The Ultimate Guide to Revenue Cycle Management Metrics in Healthcare

Revenue Cycle Management (RCM) is the foundation of financial health for healthcare companies. It includes all the administrative and clinical aspects related to claims administration, reimbursement, and revenue generation. But governing the revenue cycle is not about billing and payment, it’s about learning what metrics make a healthcare professional financially sound.

Tracking and examining RCM metrics can help clinicians identify inefficiencies, optimize revenue and thus drive better patient outcomes. In this blog, we’ll take you deep into the top RCM healthcare service providers organizations must address to forecast and preserve financial well-being.

What are RCM Metrics and Why Do They Matter?

RCM metrics are indicators for revenue cycle efficiency and performance. These statistics show the health of a healthcare organisation’s finances and the things that need to be managed like patient billing, claims handling, and collections.

If we pay attention to these indicators, clinicians:

• Figure out revenue bottlenecks.
• Decrease claim rejections and claims processing times.
• Optimize cash flow.
• Enhance operational efficiency.
• Improve patient experience through open and prompt billing.

Here are the top RCM indicators that healthcare institutions must track to calculate financial health.

Top RCM Indicators That Healthcare Should Track

1. Days in Accounts Receivable (A/R)

Days in A/R tracks how long it takes a healthcare facility on average to receive reimbursement for services rendered. And it’s one of the best proxies to financial wellbeing.

Why It Matters

If “Days in A/R” is high, it means payments are late and the cash flow will be impacted. But, if “Days in A/R” is low, it shows that billing and collecting are running well. 

How to Calculate

Days in A/R=(Total Accounts Receivable Average Daily Charges)\text{Days in A/R} = \left(\frac{\text{Total Accounts Receivable}}{\text{Average Daily Charges}}\right)Days in A/R=(Average Daily ChargesTotal Accounts Receivable)

Strategies to Improve

• Automate Billing Cycles: Coding should be perfect and claims submitted on time.
• Track Unpaid Claims: Automate your tracking and follow-up of unpaid claims.
• Set up Patient Payment Plans: Flexible payment plans to lower balances.

Day in A/R target should range between 30 and 50 days based on the organization’s size and types of payers.

2. Clean Claim Rate (CCR)

Clean Claim Rate is calculated as percentage of non-erroneous claims submitted. CCRs that are high mean less claim rejections and rework and thus has a direct effect on the cash flow of the company.

Why It Matters

Denials of claims are a revenue drain for doctors and hospitals. A lower CCR can cause­ delayed payments, more administrative overhead and lower revenue.

How to Calculate

Clean Claim Rate=(Total Claims SubmittedNumber of Clean Claims Submitted)100textClean Claim Rate = left(fractextNumber of Clean Claims SubmittedtextTotal Claims Submittedright) times 100Clean Claim Rate=(Total Claims SubmittedNumber of Clean Claims Submitted)100

Strategies to Improve

• Invest in Training: Regularly update your team’s knowledge about new coding rules and payer guidelines.
• Use Claim Scrubbing Tools: Automation of finding a claim error prior to submittal.
• Root Cause Analysis: See if there are common causes of claim rejection and resolve it.

The Ideal Clean Claim Rate is more than 95%.

3. First Pass Resolution Rate (FPRR)

FPRR measures the number of claims paid after follow-up and resubmission. It’s about the claims process speed.

Why It Matters

FPRR is very low because this minimizes administrative expenses and generates cash faster. It also minimizes the time caused by denied or appealed claims.

How to Calculate

FPRR=(Number of Claims Paid on First SubmissionTotal Claims Submitted)100textFPRR = left(fractextNumber of Claims Paid on First SubmissiontextTotal Claims Submittedright) times 100FPRR=(Total Claims SubmittedNumber of Claims Paid on First Submission)100

Strategies to Improve

• Improve Documentation Accuracy: Add all necessary information to claims.
• Work with Payers: Learn the payer-specific requirements to minimize rejections.
• Use Analytics: Analyze data to spot patterns in claim denials and modify workflows as a result.

Any successful business will have FPRR at or above 90%.

4. RCM Denial Rate

Denial Rate is the percentage of claims denied by payers. It acts as a rich source to identify areas of improvement in revenue cycle processes. 

Why It Matters

Each rejected claim is lost money, and wasted admin time. Reduce the Denial Rate and you’ll see a significant increase in ROI.

