Metrics: Live by the numbers

Q. What financial metrics guarantee business health? 

A. Although there are hundreds of financial metrics to consider for business health, we will focus on five: revenue, accounts receivable, cash deposits, denials and profit. 

Revenue is the total of all booked sales for a given period.  To know your revenue, your fee schedules must be up to date. You can then trend your revenue and track growth. 

We must acknowledge that there is a delay between the booked sale and the payment. That delay is housed in the accounts receivable. AR aging is typically divided into five buckets. Make sure that any claim falling into the 91- to 120-day bucket gets aggressively worked. This eliminates the possibility of a timely filing denial.  

Collected AR is cash. Cash is the lifeblood of any organization. Track monthly cash activity, bank deposits, cash from payers and cash categorized by HCPC codes. The collection rate, which is the percentage of AR collected each month, and the days sales outstanding, which is the average number of days it takes to collect AR, are vital to understanding cashflow and business health. 

Next, we trend denials by payer and by HCPC codes. Denial reports must be promptly communicated in order to tackle the root causes that lead to these denials. When starting with a new client, we often encounter aged AR exceeding 150 days. This old AR houses denials that were caused by operational issues that should have been addressed upstream but were not effectively communicated, resulting in revenue losses. 

Finally comes profit margin. The allowable is different from payer to payer, and the fee schedule can change annually and not in your favor. This means that the profit margin can vary widely between payers. Throw in price changes from vendors, and it is hard to know what is making you money and what is losing you money. EMR systems allow us to track costs if set up correctly.   

In business, we live or die by the numbers. Track these metrics to have a pulse on your business. 

Skye Banegas is director of revenue cycle management at Strategic Office Support. You can reach her at skye.banegas@strategicofficesupport.com.