By Matt Seefeld
For medical practices struggling to maintain steady cash flow, leveraging data is the only way to maximize financial performance and combat declining reimbursements.
On the plus side, advances in revenue cycle management (RCM) technologies have given us rich, detailed insight into key performance indicators. Powerful analytics can now dig into our data and display our performance in dashboard-ready context. In doing so, these analytics can help practices understand what is driving poor, or below-average, metrics. Such high-level visibility, coupled with insights from RCM machine learning tools, can trigger positive changes in operations.
To truly understand the importance of analytics in RCM, we need to actually see how a single practice’s performance data, benchmarked against those of similar practices, can enlighten us. Here, we look at three common physician practice RCM scenarios, and how data are the game changers.
Scenario 1: Net collection rate is too low. Many practices focus on gross collection rate, which is heavily dependent on the pricing of services, changes in payer mix, and the clinic’s effectiveness in collecting patient liability. Net collection rate is the measure that all practices need to evaluate to see how much money is being left on the table. The industry benchmark is 96% where the remaining 4% is allowance for avoidable adjustments, bad debt, charity care, and administrative write-offs. If your practice’s net collection rate is less than 96%, you need to quickly understand where noncontractual write-offs are occurring and how you can convert those to cash.
Scenario 2: First-pass denial rates are high. Unlike other problems, when denials spike, the root cause isn’t always obvious. It’s like sitting in a forest, smelling smoke, but not knowing where the fire is coming from. But they can add up. In one example, a small orthopedic practice carried $1.6 million in unpaid balances because so many claims were denied by multiple carriers.
Here, again, RCM analytics tools can provide comparative values between multiple carriers so practices can see which insurers are denying the highest number of claims and, more importantly, why. This can save hours of time; for example, if Carrier A denied $200,000 over the first quarter of a calendar year and routinely requested additional documentation for a few codes, the practice will know it needs to dig deeper into what’s happening with that carrier. Perhaps they need to audit their code-mapping system. Are they using incorrect codes? Do they need to remap their codes on the back end? What else can they do to make sure their claims are “clean”?
Scenario 3: Too many of our patients are no-shows. Patient no-shows are a big problem for every health care organization in the country, especially primary care and specialty practices. Yet many providers don’t realize quite how many tens of thousands (or hundreds of thousands) of dollars they’re losing every year because of these common occurrences. When a patient no-shows or cancels an appointment on the day of the appointment, practices not only lose revenue from that patient, they also lose the opportunity to generate revenue during that time slot by offering the appointment to someone else.
A good RCM analytics solution can tell a practice, for example, that it’s losing $75,000 per provider per year. Seeing these numbers on a dashboard is often the impetus a practice needs to take a hard look at its cancellation policies and no-show fees. Using no-show data to engage with patients who have a history of not showing up prior to their next visit can help transform the culture of the practice and protect revenue. A few helpful questions to ask include the following:
Having visibility into the revenue cycle empowers practices to see, in numbers, what’s not working—and how they fare against competitors. In this way, RCM data and insights, presented in an easy-to-understand, detailed format, can truly drive operations and help practices improve and grow.
— Matt Seefeld is the executive vice president of MedEvolve, Inc, with 17 years of experience as a leading consultant in the field of revenue cycle management.