Top Key Performance Indicators (KPIs) to Track Alongside Net Collection Rate
In the field of medical billing and revenue cycle management (RCM), tracking the right Key Performance Indicators (KPIs) is crucial for ensuring the financial health of healthcare organizations. While Net Collection Rate (NCR) is one of the most important metrics for assessing how efficiently a practice is collecting the revenue it’s owed, it’s not the only KPI that matters. To gain a comprehensive understanding of your organization’s financial performance, there are several other key metrics that should be tracked in conjunction with NCR.
Here are the top KPIs you should monitor to ensure optimal revenue cycle performance and overall operational success:
1. Days in Accounts Receivable (A/R Days)
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Days in Accounts Receivable measures the average number of days it takes a healthcare practice to collect payment for services provided. Lower A/R days indicate that your billing team is efficient in collecting payments, while higher A/R days suggest potential issues in your billing process.
How to Calculate:
- Total Accounts Receivable ÷ Average Daily Charges
Why It’s Important: Tracking A/R days alongside Net Collection Rate can provide insights into whether the billing team is processing claims quickly enough. A high NCR paired with high A/R days could indicate delays in collections that need to be addressed.
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2. First Pass Resolution Rate (FPRR)
The First Pass Resolution Rate (FPRR) measures the percentage of claims that are paid after the initial submission, without needing any rework. The higher the FPRR, the more efficient the claims process.
How to Calculate:
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- (Number of Claims Paid on First Submission ÷ Total Number of Claims Submitted) × 100
Why It’s Important: A high First Pass Resolution Rate directly correlates to quicker payment turnaround, fewer denials, and lower administrative costs. Tracking this KPI alongside NCR can reveal inefficiencies in claim submissions that may be affecting cash flow and collections.
3. Denial Rate
The Denial Rate reflects the percentage of claims that are denied by payers. Denied claims need to be resubmitted, which delays payment and increases the time and cost of collections.
How to Calculate:
- (Number of Denied Claims ÷ Total Number of Claims Submitted) × 100
Why It’s Important: Monitoring the denial rate helps pinpoint issues in coding, eligibility, or documentation. A high denial rate can reduce your net collection rate, as claims that are not properly followed up may go uncollected. By reducing the denial rate, you can ensure more revenue is captured at the outset.
4. Gross Collection Rate (GCR)
While Net Collection Rate measures the percentage of collectible revenue that has been successfully collected, the Gross Collection Rate (GCR) measures total payments collected as a percentage of total charges.
How to Calculate:
- (Total Collected Payments ÷ Total Charges) × 100
Why It’s Important: GCR provides a broader view of financial performance, though it includes contractual adjustments and other non-collectible amounts. Tracking GCR alongside NCR helps give context to your collections—understanding the portion of revenue that is adjusted versus what is actually collectible.
5. Adjusted Collection Rate
The Adjusted Collection Rate is similar to the Net Collection Rate, but it focuses on the percentage of collectible revenue after adjustments (such as contractual adjustments, charity care, etc.) have been made.
How to Calculate:
- (Payments Collected ÷ Adjusted Charges) × 100
Why It’s Important: This KPI shows how efficiently you are collecting revenue based on the charges that are realistically collectible, excluding contractual allowances or write-offs. It gives a more focused view of your performance, showing how well you manage the revenue cycle after adjustments are taken into account.
6. Claim Submission Lag
Claim Submission Lag measures the average time between when services are rendered and when claims are submitted to the payer. The shorter the lag, the quicker you can begin the reimbursement process.
Why It’s Important: The longer you wait to submit claims, the longer it takes to get paid. Tracking submission lag alongside NCR helps ensure that delayed submissions aren’t the reason for a lower collection rate or longer A/R days.
7. Cost to Collect
Cost to Collect measures the overall cost associated with collecting revenue, including the cost of billing staff, software, and other resources dedicated to revenue collection.
How to Calculate:
- (Total Revenue Cycle Costs ÷ Total Collections) × 100
Why It’s Important: This KPI helps you understand how much it costs to collect each dollar. A high cost-to-collect can reduce overall profitability, even if your net collection rate is high. By improving the efficiency of the billing and collections process, you can reduce this cost and maximize your net revenue.
8. Clean Claim Rate (CCR)
The Clean Claim Rate measures the percentage of claims that are correctly processed and paid without needing any adjustments or additional documentation.
How to Calculate:
- (Number of Clean Claims ÷ Total Number of Claims) × 100
Why It’s Important: A high Clean Claim Rate means fewer rejections, faster payments, and reduced administrative work. Monitoring CCR alongside NCR will highlight whether your claims are accurate and complete at the time of submission, reducing delays in collections.
9. Payment Velocity
Payment Velocity tracks the average time it takes for a claim to move from submission to payment. This can help identify bottlenecks in the billing process.
Why It’s Important: Understanding the time it takes to receive payment after claim submission can help improve cash flow and streamline your billing cycle. Slow payment velocity, when coupled with a low net collection rate, may indicate issues with claim follow-up or payer processing times.
10. Patient Responsibility Collections Rate
With the rise of high-deductible health plans, patient payments now represent a larger portion of healthcare revenue. The Patient Responsibility Collections Rate measures how effectively a practice is collecting this portion of the bill.
How to Calculate:
- (Patient Payments Collected ÷ Total Patient Responsibility Amounts) × 100
Why It’s Important: Since a significant amount of revenue now comes from patients rather than insurance payers, it’s critical to track how well your practice is collecting these payments. Failure to collect from patients can directly impact your NCR, especially as patient responsibility increases.
Conclusion
Tracking these KPIs alongside Net Collection Rate provides a comprehensive view of the efficiency and financial health of your revenue cycle management process. By keeping a close eye on these indicators, you can make informed decisions that improve collections, reduce delays, and ultimately boost your practice’s profitability. Each of these metrics offers a different perspective on your financial operations, and together they provide the full picture you need to optimize your revenue cycle.