How to Calculate

Denial Rate=(Number of Denied ClaimsTotal Claims Submitted)×100\text{Denial Rate} = \left(\frac{\text{Number of Denied Claims}}{\text{Total Claims Submitted}}\right) \times 100Denial Rate=(Total Claims SubmittedNumber of Denied Claims​)×100

Strategies to Improve

• Evaluate Denial Reasons: Group denials like coding errors or incomplete data and tackle the underlying issues. 
• Standardize Documentation Practices: Keep patient records and billing data consistent. 
• Appeal Denied Claims: Create a solid method for quickly appealing denied claims. 

A good Denial Rate generally falls below 5%.

5. Net Collection Rate (NCR)

The Net Collection Rate (NCR) is the measurement of how much money is collected from the total amount that can be collected. It shows how well a healthcare provider is at collecting revenue.

Why It Matters

A low NCR can signal problems with collections. This could involve outstanding balances from patients or low payments from payers.

How to Calculate

Net Collection Rate=(Payments ReceivedTotal Collectible Charges)×100\text{Net Collection Rate} = \left(\frac{\text{Payments Received}}{\text{Total Collectible Charges}}\right) \times 100Net Collection Rate=(Total Collectible ChargesPayments Received​)×100

Strategies to Improve

• Enhance Patient Payment Collections: Use clear and upfront communication about payment responsibilities.

• Check For Underpayments: Audit payments often for payer underpayments.
• Partner with Third-Party Agencies: If required, partner with collection agencies on account that are past due.

A NCR greater than 95% is the best.

6. Patient Collections Rate

Patient Collections Rate is the amount of patient payment received as a percentage of total owed. It shows how the front-end operations like patient registration and payment collection works smoothly.

Why It Matters

Healthcare revenue largely comes from patient repayments, especially in high-deductible­ plans. If patient collections are poor, revenue decreases.

Strategies to Improve

• Payment Portals: Offer patients an option to easily pay over the internet.
• Plan Payments: Allow patients to pay the bills by allowing for installment plans.
• Entrain Front-End Staff: Make sure staff is ready to talk with patients about payment duties.

7. Cost to Collect

Cost to Collect is the amount of RCM processing expense against revenue received. It tells us the performance of a healthcare organization’s revenue cycle activities.

Why It Matters

Cost to Collect : Too high costs are negative for profit so you should cut your cost of collect as much as possible.

How to Calculate

FPRR =(Number of Claims paid on Initial Submit)/Total Claims submitted )100.

Strategies to Improve

• Automate Processes: Eliminate Manual Billing and Claims Processing.
• RCM Outsourcing: Use third party providers to tap their knowledge and save money.
• Maximize Numbers of Employees: Make sure the number of employees is adequate for a proper function.

A good Cost to Collect is under 5%.

8. Lag Days

Lag Days are calculated from when the claim is submitted until when the service is provided.

Why It Matters

Less frequent lag times stall payments and cash flows. Keeping track of this metric also shows you the bottlenecks in billing.

Strategies to Improve

• Reduce Documentation: Maintain the timely execution of records.
• Claims Submission Easier With Technology: Get Claims Submitted Quicker.
• Real-Time Eligibility Verification: Avoid delay due to missing or incomplete patient data.

9. Write-Off Rate

Write-Off Rate is the share of revenue that is written off as uncollectible.

Why It Matters

Low write-off rates indicate ineffective collection practices or payer contract issues.

Strategies to Improve

• Negotiate Payer Agreements: Reimburse on a consistent basis.
• Monitor Payment Activity of Patients: Identify non-payment behaviors and remediate them.
• Partner with Collection Agencies: Acquire unsecured loans on time.

10. Revenue Per Encounter

Revenue Per Encounter refers to the average revenue generated per visit.

Why It Matters

It’s a measure of whether services are profitably delivered or need to be enhanced

Strategies to Improve

• Optimize Service Mix: Invest in high margin services.
• Increase Patient Number: Promote specifically to draw in more patients.
• Avoid Cancellations: Provide reminders for no-shows.

Conclusion

Healthcare providers need to keep track of and analyze RCM metrics if they’re going to remain financially secure and provide good care. Statistics such as Days in A/R, Clean Claim Rate, Net Collection Rate, etc are valuable indicators of the performance of revenue cycle. 

Healthcare organizations can get their money back, automate, and continually improve processes, resulting in better financials and more satisfied patients.