Metrics Private Practice Owners Should Know When They've Outsourced Their Billing
One of the lessons that business owners learn at some point in the life of their business is that data is everything. Business rarely, if ever, functions on intuition alone. Rather, all businesses utilize a dashboard of data in order to know what actions to take given a variety of market conditions. When a practice owner outsources their billing to another company or individual they also need to keep track of a variety of metrics to help them know if the partnership is working and profitable. This blog is intended to give you an overview of the metrics that you should know and look at on a regular basis in order to know if your billing is moving your practice forward. By the end of this blog you should be able to have a good understanding of billing metrics and be able to implement them in the life of your practice.
Medical and insurance billing is very trackable. This is a key assumption that should be made when approaching insurance billing, and this should be an encouragement to you when running your business. It should be very easy for you to be able to determine if your billing systems are successful, struggling, or failing. Knowing the metrics to track can be difficult but we are here to help you discern what you should be tracking and what that data is telling you about the life of your practice.
Here are some key metrics that you could be tracking in your practice:
The amount of time it takes for claims to pay
The amount of money that the average claim pays to your practice
The contracted rates for each insurance company and for each service that you provide
The time it takes to submit a claim
The first-pass rate (i.e. the percentage of claims that pay after the first submission)
Production and collections
The amount of sessions each therapist is scheduled for daily, weekly, or monthly
The percentage of correct verification of benefits
The time it takes for your staff to do eligibility and benefits
The profit from each claim that you submit
The amount of money that you are collecting from patients on average
The amount of time it takes to credential a new clinician
The percentage of collections that you are paying for each claim
The amount of money past 30, 60, 90, and 120 days
The trendline of money resolved past 90 and 120 days
The amount of money that you are writing off every month and year
These are some of the metrics that you could be tracking in your practice and oftentimes clinicians are tracking one or two of these metrics. As business owners there is a lot of information that circulates through your email and through your office, so what are the bottom line metrics that you should start with to evaluate the effectiveness of your billing systems and processes?
The three metrics that you absolutely need to be tracking to evaluate the success of your billing processes are:
The trendline of money resolved past 90 and 120 days
Production and Collection
The first-pass rate of your claims
Tracking the other metrics listed above could be very helpful in understanding the revenue cycle management of your practice, but a general rule of thumb for tracking data is to only track information you use to run your practice. Each of the three metrics mentioned above exist to help you manage key portions of your practice. We will go through each one and help demonstrate how you can use these metrics to become a better practice manager.
The trendline of money resolved past 90 and 120 days is used to show whether or not your biller is collecting on money that you probably would not have collected otherwise. Collecting money that is going to be written off is one of the key value propositions that a biller can bring to the table when working for your practice.
Keep in mind that your biller can’t collect on claims if notes haven’t been completed or if there is a systematic credentialing issue with your practice. It is important to know the difference between claims not followed up on and claims that will never pay out. Your biller should be able to help you identify either issue and either write-off the claims or leave them on your aging report. Practice Solutions billers send reports to our clients on each billing day, giving providers an overview of the work that has been done to resolve claims and maintain a good understanding of this particular metric.
Your aging report should be a high level summary of your claims and depending on how it looks will tell you a lot about the health of your practice. To give you a benchmark for your own practice, Practice Solutions operates with a goal of keeping aging under 60 days for mental health practices. This is an aggressive goal but one that incentivizes our team to collect on claims that are older or haven’t been followed-up on in quite some time.
We don’t want you to leave money on the table with old claims and we definitely want to make sure you are getting paid for everything you should be collecting. Your team may have a different goal based on the size and complexity of your practice, but if your billing is running efficiently and effectively you should be able to see a positive or no trendline past a certain aging threshold.
How can you track this particular metric? Every EHR comes with a feature to view your aging report. You should not have to data mine this particular metric. We recommend that you pull the aging report every quarter to ensure that you are trending in the right direction.
What if you are not seeing positive results with this metric? If you are noticing your aging growing or if you are noticing a stagnating trend on this particular metric in private practice, we recommend scheduling a team meeting with your biller to find out some of the root causes. Once you know the root cause of the issue you can make system adjustments to see a positive trendline. If you already have a good idea of what is broken in the system, continue to make gradual improvements to see if they have an impact. If after you have tried to make adjustments you are not seeing a change you may need to call in a professional to help diagnose the issue and consult on how you can improve.
Production and collection is a comparison between what a provider is actually collecting per session versus what they are expected to collect per session based on their average contracted rate. If a provider is performing at or above the contracted rate average, your billing systems are functioning properly. If a provider is performing below the contracted rate average, this is an indicator that one of three things needs attention: the provider needs to improve on collecting from their patients, the provider needs to adjust their patient mix by insurance type to meet the average, or there are problems within the billing department that need to be addressed. There are several factors that go into analyzing this metric.
First, you will need to calculate an average contracted rate. To do this, you will need to reference the fee schedule from each insurance company a provider is credentialed with and find the reimbursement rate for a one hour session. We recommend using a one hour session because it is one of the most commonly billed sessions for providers. In Example A, the provider is credentialed with three different insurance companies with three different rates for an hourly session that average to $114.57. This is the average contracted rate for that provider. Depending on how your practice is organized, different providers may have different average contracted rates depending on which insurance companies they are credentialed with.
