KPIs Shift With the Times
By Selena Chavis
For The Record
Vol. 33 No. 6 P. 10
Health care organizations are changing their views on key performance indicators.
What are the best indicators of a sound revenue cycle and a healthy bottom line? According to a new study commissioned by AKASA, as with many areas of health care, when it comes to tracking key performance indicators (KPIs), priorities are shifting.
Conducted by the Healthcare Financial Management Association, the survey fielded responses from more than 350 chief financial officers (CFOs) and revenue cycle leaders at hospitals and health systems across the United States between December 17, 2020, and February 5, 2021. According to Grant Messick, managing director of customer success with AKASA, the survey was designed to assess the adoption of automation in revenue cycle operations at hospitals and health systems and gain an understanding of what they considered to be important information.
The report found the top five measures of revenue cycle operations success, in order of most to least important, were the following:
• net days in accounts receivable (in general);
• aged accounts receivable (A/R) (billed >90 days);
• initial denials rate;
• discharged not final billed; and
• final write-offs rate.
Michelle Darby, CHC, RHIA, director of client services and privacy officer with JTS Health Partners, suggests that the findings should come as no surprise to those who have been working within the revenue cycle sector. “Health care organizations have been looking more closely at the contributing factors responsible for increased A/R totals for some time now and applying various methodologies to address those issues,” she says.
Marlowe Dazley, senior vice president and managing director at Health Catalyst, is seeing similar trends across the industry. “In recent years, there has been an increased awareness in metrics that monitor preservice and time-of-service performance, further highlighting the need to mitigate any financial exposure earlier in the life cycle of a claim,” Dazley notes. “Cash and the timeliness of collecting cash continues to be top of mind for executives and is necessary to generate positive margins and invest in infrastructure and growth. Of note, is the importance of initial denials. This points to the need for leaders to minimize and eliminate controllable loss earlier in the revenue cycle.”
According to the study, benchmarks such as the number of days a claim lingers in A/R, the number of outstanding unpaid patients bills 90 or more days past due, and initial denial rate emerged as the top KPIs.
At a high level, Messick points out that metrics related to A/R remain important, although the philosophy behind tracking these numbers varied widely across hospitals and health systems. For many, it’s less about cash acceleration and more about bottom-line health. “Anecdotally, what we are hearing as we're getting deeper and deeper with the CFO and the VP of revenue cycle is that cash acceleration remains important, but ultimately the most important thing to them is that bottom line.”
Messick adds that the focus is more on revenue quality and accurately getting paid what the health care organization is owed. “I think some of the new challenges with revenue cycle, or some of the most difficult challenges, have bubbled up around denials, around documentation improvement, around financial clearance upfront with a patient,” he says. “All of those workloads tend to impact write-off and revenue maximization. And so that's where a lot of the interest in the focus has been. I don't know that anybody is taking A/R out of their KPI dashboards as much as they are shifting their focus.”
Of note, the survey found the standard industry benchmark of "cost to collect" as an indicator of revenue cycle operations success did not rank in the top five most important measures.
While cost to collect may not be a metric revenue cycle teams prioritize in day-to-day operations, Messick points out that CEOs, CFOs, and other senior executives still consider it a critical metric when examining the overall financial health of their organizations. “I think cost to collect is a really difficult metric to wrangle, and one of the reasons for that is because there's not a clear apples-to-apples measurement for it,” Messick says, noting that typically there is confusion about what departments to include, which will vary by organization. “There's not a universal calculation of that metric. There are a lot of different schools of thought out there in terms of what should and should not be included.”
Dazley emphasizes that there is a high degree of variation of performance metrics across organizations due to the inability to extract and aggregate data to monitor real-time performance. He adds that while some organizations report high-level performance, the most successful identify performance measures for each revenue cycle function and ensure clear accountability exists among stakeholders responsible for these workflows and outcomes.
What works for one organization may not work for another, even with those KPIs that tend to be standard across organizations, says Abner Brignoni, CCS, director of client services at JTS Health Partners. “Establishing benchmarks at an executive level for the organization is critical. Working cooperatively with departments throughout the organization is key to achieving individual goals for a department and the organization as a whole,” he says.
Trends and Best Practices
According to Dazley, the largest factors impacting the KPI landscape are related to fragmentation across multiple source systems and the need to efficiently surface data and analytics from these systems.
“New innovations in technology and data science are also influencing this landscape,” he says. “Many organizations are still evolving to trend historical analytics that are meaningful to their revenue cycle operations. The most successful health care organizations are using data to predict denials, write-offs, and, ultimately, revenue to become more proactive in their ability to intervene earlier in the process.”
