Improve revenue cycle KPIs with the right analytics

Most of us think of claims denials as a bad thing. They eat up time and resources for reprocessing, they delay payments, and they increase your risk of bad debt. They’re an all-around drag on your cash flow.

And yet, claims denials have an upside. Your denials can be a powerful source of data for transforming revenue cycle management…if you know where to look. Let’s explore how claims analytics and denial data can yield insights that will help you turn around your revenue cycle performance.

Revenue cycle goals for cash flow optimization

First off, let’s establish what it means to be cash flow optimized. First pass yield and denial rate are among the top indicators of your cash flow strength.

First pass yield measures the number of claims that are paid upon first submission. This is an important cash flow KPI because it’s indicative of the right amount of revenue coming in the door on the shortest timeline possible, without any rework required. Your target first pass yield should be between 90 and 95%.

Denial rate measures the proportion of claims that are denied upon first submission. Average claim denial rates range from 6 to 13%, but they’ve been on the rise for the last five years. Claims denials hit an all-time high in mid-2021, with a third of hospital executives reporting denial rates of 10% or more. We want to avoid denials for all the reasons we touched on earlier and aim to maintain a denial rate under 5%.

Useful KPIs for A/R

Now that we’ve examined the impact of denials on cash flow, let’s look at what our accounts receivable data can tell us about our revenue health.

First, consider average A/R days. To get an accurate understanding of the impact to your revenue cycle, it’s important to distinguish between payers. For accounts being billed to a payer, we want to see less than 10% spend over 90 days in A/R. For self-pay accounts, a target of less than 40% over 90 days in A/R is a good benchmark.

Gross days revenue outstanding (GDRO) is another way of looking at outstanding receivables. It tells you how many days, on average, it would take to recoup the full balance of your receivable accounts. Calculate GDRO by dividing gross A/R by your average daily gross patient revenue. A traditional benchmark for this metric was 60, but we ideally want to see this number somewhere in the 30’s or 40’s.

Not all A/R KPIs deal with receivables. Another important metric to monitor is credit balances, which measures accounts with a payment that exceeds the correct charges. Credit balances should be resolved as soon as possible, with a target of under one day. They don’t count as a positive asset and can lead to serious problems in the case of an audit or if a patient complains to a regulatory agency.

Additional strategies to strengthen cash flow

In addition to measuring the right metrics, it can also be highly valuable to change up the way you examine them. Seeing metrics in a new context can reveal new revenue-strengthening insights.

The first example is using department-based denial reporting. Analyzing denials based on the responsible department will give you a better handle on where breakdowns are happening in the claim life cycle (patient access vs. coding, for example) so you can take steps to avoid denial-causing errors.

The second example is using a payer scorecard, which shows you reimbursement and denial data from all payers, compared against each other. This can help pinpoint payer-specific issues that require further attention.

Harnessing analytics to improve revenue KPIs

As you can see, it’s crucial to have a technology solution that allows you to not only access the most impactful revenue metrics, but visualize the data in a meaningful way. Monitoring and optimizing this data leads to fewer denials, faster reimbursements, and most importantly, the predictable revenue you need to maintain smooth operations.

Inovalon’s RCM Intelligence allows you to harness payer, payment and performance data to make smarter financial decisions. With user-friendly reports like payer- and department-based scorecards, it’s easy to identify revenue leaks and cash flow bottlenecks so you can take steps to correct them.

Learn more about strengthening your bottom line with the help of RCM Intelligence.