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An uneven recovery finds many medical practices struggling to hit revenue goals

MGMA Stat - February 23, 2022

RVUs

Billing & Collections

Reimbursement

Cristy Good MPH, MBA, CPC, CMPE
Recovery from the COVID-19 pandemic has been slow for some medical practices and healthcare organizations, while others capitalized on a variety of opportunities to meet their 2021 revenue goals.



A Feb. 22, 2022, MGMA Stat poll found that 60% of medical practices met their revenue goals while 40% did not. The poll had 690 applicable responses.

Among respondents who told MGMA that they met their organization’s revenue goals, the following were the main ways they did so:
  • Volume was back up from 2020
  • Telehealth
  • Restart of elective surgeries and no shutdowns
  • Funds from stimulus and other government help
  • COVID-19 visits and testing.

Among those respondents who told MGMA that they did not meet their organization’s goals, the main reasons were:
  • Staffing issues
  • Increase in expenses
  • Slower reimbursement by payers
  • Drop in elective surgeries
  • COVID-19 quarantines and closures.

In a Nov 16, 2021, MGMA Stat poll, 35% of medical practices said that their productivity exceeded expectations. So while many practices were short staffed, those staff members were finding ways to care for patients, helping practices meet revenue goals.

In the latest physician flash report by Kaufman Hall, physicians responded that productivity and revenues came back in the second and third quarters of 2021 but expenses “climbed above pre-pandemic levels for a third straight quarter, due in part to increases in non-labor expenses such as drugs and medical supplies.”

One of the most important performance metrics a medical practice or large healthcare organization needs to track are revenue goals. Although many clinics track KPIs monthly, practices should at least track them quarterly, because they can help measure how well your organization is meeting its financial goals. A successful medical practice should align financial goals with the practice’s mission and vision to ensure that everyone is on the same page.

Staffing, patient access, revenue cycle management, practice culture and payer contracts can all impact a practice’s revenue. To help increase revenue, organizations should follow revenue cycle best practices:
  1. Identify and measure the right key performance indicators (KPIs)/metrics
  2. Measure the right metrics at the right time
  3. Ensure accountability for each specific metric
  4. Standardize workflows so that each step in the revenue cycle process is clear and effective

To help reduce bad debt, practices should:
  1. Establish financial policies for patients and educate them on payment options
  2. Identify bad debt early on and have procedures in place for staff to work with patients to resolve issues
  3. Leverage technology within the workflow
  4. Offer price transparency for patients using a cost estimator
  5. Institute a prior authorization process
  6. Understand the true cost of delivering care
  7. Focus on correct documentation and coding
  8. Reduce account receivable (A/R) days
    1. Submit clean claims
    2. Track and work denials regularly
    3. Understand payer processes and policies

In a Nov. 9, 2021, MGMA Stat poll, 49% of medical practices said that days in A/R increased. This may be due to staffing issues in the practice, on the payer side or both.

For healthcare organizations it is important to reduce barriers and support a positive patient experience, which starts when a patient first schedules their appointment through the billing and collection process. Many patients don’t know what their out-of-pocket liability is and rely on their medical practice to let them know.

An organization’s culture around the mission and vision surrounding the revenue cycle can also impact performance. Training and education for revenue cycle staff as well as other departments and clinical professionals help foster a better understanding of the importance of revenue cycle management, as well as the impact it has on the patient experience. It is helpful to supply scripting to staff with similar language on websites and printed materials so that patients receive consistent information.

KPIs for high-performing revenue cycles include:
  • Third-next-available appointment (TNAA): This measure is used to assess the average number of days to the third-next-available appointment for an office visit and is the industry’s standard measure of access to care.
  • Payer mix: The percentage of income a medical facility receives from private and government insurance sources versus self-payments from patients. An increase in those seeking Medicaid benefits due to current economic conditions, higher deductible plans and loss of employer-sponsored health plans will affect practice revenue.
  • First pass resolution rate (FPRR) measures the number of claims that get resolved the first time they are submitted and is an indication of the success of your revenue cycle management process from appointment through billing.
  • Days in A/R: Gross Charges Posted in 90 days/90 = Daily Charges; then (Total A/R for 90 days)/Average Daily Charge = Days in A/R. The lower the number, the faster payments are being procured and this measure will help a practice forecast practice income.
  • Net days in A/R: (Total New Account Receivable (A/R)/(Total Net Patient Revenue/365 days)
  • Bad debt expenses as a percentage of net patient services revenue: (Total Bad Debt Expenses/Net Patient Services Revenue)
  • Net collection rate: (Payments Received)/(Charges-Adjustments) This measures the practice’s effectiveness in collecting reimbursements.
  • Cash collections as a percentage of net revenue: (Total Cash Collected/Net Patient Revenue)
  • Claim denial rate: (Total Number of Claims Denied)/(Total number of Claims Remitted). A low denial rate reflects a healthy cash flow within your practice, while a high denial rate tends to indicate an unhealthy cash flow.
  • Denial write-offs as a percentage of net patient service: (Net dollars written off as denials)/Average monthly net patient service revenue
  • Average reimbursement rate: (Sum to Total Payments)/(Sum of Total Submitted Charges)

More specifically for hospitals:
Discharged not final billed (DNFB): (Gross Patient Revenue)/(Total Gross Patient Revenue/365)

MGMA DataDive has industry benchmarks organizations can use to evaluate how they are doing compared to other practices. Regularly measuring and analyzing your revenue goals is key to successful revenue cycle management and meeting those goals or adjusting when needed.

Organizations will need to find ways to decrease revenue cycle costs and overhead while looking at ways to create revenue streams.

Additional resources:

JOIN MGMA STAT 

Our ability at MGMA to provide great resources, education and advocacy depends on a strong feedback loop with healthcare leaders. To be part of this effort, sign up for MGMA Stat and make your voice heard in our weekly polls. Sign up by texting “STAT” to 33550 or visit mgma.com/stat. Polls will be sent to your phone via text message. 

About the Author

Cristy Good
Cristy Good MPH, MBA, CPC, CMPE
Sr. Industry Advisor MGMA
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