Darby agrees, noting that revenue cycle management departments are incorporating and leaning more on artificial intelligence (AI) to provide them with the needed data to determine what and where they should concentrate their efforts to not only mitigate financial risks but also implement the needed workflows that will produce positive results on a continuous basis. “AI has now become a routine and necessary resource to aggregate financial data,” she emphasizes.
Offering an example, Darby points to the use of AI in coding audits. “The typical KPI focuses on DRG [diagnosis-related group] accuracy, but that doesn't begin to tell coding management about any of the other factors that go into true coding quality,” she points out, adding that the detail needed to inform performance improvement can be addressed using advanced analytics tools. “What about the accuracy of the secondary diagnoses or assignment of procedure codes? Are the coders assigning too many ‘unspecified’ codes due to lack of proper documentation?”
Messick says there is now a “hyperbolic change” in terms of new interest in automation and AI to support revenue cycle processes. Drivers for this trend include a cost component related to cost to collect—not necessarily comparing it with an industry benchmark, but organizations comparing themselves with colleagues and their historical costs; an accuracy component that impacts denials, uptime patient performance, and different workflows that could ultimately influence the bottom line; and an appetite for something different.
“There's been a lot of investment around the same kinds of projects for the past 10 to 20 years—centralizing a business office, improving denials, bringing in an army of consultants, trying to improve point-of-service collections,” Messick notes. “We've seen so many of those efforts for a long time now, and I think health systems are still facing razor-thin margins. So, there's a desire to try to change things up and try something different.”
Messick also points out that patient financial responsibility will continue to influence bottom-line performance as trends point to continued increases in that area. “It's one of the growing areas of revenue loss, because largely speaking, patients are taking on more responsibility for the cost of their health care,” he explains, pointing to the growth of high-deductible health plans and different kinds of creative financing in the industry.
As a result, revenue capture shifts to the patient, meaning health care organizations are often seeing a negative shift in bad debt because they are not prepared to capture that revenue. “When I talk to a large health system, I often find that their patient bad debt numbers in the 5% range, and that's a lot of revenue,” Messick says. “It's a hard issue to tackle because if you have uninsured patients—that's an incredibly important demographic to be serving—but at the same time, you want to make sure that you're pursuing every means possible of finding resources for that patient, whether that's different plans or different sponsored initiatives, whether that's charity care, whether that's financing. It's a tough area. It's a highly regulated area. It's a very sensitive area.”
The best way to address capture of patient responsible balances is through more accurate and more efficient upfront processes prior to service, Messick says. And while many health systems recognize this trend and have implemented centralized financial clearance centers or other systems that elevate the patient financial experience, there is still a lot of variability across the industry in the effectiveness of those strategies.
According to Darby, greater collaborations across departments that impact revenue cycle performance is emerging as a best practice. “Revenue cycle management departments within health care organizations are breaking down the silos and working together, understanding that a concerted approach is the most effective process in reaching organizational and departmental financial goals,” she says, adding that HIM is a key contributor to obtaining positive financial metrics. “Coding, auditing, and clinical documentation improvement departments are the most pertinent ingredients that must be incorporated into an organization’s KPI goals and metrics. Those areas collaborate to obtain accurate diagnoses assignment, verification, and compliant documentation to drive reimbursement for the organization regardless of the type of health care entity.”
Dazley agrees, pointing out that HIM plays a vital role in monitoring revenue cycle throughput and performance. “HIM can influence throughput of coding and accounts waiting to be billed,” he says. “They also play a key role in clinical documentation improvement by ensuring comprehensive and complete clinical documentation is obtained and coded appropriately, driving better capture of complications and comorbidities, acuity as measured by case-mix index, and ultimately improving revenue.”
With advanced analytics, HIM, revenue cycle, and coding leaders can start thinking outside traditional methods of how to achieve goals and how to expand on those same goals for better outcomes, Brignoni says. “With staffing shortages and a myriad of complexities to handle on a daily basis, it can be a huge financial and operational benefit to have a focused expert resource to optimize the workflow, understand the details below a particular KPI, and recommend changes that could bring out positive outcomes,” she notes.
Simply put, measuring success is critical to every organization regardless of type, Dazley emphasizes. “Every organization should incorporate principles of discipline, measurement, and accountability into their business process and particularly their revenue cycle operations,” he says. “Basic operating metrics should be consistently tracked and monitored such as cash collections, net days in A/R, denial rates, write-offs, etc. Organizations should also consider strategic destination metrics that align with that organization’s strategic imperatives.”
— Selena Chavis is a Florida-based health care writer.