Methods used in the United States to measure quality vary by industry. The country’s food supply, human and veterinary drugs and multiple other products are regulated by the Food and Drug Administration (FDA). The Environmental Protection Agency (EPA) oversees national efforts based on the best available scientific information to reduce environmental risks. The Federal Communications Commission (FCC) is responsible for regulating interstate and international communications by radio, television, wire, satellite and cable.
In healthcare, the Centers for Medicare & Medicaid Services (CMS) utilizes Quality Measures, which the agency defines as “tools that help us measure or quantify healthcare processes, outcomes, patient perceptions and organizational structure and/or systems that are associated with the ability to provide high-quality health care and/or that relate to one or more quality goals for health care.” The goals to which the CMS is referring are effective, safe, efficient, patient-centered, equitable and timely care.
Hospitals and physician practices measure the progress of their strategic goals through key performance indicators (KPIs). These measurements are designed to help highlight and compare key quality improvement and value metrics ad facilitate insight into their clinical, operational and financial performance through analysis of real-time data.
KPIs offer hospitals and physician practice groups of any size a practical way to boost staff productivity, identify and eliminate root causes for poor performance, increase patient satisfaction and promote proactive decision-making. In order to be effective, though, they must be specific, achievable, measurable, actionable and relevant.
A group of 29 KPIs developed by industry leaders for the Healthcare Financial Management Association (HFMA) and considered an industry standard are the Measure, Apply, Perform (MAP) Keys. Placed in five categories – Patient Access, Pre-Billing, Claims, Account Resolution and Financial Management – they enable providers to track revenue cycle performance using objective and consistent calculations.
Other common KPIs used by providers include percentage of claims denied; accuracy of department charge capture; net days in account receivable (A/R); insurance A/R over 90 days; percent of A/R greater than 90 days; cost to collect; denials by procedure code; and preregistration, insurance verification and service authorization rates. The two KPIs most relevant to medical billing companies are denial rate and clean claim percentage because they cultivate increased reimbursement through faster payment and less time spent on denials and appeals.
A provider’s denial rate is calculated by dividing its total number of claims denied by its volume of claims remitted. The industry average denial rate is 5-10 percent, but getting it under one percent is possible.
Claims can be denied for an assortment of reasons, a problem that costs providers about 5 percent of their net revenue stream. When the reason(s) for a provider’s denials isn’t examined, other important KPIs can be affected, resulting in a less than optimal revenue cycle.
Using an experienced and knowledgeable medical billing service helps eliminate denied claims that occur due to missing or incorrect data, improper or outdated CPT or ICD-10 codes, duplicate or late submissions, lack of prior authorization and similar issues. It also aids in mitigating the reworking of claims, which overall increases administrative costs by almost $9 billion annually.
Clean Claim Percentage
Calculated by dividing the number of claims paid on first submission by the total number of claims accepted into the claims processing tool for billing, a provider’s clean claim percentage should ideally be 95 percent or higher. However, the industry standard for this KPI is between 75 to 85 percent.
A low percentage of clean claims means a provider is ineffectively processing them, but a higher number points to superior financial performance. By facilitating clean claims, outsourced medical billing ensures providers are reimbursed by the payer on the first submission, resulting in a decreased denial rate, timely payment and reduced days of claims in A/R.