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US Healthcare market is ever-changing and complex, there are many medical practices grappling to stay ahead. It is indeed overwhelming for physicians to strike a balance between patient care and getting paid for all the hard work rendered. Fighting for every dollar should be the trend for any physician or group. Joining forces with medical billing service companies is often the best way to stay ahead of market dynamics and its potential revenue challenges.

One of the advantages of using Medical Billing services company is, they track and maintain financials diligently by calibrating the Practice’s performance using industry proven Medical Billing KPI metrics. It’s always imperative to have a good idea of both bright and dark side of Practice’s performance. Now let us try to understand different metrics of KPI and its criticality.

What is a Key Performance Indicator?

A key performance indicator (KPI) is a measurable value that indicates how well any practice is achieving its key business objectives. While different companies use different metrics in KPI, the 4 most important and easily measurable parameters are Days in AR, First Pass Billing Ratio, First pass collection ratio and Aged AR above 90 Days. If any practice can maintain an overall score of 80% is considered as a stable healthcare business unit. Let’s see how these are calculated in detail.

DAR Calculator

A practice’s accounts receivable (A/R) indicates how many payments have not yet been collected or outstanding with Insurance carriers. As per MGMA or HBMA the average time a bill spends in A/R should be about 30-40 days. Objective of any medical practice here is to eliminate and streamline your operations to get your practice paid faster. Calculation of AR days requires 3 parameters, Current month total outstanding AR and calculation of average daily charges based on 3 or 6- or 12-months average charges. Calculation is illustrated.

Days in AR: Total Insurance AR/Average daily charges (ADC)
Please note ADC is nothing but sum of 3 or 6- or 12-months charges divided by numbers of months or period.

Current Outstanding Insurance AR

Insurance Charges Previous month 1

Insurance Charges Previous month 2

Insurance Charges Previous month 3

Sum of Last 3 months Charges

Average Daily Charges(ADC)

DAR(Days in Acct Receivables)

Bench Standard

Weightage Standard

Weightage Scored

Billing FPR

This KPI metric defines efficiency of your billing team in submitting claims without any errors thereby minimizing rejections or denials and eventually faster payment collections. Its ratio between number of rejected claims by both clearing house and payer for the month against total number of claims submitted for the month. As per industry standards, any practice that maintains less than 2% of rejections is expected to have better cash flow.

Billing FPR – CH Rejections + Payer Rejections for the calendar month/Total number of Insurance bills for the month

# of Claims billed for the service month

# of scrubber rejections for the service month

# of CH rejections for the service month

# of Payer rejections for the service month

Billing First pass ratio

Bench Standard

Weightage Standard

Weightage Scored

Collections FPR

Lastly, most important KPI is First pass collection ratio as any practice would like to have super fluidity in payment collections since it faster the cash better the opportunity for managing operations and business tangibility and continuity. This KPI is an extension of clean claim ratio tied with payment liquidity and it is calculated as below:

Collections FPR – (Sum of all rejections and denials for the service month) – (Number of claims paid for the service month)/Total number of claims billed for the service month

If a practice is consistent enough in collecting at least 30% of the submitted claims paid without Rejections and Denials for the service month is claimed to be very successful in recovering receivable without letting it to be chased by AR team.

# of Claims billed for the service month

# of scrubber rejections for the service month

# of CH rejections for the service month

# of Payer rejections for the service month

# of Payer Denials for the service month

# of Paid Claims for the service month

# of Claims paid without Rejection or Denial

Collections First pass ratio

Bench Standard

Weightage Standard

Weightage Scored

90+ AR Calculator

Claims or bills aged more than 90 days becomes an uphill task to recover and anything over 120 days is likely lost the collection opportunity. If more than 10% of claims are inflating over 90 days in A/R, Practice’s has serious problem in recovery and deserves complete attention to fix the inefficiencies. Calculating AR above 90 days is easy, and illustration is as

90 Days AR = AR $ outstanding above 90 days/ Total outstanding AR $

Total Insurance AR Outstanding

Insurance AR outstanding at 90 Days

Insurance AR 90+ Days %

Bench Standard

Weightage Standard

Weightage Scored

Key Metrics	Benchmark	Weightage
	4 Important Metrics of Medical Billing Practice
Days in AR(DAR)	30	30%
Billing FPR	2%	20%
Payments FPR	30%	20%
90+ INS AR	5%	30%
Total Score
Overall Health Score

Contact	Box 3233 1810 Kings Way King Street, 5th Avenue, New York +3473010812 / +6463492144 contact@commitservices.co

Performance Scaling
< 60%	Poor
< 70%	Average
80% Above	Good

What is a Key Performance Indicator?

DAR Calculator

Billing FPR

Collections FPR

Collections FPR – (Sum of all rejections and denials for the service month) – (Number of claims paid for the service month)/Total number of claims billed for the service month

If a practice is consistent enough in collecting at least 30% of the submitted claims paid without Rejections and Denials for the service month is claimed to be very successful in recovering receivable without letting it to be chased by AR team.

90+ AR Calculator

4 Important Metrics of Medical Billing Practice