June 22, 2015
A Key Performance Indicator (KPI), simply put, is a performance measurement. KPIs evaluate the success of a particular activity, in this case, the success of a center’s revenue cycle operations. Success is generally defined as the achievement of some measure of a finite goal. However, success can also be defined in terms of making progress toward a strategic goal. Choosing the right KPIs relies upon a good understanding of what is important to the organization. The KPIs useful to finance will differ from the KPIs assigned to clinical operations. These measurements often lead to the identification of potential areas of improvement, so performance indicators are routinely used to develop improvement initiatives.
One such revenue cycle KPI is Days in Accounts Receivable (Days in AR of DAR). DAR measures the average number of days it takes a center to collect or fully adjudicate a claim. So how to we measure DAR? Only 3 data points are needed for this calculation. 1) Total Accounts Receivable 2) Total charges for a defined period 3) the number of days in that defined period.
Let’s look at a real life example:
This health center has DAR equaling 87.66 days. This means it takes this health center, on average 87.66 days to collect a claim. While we have calculated the DAR, to apply this calculation, we still need a goal against which it is measured. At PMG we believe goal of 30 days is optimal. This goal may currently be out of reach due to a number of contributing factors. The statement, “My DAR is XX days BUT…” is often made. The “BUT” is the most important part of that statement. That is exactly where the factors causing high DAR are identified. This information is pure gold!! The information defining the variance between your current DAR and your goal DAR should then be used to determine your performance improvement initiatives. You have essentially identified your own to-do list. Now that you have that list, work on that list, then measure again.
Your to-do list (the factors that are keeping you from your DAR goal) may be tactical and short term. They may be strategic long term fixes you will need break up into actionable items. Either way you must fix what caused the problem in the first place. Here are some common factors we have seen:
- Is there in-house expertise?
- Do you need outside help to optimize these systems?
- Are there enough resources to manage this process?
- Is this integrated into your hiring process?
- Do your providers get feedback on coding and/or coding related denials?
- Is there provider education on coding?
- Is eligibility checked before the visit for every patient encounter?
- Is the process to cumbersome?
- Are there more efficient and automated alternatives?
Each center must measure this KPI each month. Do not change the formula to allow for those “but” factors. Keep the formula as your single source of truth for this measure. We’ve said it before, NUMBERS DO NOT LIE! Continue to delve into the “but” factors and use that to drive the accounts receivable work for the following month. Identify and then engage departments outside of revenue cycle to mitigate those factors that are affecting your DAR numbers. By consistently following this process, incremental improvements can and will be achieved. What was once unattainable is now well within reach.