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Benchmarking and KPIsQ&A with Jho Outlaw and Jessica Nelson

Following a recent webinar presentation on "Put Your ASC's Data to Work: Leveraging KPIs and Benchmarking," Jho Outlaw, senior vice president of Revenue Cycle Services for SIS, and Jessica Nelson, director of Revenue Cycle Services for SIS, were asked seven questions by participants. Here are those questions, along with Outlaw's and Nelson's responses, summarized for readability.

Q: If I'm setting goals for my accounts receivable (A/R) over 90 days based on my current data, how often do you recommend I evaluate these goals?

A: At a minimum, once a year, although there's nothing that says you can't evaluate it more frequently. These goals should be based on your current payer and case mix. If you bring on another doctor or your payer mix suddenly changes, you may want to plan an evaluation sooner than later.

Q: How do you calculate days in A/R if you net down your A/R at time of final bill?

A: This is a complex answer. Before we dive into it, it will be helpful to explain what "net down your AR at the time of final bill" means. Some ASCs will enter charges onto the account and then post the contractuals at the same time. When the bill goes out the door, what's left in A/R is the expected amount due.

Let's say charges are $10,000, but a payer is going to pay you $3,000. That $3,000 balance stays on your books and in your A/R. Now what you have is a net AR. You must determine your net revenue to be able to come up with your net A/R days if you're at net.

There's a simple way to perform this calculation. If your A/R is at net, you need to determine your net revenue on a daily basis and take your average collections for either the past 60 days or 90 days. An argument can be made for both figures, but let's use 60 for this example. You average the past two months of cash collections and divide it by 30. That gives you your daily net revenue. Then divide your total A/R, which is at net, by your net revenue per day. That will give you your days in A/R.

To summarize: Let's say you have $100,000 in your net A/R. That's your expected cash in the door since you've already removed contractuals. You average $10,000 in collections a day. Divide your $100,000 by your $10,000 and you have 10 days in net A/R. That would be an excellent figure, and one I don't see very often. But that's the simple way to calculate your net days in A/R.

Q: How would you suggest handling A/R follow-up assignment so those responsible can be held accountable?

A: The good news is that it can be pretty easy to hold these individuals accountable to their numbers and also motivate them through incentives to hit their numbers. It's a good practice to have at least two individuals doing the same job. Depending on the size of the ASC, take your A/R and divide it in half. If you have 100 accounts registered each month, then each individual would be assigned 50. Hold them accountable for the A/R greater than 90 days.

In an ideal situation, you will have enough A/R to have three individuals working accounts or you can divide jobs up enough so that you can have three people sharing A/R follow-up. Then you benchmark them against each other. There's almost always somebody that performs the best essentially from the start and then the other two need to strive to be as good. This creates healthy competition.

Q: Our ASC relies upon our practice management system to calculate our days to bill. Is there another method we can use to validate this information?

A: There is, but it will depend on software and technology. You essentially need to compare the date of service to the date the bill goes out the door. At Surgical Information Systems (SIS), we have a proprietary system that provides us that information. Without this system, I would run reports directly from the software, placing date of service in one column and date of final bill in the next.

If you use ASC-specialized software and it doesn't provide you with the date of final bill, you could also balance this information with your clearinghouse. The clearinghouse documents the date the claim is received. Export that date so you can compare the date of service to determine your days to bill.

If you have no means of using technology to calculate days to bill, you would need to perform an audit. You might pull a sample of accounts, perhaps a few from each of your physicians from each specialty, and then crunch the numbers on paper.

A few other notes: Specific to the date of a bill, you want to make sure that you're looking at the original bill date. Some software may include re-bills with original bill dates in reports. If you're holding people accountable for days to bill and include re-bills, staff will likely question the numbers and the manner in which you are holding them accountable.

Q: What is an acceptable denial rate for ASCs?

A: An ideal rate would be 5% or less. We know payers will find different reasons to deny claims, so giving yourself a small cushion is reasonable.

When thinking about an acceptable denial rate, it's important to understand what is and is not a denial. Several claim adjustment reason codes (CARC)/remittance advice remark codes (RARC) indicate "denial" when the unpaid amount is actually a contractual adjustment, non-covered by contract, and/or patient amount due.

Then there are rejections. That's when you typically need to perform additional work to get paid. The final denial rate is when you give up trying to collect the reimbursement and adjust the account off.

Q: What is the industry standard for working denial reports?

A: If you went online and researched "industry standard," you might find that common sentiment is accounts need to be worked every 30 days. But for denials and their follow-up, you really should look at what occurred as soon or shortly after the denial is received. This should trigger follow-up rather than a predetermined date and time.

If you were asked to do something (e.g., submit new documentation) two weeks from when you received the previous denial, two weeks should be the next follow-up date. Don't wait to follow up just because you believe 30 days is the "standard".

If you're running an ASC that just follows up on denials every 30 days and follow-up is just treated as a task to be completed without any staff incentive or goals attached, you're not likely to achieve best practice. Doing so requires critical thinking to ensure you optimize that follow-up and complete it as often as possible to get paid.

Note: Some payers have rules for how often you can follow up on denials and how many appeals you can submit. Determine whether any of your payers have such rules before initiating denials and appeals.

Q: I understand auditing is important. How can I use automation to help with audits? I don't have time to complete manual audits very often.

A: There are many different ways. Auditing for quantity or the amount of work completed is easiest. Almost every revenue cycle task worked and completed should be documented in your system. Staff are required to sign-in before beginning work, so the system will tag the date, time, and who entered the follow-up note.

That's a critical step that must be required. When staff members sign into a software system, it should attach their initials or associate them in another manner to every task they perform. Then you can run reports off of that work. If you want to see how many accounts one of your collectors followed up on last month, you should be able to run a report that tells you every instance they were in an account. You can compare the number of follow-up opportunities to the number of accounts in their assignment. That's an example of a quantity result.

Auditing for quality is a much more difficult process. It requires pulling random accounts and making a judgment on whether "good" work was completed or not. Let's consider follow-up. “Good” follow-up is validated by the documentation of an action step that moves the account closer to getting paid.

We have a system and policy at SIS concerning judgment of follow-up. When employees document an action step that moves an account closer to getting paid, they get a score of 100. If they did maybe half of what we thought they should do, they would get a 50%. If there was no action step — and "left a message" is not an action step — they would receive a zero.

What we do is pull a number of accounts for a collector and assess their performance based on that policy. 90% is our floor for meeting expectations, with 95% or better exceeding expectations. That's one way you can go about it. The reality is that measuring quality will likely require a manual audit.

 Leveraging KPIs and Benchmarking