Beyond the Metrics: Why Standard Billing KPIs May Be Holding Your Practice Back

Author:

Dr. J is a Physician, MBA graduate, AAPC Certified Coder (COC), and ASQ Certified Six Sigma Black Belt (ASQ CSSBB) with 20+ years of experience in the Healthcare Industry. His key expertise areas include coding in multiple specialties, end-to-end RCM, multiple market segments, product and process innovation for the healthcare business, lean six sigma management, and process design and improvement.

ABA Providers Recover Dues From Patients To Efficient Your Account Receivables

Medical billing is crucial to the financial success of any healthcare practice, but are we looking at the wrong metrics? It's hard to deny that healthcare service providers and medical billing companies are still relying on traditional KPIs such as "days in accounts receivable”, “net collection rate”, and “claim denial rates” to measure performance. But wait! Here’s a thought: What if these KPIs - while they are the popular metrics - are keeping your healthcare practice from truly optimizing revenue?

Inside this article:

Days in A/R: Outdated and Overrated
Net Collection Rate: A False Comfort
Denial Rates: The Illusion of Control
Outsource Medical Billing: Efficiency Through Expertise
Challenge the Status Quo

A New Way to Measure Success

Healthcare executives are always told to "track your KPIs," but let’s rethink this approach. Consider these industry-wide statistics:

Are We Measuring What Matters?

Let’s challenge the common myth: "The better you track traditional KPIs, the better your revenue cycle will perform." This narrative often creates a false sense of security. While it’s critical to track data, being overly focused on the wrong metrics can blind you to greater inefficiencies.

As a C-suite leader, ask yourself: Are my metrics driving action or simply validating a process?

1. Days in A/R: Outdated and Overrated

The healthcare industry loves talking about days in accounts receivable (A/R). But here’s the reality— this metric alone doesn't uncover why claims remain unpaid. While a lower A/R is great, solely focusing on this number can mask underlying issues such as incomplete patient information or undertrained billing staff. To address payment delays, digging deeper and tackling the root causes is crucial rather than just chasing a lower A/R figure.

What to ask instead:

How many claims are being fixed on the first submission?
What percentage of claims are being sent out clean, without rework?

2. Net Collection Rate: A False Comfort

We often praise practices with a high net collection rate (NCR), but NCR can be a misleading metric. Let’s say your practice’s NCR is 95%, which sounds great, right? But this number may obscure issues like small claim write-offs, poor patient collections, or systematic under coding.‍‍

Here’s a quote to ponder: "A high net collection rate without context is like a ship sailing on autopilot—it looks good on course but ignores the icebergs lurking beneath the surface."

Instead, focus on preventive metrics that speak to revenue capture opportunities, like:

Write-off percentages: Small write-offs add up.
Patient payment velocity: How quickly are patients paying their share?

3. Denial Rates: The Illusion of Control

Denial rates are another popular KPI, and for a good reason—denials directly impact cash flow. However, managing denial rates alone won’t fix the underlying process issues causing them. Many medical billing companies report a denial rate below the industry average (10-12%), yet they still struggle to keep up with cash flow.

Denials are a symptom, not the disease. What’s really broken? Often, it’s front-end processes like insurance verification and coding accuracy. Rather than celebrating a low denial rate, focus on how well your front office captures patient information or how frequently coders update their knowledge of payer rules.

A fresh question for your team:
"Are we solving for denials, or are we preventing them from happening in the first place?"

Embrace Predictive Metrics
‍In the age of AI and automation, it’s time to shift from reactive metrics to predictive analytics. By predicting claim issues before they happen, you can prevent problems and shorten your revenue cycle management process altogether.

Consider:

Using AI to identify payer trends in rejections before submission.
Automating eligibility checks and authorization workflows to prevent delays.
Analyzing patient payment patterns to improve collection strategies.

Outsource Medical Billing: Efficiency Through Expertise

One of the most strategic moves healthcare providers can make is to outsource medical billing. Medical billing companies, especially those specializing in revenue cycle management in healthcare, often leverage technologies that far exceed what an in-house billing team can achieve. From sophisticated denial management workflows to predictive RCM analytics, these companies have the resources to continuously improve their processes in ways most practices can’t.

When outsourcing, the conversation shouldn’t stop at price and basic KPIs. Instead, ask potential partners:

How do they leverage data for proactive performance improvements?
Can they identify emerging payer trends before they affect your revenue?
What’s their approach to patient payment strategies, especially in a high-deductible landscape?

Challenge the Status Quo

Here’s the bottom line: Simply following traditional RCM strategies isn’t enough. It’s time for healthcare providers like you to break free from the myth that perfecting traditional billing KPIs will solve your revenue challenges.

Let’s not forget that healthcare's revenue cycle management process isn’t static; it’s dynamic and continuously evolving. By shifting focus from basic KPIs to predictive analytics, deep-dive metrics, and leveraging outsourced expertise, your healthcare company can move from billing efficiency to revenue optimization.

A final thought: "If your KPIs are making you comfortable, it’s time to start asking uncomfortable questions."

‍‍Conclusion: The New Paradigm of Billing Performance

For C-suite leaders in the healthcare space, the future of medical billing lies beyond just crunching the numbers. It’s about seeing KPIs as a part of the bigger picture—an ever-evolving strategy aimed at maximizing every dollar. So, while the industry may continue preaching traditional KPIs, it’s time to shift your mindset and embrace a more proactive, numbers-driven, and unconventional approach to truly optimize your revenue cycle.