Tips and KPIs to Optimize Your Medical Billing Practice
October 23, 2020
October 23, 2020
When you open up a medical practice, you want to deliver the highest level of care to all the new patients that walk through your doors. But while patient care should always be the top priority, itâ€™s not the only element in building a thrive practice. If you really want your practice to succeedâ€”and to be able to continue delivering the care your patients deserveâ€”you also need to make sure youâ€™re hitting your bottom line and driving the revenue growth you need to continue to expand and move forward.
Getting your medical billing in order and monitoring key performance indicators (also known as KPIs) can give you insights into the financial performance of your medical practiceâ€”and can help you figure out where the largest revenue opportunities and potential exist.
But why, exactly, is medical billing such an important part of your practice management? What KPIs should you be monitoring? And how can improving your medical billing processes actually help drive more revenue for your medical practice?
Before we jump into how improving your medical billing can help you earn more for your practice, letâ€™s quickly cover what medical billing actually isâ€”and why itâ€™s so important in the first place.
Medical billing is the practice of negotiating and collecting payment for your clinic (whether thatâ€™s payment for patient procedures, missed appointment fees, or any other revenue that might be due to your clinic). A medical biller acts as a liaison between the healthcare provider, the patient, and the insurance companyâ€”and makes sure that the practice collects the proper funds for all services rendered, whether from the insurance companies, directly from the patient, or a combination of the two.
Having effective medical billing services and systems is an absolute must for any medical practice. Collecting payment for medical procedures is a complex process; if you want your practice to succeed, you need a biller who understands how to navigate the processâ€”and who has the follow up necessary to collect and make sure nothing falls through the cracks.
Medical billing is also important because it gives you a ton of data on your practiceâ€”and by digging into that data, you can figure out where your practice is performing well, where it can stand to improve, and how you can make those improvements.
And thatâ€™s where measuring KPIs comes in. By monitoring medical billing KPIs, you can continually evaluate and optimize your medical billingâ€”and drive more revenue in the process.
So, the question is, which KPIs should you be looking at if you want to take your medical practice to the next level?
Itâ€™s important to understand the total number of patients that are getting treated at your medical practice. By tracking patient visits, you can determine whether youâ€™re seeing enough patients each day to hit your bottom lineâ€”and, if youâ€™re not, it can act as a springboard for developing a strategy to increase your daily visits and get more patients through the door.
One of the biggest potential drains to your revenue cycle is no-shows. If a patient makes an appointment with your officeâ€”and then fails to show for their scheduled appointmentâ€”your practice is not only missing out on the cost of whatever you were going to bill that patient, but there are also missed opportunity costs for the patients youâ€™re not seeing during that time slot.
Tracking no-show rates can help you gain insights into what percentage of your patients are making appointments and not showing upâ€”and if that percentage is high, it can be a red flag that you need to develop a system to prevent it (like charging a hefty fee for patients who fail to cancel with 24 or 48 hours advanced notice).
Because thereâ€™s an entire medical billing and collection process, youâ€™re most likely not going to collect full payment from your patients (or their insurance companies) on the day services are rendered. But you also donâ€™t want to go too long without collecting payment; otherwise, it could cause a bottleneck in your income stream and make it harder to cover your practice costs.
Thatâ€™s why tracking average days in accounts receivable (AR) is a must. This is the average number of days between the date of service and collection from the payer, whether thatâ€™s a patient payment or payment from an insurance company.
Ideally, you want to keep your average days in AR at 30 or less. If itâ€™s taking your practice longer to go through insurance or patient collections, you may need to optimize your billing processes so you can collect faster.
Ideally, you want claims to be approved the first time you submit them to the insurance company; denied claims create extra work for your biller and delay payments.
Tracking your FPRR (the percentage of claims that are accepted and paid out the first time theyâ€™re submitted to insurance) and your denial rate (the percentage of claim denials you get back from the insurance companies) can help determine whether your claims process is efficientâ€”and if youâ€™re getting paid as quickly as possible.
If your FPRR is high and your denial rate is low, then the majority of the claims your practice is submitted are accurate and that those claims are being approved and paid out in a timely fashion. If your denial rate is high and your FPRR is low, it means thereâ€™s an issue with your billing processâ€”and claims are taking longer to get approved and paid out then they should.
Tracking these KPIs can help you identify any potential issues with your billing before they get out of controlâ€”and before they cause serious issues with your practiceâ€™s profitability.
Ultimately, you want to collect payment for all services rendered by your medical practice, whether that payment is the patient responsibility or is collected from insurance.
Which is why your net collection rate is arguably the most important medical billing KPI of all.
Your net collection rate tells you how much revenue youâ€™re collecting compared to the total of services youâ€™ve billedâ€”and by digging into your net collection rate, you can gain invaluable insights into the performance of your practice and how you can optimize your revenue cycle.
For example, if you look into your net collection rate and realize your patient collections are taking months and dragging down your numbers, it tells you that you need to implement a more efficient patient follow up procedure. If you realize that insurance companies are taking 60+ days to pay out, it could clue you into a billing issue.
The point is, your net collection rate gives you a baseline for how much money is coming into your practice compared to how much your practice is putting out (in the form of services rendered) to your patientsâ€”and itâ€™s an incredibly important metric to keep track of.
In order to continue providing the high level of care your patients deserve, you need to drive revenue for your practiceâ€”and now that you know how medical billing plays into that revenue, you have everything you need to monitor your KPIs, optimize your billing practices, and take your medical practice to the next level.