue and improved financial performance.
The industry standard benchmark for Total Adjustments as a Percentage of Gross Revenue is typically around 10-12%. This means that a healthcare organization should aim to keep their total adjustments to no more than 10-12% of their total gross revenue.
If a healthcare organization's total adjustments exceed this benchmark, it may indicate issues with their revenue cycle management processes, such as inaccurate billing or coding, poor collections practices, or inadequate insurance verification procedures. In such cases, the organization should take steps to identify and address the root causes of these issues to improve their revenue cycle performance.
Overall, monitoring Total Adjustments as a Percentage of Gross Revenue is an important part of healthcare revenue cycle management, as it provides valuable insights into the financial health of an organization and helps identify areas for improvement.
Revenue cycle software can improve the Total Adjustments as a Percentage of Gross Revenue metric by streamlining the billing and collections process, reducing errors and denials, and increasing efficiency. With the help of revenue cycle software, healthcare organizations can automate their revenue cycle management processes, including claims submission, payment posting, and denial management. This automation can help reduce the number of errors and denials, which can lead to a decrease in the total adjustments required.
Additionally, revenue cycle software can help healthcare organizations identify areas where they can improve their revenue cycle management processes. By analyzing data and identifying trends, revenue cycle software can help organizations make data-driven decisions that can lead to increased revenue and decreased adjustments.
If you're interested in seeing firsthand how revenue cycle software can improve your Total Adjustments as a Percentage of Gross Revenue metric, we encourage you to book a demo with MD Clarity. Our revenue cycle software is designed to help healthcare organizations improve their revenue cycle management processes and increase their revenue. Contact us today to learn more and schedule your demo.