Key Performance Indicators (KPIs) in Medical Billing

Key Performance Indicators (KPIs) are helpful to increase the performance and collection of the practice. It shows the health of the practice that can be improved if not good. Below is the list of KPIs.

1. Days in AR (Account Receivable):

• Days in AR measures how many days it takes to get paid for the services. 

• Days in AR help the provider to determine the time frame to receive the payment.

• Days in AR Calculation: (Total AR (Account Receivable) amount / Total Charges amount) * number of days

• For example, If we take 3 months of data where the total AR value is $50,000.00 and the value of the total charge is $100,000.00 then Days in AR will be (50,000/100,000) * 90 = 45 days

• If the AR days are 35 or below 35 then AR performance is considered as "High". If AR days are between 36 to 50 days then AR performance is considered "Average" and if the AR days are above 50 then AR performance is considered as "poor".

2. Percentage of AR older than 60 days:

• This represents AR older than 60 days. Usually, denied claims are included in this bucket and require more work to get paid.

• Percentage of AR older than 60 days calculation: Total AR Balance Greater than 60 Days / Total AR balance of all ages

• The percentage must be less than 25% to keep the high performance.

• With the same formula, we can calculate the AR for 90 or 120 days.

3. First Pass Resolution Rate:

• FPRR shows the percentage of claims that are paid in the first pass when submitted to the insurance company. 

• It shows the effectiveness of your RCM process & If the FPRR is low then it is necessary to focus on insurance verification, billing, and coding for a more efficient Revenue Cycle Management (RCM).

• More effective FPRR will decrease the AR and payment will be much sooner.

• FPRR Calculation: Number of claims paid on a first pass / Total number of claims submitted

• FPRR must be 90% or higher for high performance.

4. Gross Collection Ratio:

• GCR is useful for measuring a firm's profitability. It shows what the practice is allowed to collect.

• A high gross collection ratio (GCR) indicates that the fees are closer to the insurance's fee and the practice is doing well in terms of collecting money.

• Every practice has a different GCR due to a unique fee schedule, therefore this metric is best to monitor internally rather than compared with industry benchmarks or other practices.

• GCR Calculation: (Total Payment amount / Total Charge Amount) * 100% (for a specific time period)

5. Net Collection Ratio:

• Net Collection Ratio helps to measure the overall health of the billing and collection process.

• It is helpful to determine the efficiency of the practice by measuring reimbursement amount over the allowed amount. 

• It is also helpful to determine how much revenue is lost due to contractual adjustments or other adjustments.

• A high NCR indicates timely billing and reimbursement from insurance and patient.

• The net collections ratio is the percentage of total reimbursement collected out of the total allowed amount.

• NCR Calculation: (Total Payment Amount / (Total Charge Amount – Contractual Adjustments)) * 100

• Net Collection Ratio must be 98% or greater. NCR, below 90% is considered poor performance. 

6. Collection Per Visit:

• It is helpful in determining how much money is getting collected on a visit. 

• It is a good way to measure the practice against the industry standard and other same-specialty practices in the same area.

• This will enable you to determine the appointments that are most profitable, further helping you to prioritize similar cases.

• It is helpful in determining the most profitable appointments and such appointments must be increased to generate more profit for the practice.

• Collection Per Visit Calculation: Total Reimbursements / Total Visits (for a specific time period)

7. Contractual Variance:

• Contractual Variance is the amount that is paid less by the insurance company as per the contract.

• For Example: If a CPT code is decided to be paid for $40.00. However, if insurance pays only $25.00 then the Contractual Variance will be $40.00 - $25.00 = $15.00

• This can be affected due to incorrect billing or changes in the contract.

• It is necessary to have analytics to calculate the difference between the received amount from insurance to the expected amount as per the contract.

• Contractual Variance Calculation: Contracted Rate - Insurance Allowed Amount