---
title: Effective KPIs to Solve Healthcare Finance Challenges
description: Learn how healthcare organizations can address C-suite pain points with relevant KPIs, ensuring efficient revenue cycle management and improved financial health.
---

[blog](https://pages.flatworldsolutions.com/blog)

# [Effective KPIs to Solve Healthcare Finance Challenges](https://pages.flatworldsolutions.com/blog/addressing-c-suites-pain-points-with-effective-kpis)

 Written by [Flatworldsolutions](https://pages.flatworldsolutions.com/blog/author/flatworldsolutions) | Jul 2, 2024, 11:30:49 AM

2023 was a precarious year for the healthcare industry, with many hospitals struggling to break even during the post-pandemic recovery period. Liquidity and cash flow became essential to staying afloat, and as a result, revenue cycle management (RCM) quickly became an increasingly pivotal part of operations. 

You can read all about the evolution of RCM over the years here. That blog focuses on the bigger picture, while this one focuses on tangibles. The truth is that hospitals are faced with a lot more pain points these days, and the solution for many of these is an efficient RCM program. 

But how do we judge whether the program is efficient or not? 

It’s simple: decide on a variety of relevant KPIs at the outset, track them constantly, and use their insights to implement positive change in your organization.

Let’s look at all the critical KPIs at every stage of your finance journey:

## Stage 1: The Viability

To run a hospital, it has first to make business sense. However, that is hard in an environment where 50% of the country’s rural hospitals are operating at a loss, according to new research by Chartis. Therefore, here are some KPIs you should be looking at to judge initial business viability:

- Revenue per Encounter = Net Collections / Number of patient visits: It takes a lot of capital to run a hospital through labor, equipment, and medicines. If your collections don’t come close to matching that, that’s trouble right at the onset.
- No-show or cancellation rate = Total patients who have canceled or not shown up / Total bookings: If this figure is higher than 10%, your marketing efforts and general perception need to be reexamined.

## Stage 2: The Documentation

Providing care is just the beginning. The challenge after that is efficiently creating a trail of all the services you’ve provided while adhering to coding and regulatory requirements. It involves many moving parts; even a single error can harm your bottom line. For example, according to a coding accuracy report by Central Learning, inaccurate ICD-10 coding can result in an average potential loss of $1877 per inpatient case.

There are a lot of KPIs to consider at this stage, including:

- Discharges Not Fully Billed (DNFB) = Unbilled Charge Amount / Average Daily Revenue: This is when claims are prepared and submitted without billing for all your medical services. That’s lost money right then and there, and it is a significant cause of revenue leakage, especially in frantic emergency room settings.
- Charge Lag is the average time it takes for your organization to bill a service after an occurrence. It shouldn’t be more than 24 hours, yet some hospitals take close to a week. That delays claims decreases liquidity, and increases the chances of denials.

## Stage 3: The Claims

A 2023 study by Premier claims that hospitals are spending just under [$20 billion annually in appealing denials](https://premierinc.com/newsroom/blog/trend-alert-private-payers-retain-profits-by-refusing-or-delaying-legitimate-medical-claims). What's glaring is that more than half of this money is being wasted on claims that should have been paid out at the time of submission. But they don’t because of human errors like not checking if all the information in the claim is correct, missing deadlines, and not verifying whether your organization is in coverage. 

Here are the KPIs you should be looking at in this stage:

- Denial Rate = Total Number of Claims Denied / Total Number of Claims: A denial rate above 5-10% spells trouble, indicating inefficiencies in your denial management process. Partnering with an experienced RCM partner (like us) can help drive this down to less than 1%.
- Clean Claims Rate = Number of Claims that didn’t require any edits / Total Number of Submitted Claims: Redoing your claims takes a lot of time and money, so getting it right in the first go is essential. You should be looking at a benchmark of 98%, and phased automation in your claims submission process could help you move higher.

## Stage 4: The Collections

Finally, it all boils down to whether your RCM efforts are working. Many metrics can help give you insight here - days in accounts receivable help determine how long customers can settle invoices, and an alarming debt rate tells you about the volume of your write-offs. But there’s an all-important KPI that can be used to prove the overall efficacy of your RCM:

Net Collection Rate = Payments Received from Patients & Payors / Net Charges

[Medical Group Management Association](https://www.mgma.com/) (MGMA) recommends a net collection rate (NCR) of above 95%, and by outsourcing your RCM operations to us, we can help drive that up to 99%. We consider our USPs to be:

- Error-free billing and coding
- Timely filings and a proven track record of low denial rates
- Customer satisfaction throughout the entire RCM process
- Best-in-class security tools to protect patient PHI

Now, since this blog is about KPIs, we’d like to leave you with one that will help you decide whether to go with us:

Cost to Collect = Expenses incurred to collect payment / Total Cash Collection.

Obviously, our fees will be included in the expenses incurred. But you have to decide whether this is cost-effective compared to other options or creating an in-house team. Below 3% is the benchmark you’re looking for here; we guarantee we can go way below that!

[View full post](https://pages.flatworldsolutions.com/blog/addressing-c-suites-pain-points-with-effective-kpis)

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