Introduction
Ensuring the efficiency and accountability of a healthcare financial system is essential to fostering operational proficiency and transparency in the healthcare industry. Aiming at optimizing and monitoring the institution’s financial processes, from the patient’s engagement in the organizational process to the final collection of the payment, Revenue Cycle Management (RCM) is a highly valuable tool for organizing and tracking revenue (Atluri, 2023). Although understanding and monitoring all its metrics may be challenging, the most critical for managing RCM are Dates of Service Outstanding (DSO), Net Percentage Collection, Accounts Receivable Over 90 Days, and Bad Debt Percentage.
Revenue Cycle Management Metrics
Dates of Service Outstanding
DSO is used as a measure of the average number of days it takes a healthcare organization to collect payments, and it helps hospital managers assess whether their institution has issues with payment collection. In particular, when evaluating the DSO, an individual may need to determine whether the institution’s DSO is low or high. Depending on the outcome, the organization either faces challenges with receiving and processing payments or receives them fast, which is more advantageous for its short- and long-term outcomes.
Net Percentage Collection
Additionally, Net Percentage Collection is a helpful metric that allows the healthcare company to evaluate its actual payment rate relative to the overall percentage of billed charges. It is vital for a healthcare organization since it illustrates realistic revenue, which is among the most vital aspects for a healthcare institution to consider. Net Percentage Collection assesses whether the organization has a reliable, agile reimbursement strategy and goal-focused denial management. A falling percentage in the following metric signals that a business should reconsider its current billing practices and strengthen its revenue cycle. Otherwise, the healthcare organization may lack the resources crucial for its further operation and progress.
Accounts Receivable Over 90 Days
Furthermore, Accounts Receivable Over 90 Days assists healthcare management and professionals responsible for billing and payment processes in monitoring the percentage of outstanding accounts receivable that have been extended for over 90 days. The primary significance of the following measurement tool lies in the businesses’ underperformance in collecting their payments. As Holzhauer (2023) mentions, management of Accounts Receivable is paramount because it can “improve a firm’s cash flow, profit margin, and even customer relations” (p. 231). Therefore, high results on this metric may indicate problems with payment procedures that primarily harm the business and should therefore be corrected.
Bad Debt Percentage
Finally, the Bad Debt Percentage is the specific percentage of profit loss a healthcare organization incurs due to unrecoverable debts. When such a percentage rises, it indicates that a healthcare organization is ineffective in its credit and collection practices. If the company fails to improve its Bad Debt Percentage, it can signal the institution’s inability to maintain its financial viability and competitiveness, leading to financial losses.
Conclusion
Although all metrics in the Revenue Cycle Management are important, Net Percentage Collection can be the most essential element due to its link to the functioning and sustainability of healthcare organizations. To clarify, it provides businesses with a practical evaluation of the revenue received and how reimbursement works within the revenue cycle. Without Net Percentage Collection, a company cannot assess its claims submissions, payer negotiations, patient billing, and other activities that are indispensable to its financial viability. Unlike other metrics, Net Percentage Collection can be used as a general overview of the company’s success. Nonetheless, applying all metrics will help Revenue Cycle Management perform to its full capacity.
References
Atluri, H. (2023). Optimizing Revenue Cycle Management in healthcare: A comprehensive analysis of the Charge Navigator System. International Numeric Journal of Machine Learning and Robots, 7(7), 1–13.
Holzhauer, H. (2023). Accounts Receivable Management. In H. K. Baker, G. Filbeck, & T. Barckley (Eds.), Working Capital Management: Concepts and strategies (pp. 231–250). World Scientific.