By Sue Irwin, CHC, CHBME

After talking with the specialty group or other physicians, a physician is often wanting to know the answers to the following. You really do need to keep track of some, if not all, of the following metrics.

  1. Days in Account Receivables (A/R)
  2. Days in Accounts Receivable greater than 90%
  3. The Adjusted Collection Rate
  4. The Denial Rate
  5. Average Reimbursement Rate

We, at MBA, are the most concerned by the top three.  We also feel that the first two should be run monthly as well as the Denial Rate.  The Adjusted Collection Rate should probably be run annually and the Average Reimbursement Rate either semi-annually or annually. Using our “Excellerator,” MBA can give you these answers quickly using our Technology.

 

Days in Account Receivables: 

This is designed to tell you how quickly you get paid.  Many experts say the days it takes you to get paid are under 120 days.  We pick 90 days because much of the technology has improved and more importantly, the limits the insurance companies are using for timely filing deadlines have been shrinking.

According to the American Association of Family Practitioners, among others, best practices should be days in A/R and they should stay below 50 days. Lower is preferable (obviously).  Our Transparency focus area of the Excellerator helps you to keep on top of these numbers.

Something to keep in mind, however, is these are the days in A/R for insurance.  If you are checking on days in A/R for patient balances, that would be a whole other story.  We, as a rule, figure out the KPI (key performance indicator) according to all balances (insurance and patient).  Please also remember, any accounts that are sent to a collection agency must be adjusted off that number.  Those dollars are now the collection agency’s responsibility.

 

Days in Accounts Receivable greater than 90 days:

This is designed to check on how the practice is able to get services paid in a timely fashion.  Our theory is, if there are a limited amount of days for you to get the claim to the insurance company, then we should expect the same on the other end.  I did say theory!!

There actually should be two numbers here.  The percent of days in A/R over 90 days for insurances, as well as the percent of days in A/R over 90 days for patient balances.  We do have typical KPIs that are “acceptable” according to the pundits.  Percent over 120 days, again according to medical groups around the country (including AAFP), should be between 12% and 25%.  That is a very large range.  According to MBA, your percent over 120 days should be under 15%.  If you are talking about the percent over 90 days, we feel that should be under 25%.

Also, be sure whether the date the claim is being aged from is the date of service or not.  If you are doing the billing in house, it should be significantly faster than if you are outsourcing to a professional medical billing service.  The billing service usually ages from the date they received the initial charge from your office.  The service really doesn’t have any control over anything prior to that.  Usually, they can run the numbers both ways, either date of service or date of receipt.  Seeing the difference in the numbers every so often might show an issue between your office getting the information to the service that may need to be addressed.

 

Adjusted Collection Rate:

The reason that this number needs to be defined is that most do not charge insurance companies the exact price for a CPT code that the contract allows.  There are a handful of reasons for that couple:

  1. Not all insurances charge the same amount (nor do the plans they have charge the same amount).
  2. Many providers never receive a contract and therefore don’t know what the contract says.
  3. Here’s the big one; insurances have a habit of changing their fee schedules on an irregular basis, but, they do cover that in the contract where they state changes can be made when needed/called for/significant changes, etc. Therefore, you need a good practice management program that can give you what you charged, what you had to contractually adjust off and then what you were paid.  You should hopefully have a difference of less than 5% between (what was charged minus what was adjusted off), divided by the paid amount.

Please remember, the above is a guideline.  If you can actually get your current fee schedules AND your software will let you put that into your system so you can see if everyone is paying at the current fee schedule, then you should be collecting 99% to 100%.

 

Denial Rate:

This can be measured in a couple of places.  The first place to measure is the percentage of claims that make it to the insurance company on the first pass.  This number obviously affects all other collection numbers.  We like to see at least above 98%.  But above 99% is much better.   Through the use of our Technology and Performance acceleration, we are above 99%.

The other denial rate to calculate is during the follow up process.  This one is a bit harder to pin down.  Again, you need sophisticated software to be able to tell you when the denial codes (CARC and RARC codes) that you expect to occur (such as charge is higher than allowed, etc.) vs. when the codes are telling you there is a real problem.  This can only be found in a sophisticated software that works with a sophisticated clearinghouse. This is why we use the MBA Excellerator with its five focus areas.

 

Average Reimbursement Rate:

This number, in our experience is much more of a moot point.  If you charge what the fee schedule allows, your rate should be close to 100%.  If you charge 200% of Medicare allowed amount (many practices do charge a percent of Medicare/or their highest reimbursing payer) you should get between 35% and 40% (industry average).  We believe that the reimbursement should be along the lines 40 – 45% for that rate.  It all depends on your charge amount.

We also suggest that you may want to do this calculation per payer.  Again, this will give you more in information as well as possible targets for renegotiating your contracts.

 

Using a good, professional medical billing service that attends to the five focus areas of the MBA Excellerator (with Credentialing and Compliance high on the hit list as well) should increase your gross income so that the fee actually pays for itself plus getting you more.

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