This a first of what will hopefully be relevant and meaningful information regarding the management of your Revenue Cycle (billing and Accounts Receivable).

I’d like to start with our first and in my opinion, most important topic…measurement.

If “The Promised Land” is optimal cash flow, there are several KPI’s (Key Performance Indicators) that are commonly utilized as a road-map to measure if your practice is indeed falling within benchmarked “best practices”.  After all, don’t we need a road map to know where it is we want to arrive?

VRS utilizes several simple but powerful benchmarks, all geared and linked to providing the answer to that bigger question, am I maximizing cash flow?  These tools, indicated below, are the undercurrents to arriving at the ultimate cash flow conclusion:

  1. Gross and Net Collection Ratio.
    1. Gross collection ratio is a simple calculation that compares monthly gross collections divided by total charges.  It is a calculation that does not take into account your fee schedules
    2. Net collection ratio does take your contractual adjustments into account by dividing your payments by your net charges (charges less adjustments)
  1. Aging Analysis
    1. Aging of A/R can be measured in so many ways.  Two measurements stand true:
      1. No more than 5-7% should be greater than 120 days
      2. At least 65% of the A/R should be less than 30 days.
    2. Aging can also be measure by payer, financial class, and trended over time to make some very interesting and eye popping (somewhat unexpected) results.
  2. Cash Lag Analysis
    1. This is one of the more complicated benchmarks to measure. Its primary essence is to evaluate “when your money comes in relation to when it is billed”.
    2. It usually requires a savvy spreadsheet.
    3. It is great to know when the lion-share of your money comes in relation to the date you bill it.
  3. Accounts Receivable Days Outstanding
    1. This is the most critical and telling of all the measurements as it ties the other three KPI’s together.
    2. This measures the average number of days charges that still remain in your Accounts Receivable.
    3. The calculation is not very difficult and we are happy to provide that to you, just click on the email link below and we will forward the worksheet.
  1. Denial Management
    1. The billing team must  be able to track many aspects of denials:
      1. Denial types and dollar types associated with those denials
      2. Working of and refiling of all denials on a timely basis to facilitate collection and reduce the risk of timely filing deadlines.
  • Trending all denial types monthly; see below common denial types:
  • Intake and Registration
  • Billing
  • Coding
  • Credentialing
  1. Denials should be reported to senior management as many denials are not always (or usually for that matter) the fault of the billing team and can reveal a more deeply rooted problem.
  2. No more than 5% of your charges should be denied for any reason.

While there are many other measurement tools, these are the top 5 to really get a sense as to the efficacy of your Revenue Cycle Management (RCM) and ultimately your cash flow.

VRS offers a substantive RCM analysis.  VRS offers a substantive RCM analysis. As Billing and Business Specialists, we pull the numbers you require and present you with a comprehensive yet easy to understand report. If you have concerns or may feel as though you are coming up short on these measurements, do not hesitate to contact me, Rob Feldman, Director of Business Development and sales and I will coordinate this assessment for you.

We are also happy to provide you with the worksheets that include the formulas to make these measurements on a monthly basis.

Happy Collecting!

Rob Feldman