Find your par in revenue cycle metrics - focus on being your personal best

By Chuck Rackley, Senior Vice President & General Manager, Northeast Zone | Posted: 06/12/2018

Find Your Par

When it comes to excellence, it’s all about achieving your personal best. For instance, while famed golfer Jack Nicklaus may have a par of 72 and a goal for much lower, most of us at the top of our game never sniff 80. What is important in an amateur’s game is to discover what a personal par is, factoring in skill level, course difficulty, weather and past history. Finding par in the health care revenue cycle is no different, with much of an organization’s potential for excellence defined by talent, demographics, medical payor mix, acuity and a range of other variables.

In this sense, adopting and striving to meet a pre-determined medical revenue cycle metric may be unrealistic for some and no problem for others. Better to think of industry standards as starting points or guidelines, customizing your accounts receivable program to strive for what’s possible – your par, and defining a clear path to get there.

Varying by state

To illustrate this point, consider what might be a good measure for Accounts Receivable (AR) over 90 days old. While most cite a blanket 20 percent, the reality is that this measure can vary by state. For instance, Medicaid in California is much different from Medicaid in Texas, with 20 percent achievable for hospitals in the Lone Star state, while 30 to 40 percent is more realistic in California based on the state’s more restrictive rules on processing of authorizations and bills.

Realistically, the AR over 90 metric should vary per state, payor services and facility type. Consideration should be made for types of contracts, which differ widely from state-to-state and by insurance payor services. These variables are due to Medicare and private insurer rules, bylaws and pay rates based both on legislation and individual employer plans.

Striving to meet a pre-defined revenue cycle metric can be challenging at best due to the countless customized hospital charge capture policies health organizations must individually reckon with to get paid. Conversely, some medical payors have historical turnaround times that necessitate more aggressive targets below 20 percent. These organizations can leverage scale and medical payor relationships to accelerate payment terms and thus should be held to a higher standard of aging.

One emerging payor services trend – contracting to pay large health care systems upfront with accounts receiving reconciled quarterly – could render the “AR over 90” metric obsolete if accounts are never allowed to age past 90 days. This is one to watch as health care continues to change. Should Medicare and Medicaid regulations follow suite, holding to a flat percentage as a gold standard will be very difficult if not impossible to achieve.

Masking revenue cycle metrics

Certain conditions can also mask the revenue cycle metrics, either making an organization’s performance look better or worse depending on the circumstances. For instance, a hospital in Texas had high front point-of-service collection performance as a hospital. However, upon investigation, it was determined that over 90 percent of point of service collections were coming from a single procedure offered at a flat rate,with POS collections from other departments reported at well below peer standards.

The health care organization actually had a problem with staff effectively asking for deductibles and co-pays due to little or no training on how to script a response, formulate rebuttal statements and accurately assess health insurance coverage. All of this was being masked because they were beholden to one revenue cycle metric and not assessing specific departmental and collector performance.

In a similar case, another hospital acquired a freestanding radiology practice, which was largely a cash business. All of the practice’s POS medical collections were reported on the hospital’s ledger, masking what was actually going on at the hospital by inflating POS health care collections as a percent of the total cash. When the radiology center was excluded from the equation, it was clear that their overall numbers were not at desired levels, indicating that they were measuring incorrectly. On the surface it didn’t look like they had a problem – but they did. In both cases either adjustment of the accountable care organizational par or departmental segregation of the revenue cycle metric would be beneficial.

Measuring the right revenue cycle metrics for you

Defining the right revenue cycle metrics for any organization begins with a deep assessment of the real situation, first asking “Is this measure important to us? Why would we want to measure it?” Most measures tie to another. For example, an organization’s denials percentage ties to its cash percentage, which ties to earnings before interest, taxes, depreciation and amortization (EBITDA), an indicator of overall profitability.

Determining what the measures should be leads to where the yardstick is drawn. Apart from regulatory standards, which are sacrosanct, detailed assessments help health care organizations decide what is possible and what short- and long-term goals should be.

Why is this so important? Because health care organizations who follow the status quo are likely either leaving money on the table or holding their staff to a revenue cycle metric that is not possible. Both scenarios promote poor cultures of revenue cycle improvement and stagnant financial performance.

Learn more about how nThrive can help you find your par and be your personal best. We’ll help you transform your revenue cycle from Patient-to-Payment, ensuring that you have the resources you need to better serve your community.

Chuck Rackley, Senior Vice President & General Manager

In this role, Rackley manages the operational activities in the Northeast region. He has specialized in both acute and non-acute revenue cycle operations and is a leading subject-matter expert in the application of key performance indicators and medical revenue cycle process improvement. In prior roles he managed all commercial reporting, market intelligence, education, commercial enablement and SalesForce effectiveness activities for nThrive and was also instrumental in the creation and management of the nThrive Solution Architecture team, directing the revenue cycle portion of Total Performance Management. Rackley has a Bachelor’s of Business Administration degree from Western Governors University of Utah.