Contracted Rate for a 60 Minute Session
Insurance Company A
Insurance Company B
Insurance Company C
Average Contracted Rate
The next number that you would need to calculate is the average dollar amount actually collected per session for the provider. Keep in mind that there may be at least a 30 day delay between claim submission and claim payment, so you may want to consider calculating this average 30 days out from the month that you are calculating the average for. For example, you would want to calculate January’s average at the beginning of March to allow for payments to process and be posted.
To calculate this average, you will need to take the revenue amount that a provider brought in for a given month and divide it by the number of sessions that a provider has conducted in that given month. This will give you the provider’s actual collection value per session, which you can then compare against their contracted rate average.
If the average of actual collections is greater than or equal to the average contracted rate, then you have nothing to worry about! If the average of actual collections is less than the average contracted rate, this is a flag to look deeper into why that average is lower. As we mentioned before, there are three possible reasons that the average might be lower, and it could even be a combination of all three issues in conjunction.
In order to bring production and collection up to the average contracted rate, you will want to first look at the number of patients with a given insurance that a provider is seeing. In the example above, if 80% of a provider’s patients have Insurance Company C, then they should aim to see more patients with Insurance Company A to get closer to the average. Next you will want to look at patient collections. If the provider is not collecting money from their patients, that will impact their average revenue collected. Lastly, you will want to check in with your biller about claim submission and follow up, and if there are any denials or rejections for that provider. There could be a credentialing error that needs to be fixed, a provider could need to be more disciplined about completing their notes, or claims may not have actually been submitted and you need to have a conversation with your biller.
As a general rule of thumb, you should expect that your providers are collecting between 70% and 100% of what has been billed. You can calculate this percentage by taking actual revenue collected and dividing it by what the expected revenue should be based on contracted rates. Ideally you would like to see greater revenue and the same amount of aging as a provider takes on more patients.
The first-pass rate of claims is used to measure the payment of claims upon initial submission. Your billing systems are working extremely well if you have a high first-pass rate. A high-first pass rate means that you are credentialed correctly, eligibility checks are functioning correctly, claims are going out clean, and the insurance company is paying them promptly. This is a sign of a functioning practice with functioning systems. It is also a sign that you have the right people operating in your practice.
How can you track this particular metric? First-pass rate is probably the most challenging metric to measure because it involves looking at the number of claims submitted compared to the number of denials and rejections. In order to calculate the first-pass rate of your claims you would take the number of rejections that you have and divide it by the total number of claims that you sent and multiply that number by 100. That will give you the first-pass rate of your claims. Measuring the number of denials and rejections will require either coordination between you and your biller or setting aside time in your schedule to find this information. Each EHR is different but each one should have a way for you to look at claim denials and rejections.
What if you are not seeing a positive trendline with first-pass rate? Almost always, denials and rejections are a result of poor credentialing or a result of bad eligibility and benefits checks. If you are doing your due diligence to check the benefits and eligibility of your client before submitting claims you will likely have a very high first-pass rate. If you are credentialed properly with the insurance companies that you work with you will likely have a very high first-pass rate. We recommend looking at these two departments if you are noticing a low first-pass rate.
Each of the three metrics above will help you triangulate the problem in the event of low payment of claims and will help lead you to the solution of the problem.
Systems to Keep Metrics Current
One of the challenges with metrics is making sure that you have systems to keep them current and that they help you manage your practice. We don’t recommend that you track these metrics daily or even weekly. We recommend setting aside time once a month to pull numbers and keep track of this data every quarter.
Why do you recommend keeping track of metrics quarterly? The reason why we recommend tracking your key metrics quarterly is because of the delay that is involved with claim payment. Tracking client payment is much faster and provides real-time data, but when you are working with third-party insurance companies payment can take some time to process. Because of the delay it would be a waste of time to spend daily attention tracking this information, but when you track this data quarterly it gives you much better trendlines and allows you to make changes systematically.
Data mining and tracking metrics is taxing work. You can spend a few hours pulling information and analyzing it which can leave you feeling drained. We recommend blocking out a day or two every quarter to pull the information and analyze the data. This will help tracking metrics not feel like a chore and will help keep your excitement up as you look at your progress from quarter to quarter.
As you pull data for your metrics and analyze the information you may see information that causes you concern or makes you feel stressed about your practice. The goal of looking at data and tracking metrics is to face the brutal facts of your practice and empower you to run your practice so that it is sustainable over years to come. If you find that tracking metrics is a stressful part of your job we encourage you to leave yourself plenty of time to process through the information and make a logical thoughtful decision for your practice.
Running a practice can be compared to chess in that you have time to think through your next move and evaluate whether or not this was the right decision for your business. You can tinker and tweak your systems to make sure they are working and operating in your favor. If you are feeling overwhelmed by the task of billing please give us a call. We would love to take that burden off your shoulders so you can focus on patient care. We are with you and for you in your private practice journey and look forward to partnering with you every step of the way.