Improving A/R performance: What you may not know
Editor's note: Patrick Murphy is the vice president of business services for TruBridge. The following is an excerpt from NAHRI's 2019 State of the Revenue Integrity Industry Survey Report.
More hospitals are cash strapped than any time since the 2008 financial crisis, according to a 2017 Moody’s Investors Service survey. Not-for-profit and public hospitals, in particular, are feeling the squeeze with median operating cash-flow margins at a 10-year low. High labor costs and lower payer reimbursements are key contributing factors. Furthermore, according to a 2018 Black Book™ revenue cycle survey, 90% of small and community hospital respondents anticipate declining-to-negative profitability in 2019 due to diminishing reimbursements, unrecovered collections, and underutilized or inefficient billing and records technology. Patrick Murphy, vice president of business services at TruBridge, shares common accounts receivable (A/R) operational issues that hospital leaders may not even know they have, along with the top five key performance indicators (KPI) and best practice metrics.
Q: What are the most common A/R operational issues you see?
Patrick Murphy: Hospitals are experiencing five major A/R problems today. The first area is patient access challenges, including inaccurate patient information as well as lack of patient collections due to insufficient training, quality assurance tools, and accountability. Second, hospitals are having difficulties with their charge capture process. Many have an incomplete or outdated charge description master (CDM), which causes revenue leakage.
Medical coding quality and timeliness of coding charts is another problem for organizations. We are seeing facilities that do not have a formalized QA process or a good documentation review process. There is also a shortage of qualified staff because of the high demand for certified coders. The fourth issue is hospitals still manually touch too many accounts instead of only working the exceptions. The use of advanced technology, when implemented correctly, can significantly reduce or eliminate this bottleneck. Finally, many hospitals still do not use any type of data analytics. You cannot drive success if you do not measure the key indicators that quantify success.
Q: What are the top five A/R KPIs?
Murphy: The most important KPI is cash collections to net revenue conversion, followed by point of service cash collections, discharge not final billed (DNFB), denial percentage, and A/R days. See chart below for each KPI and its best practice metric for an average hospital.
Q: What are your top three recommendations for hospitals that want to improve A/R processes?
Murphy: Start by focusing on the patient’s front-end experience. Patients expect a retail healthcare experience today, and it begins with top-notch patient access processes supported by strong training and advanced technology. Use eligibility tools to load accurate insurance information and a patient liability estimator to provide accurate estimates to ensure a smooth transition from data collection and point of service cash collections to clinical care. Secondly, focus on people, processes, and technology, which will enable you to do more with less. For example, take advantage of revenue cycle management technology to drive productivity by pushing work to staff and allowing them to work by exception. Lastly, you cannot improve what you do not measure, so it is critical to drive and operationalize data analytics across the entire enterprise. Things will start to change as analytics give you a better understanding of what you may not know.
Average Hospital Best Practice Metrics
- Cash collections to net revenue conversion: 97%
- Point of service cash collections: 2–3% of total monthly cash collections
- DNFB: Three days
- Denial percentage: 3%
- A/R days: 35–49 days depending on the type of facility