KPIs to Fit Your 2020 Challenges as a CFO

Hospital CFOs are facing challenges that are becoming more complex and increasingly tied to other organizational initiatives. As your organization addresses new forms of competition, navigates the consumerization of healthcare, and finds its way in the wake of new payment and medical billing practices, it will be crucial to pinpoint the KPIs that align with your goals. 

To stay ahead of the curve and focus on the future, we’ve put together this challenge-based list of KPIs (MAP Keys included) to prioritize in 2020. 

A staple indicator of revenue cycle health, these KPIs will keep you on top of red flags in cash flows and collections activities. 

1.1. Bad Debt (AR-7)

This KPI is useful for judging the effectiveness of financial counseling and collection efforts. 

Equation:

Bad Debt / Gross patient service revenue = Income Statement / Income Statement

1.2 Aged A/R as a Percentage of Billed A/R by Payer Group (AR-2)

This KPI provides valuable insight and indicates revenue cycle effectiveness in terms of liquidating A/R by payer group. 

Equation:

Billed A ⁄ R by payer group by aging category / Total billed A/R by payer group = Aged Trial Balance / Aged Trial Balance          

2. Revenue Cycle Performance

2.1. Net Days in Accounts Receivable (FM-1)

This is a good trending indicator of overall A/R performance that points back to revenue cycle efficiency. 

Equation: 

Net A/R / Average daily net patient service revenue = Balance Sheet / Income Statement

2.2. Aged A/R as a Percentage of Total Billed A/R (AR-1) 

This trending indicator reflects receivable aging and collectability and points to revenue cycle effectiveness at liquidating A/R. 

Equation:

0-30, 31-60, 61-90, 91-120, > 120 days / Total billed A/R = Aged Trial Balance / Aged Trial Balance

2.3. Aged A/R as a Percentage of Total A/R (AR-3)

Another trending indicator of receivable aging and collectability. 

Equation:

Unbilled, 0-30, 31-60, 61-90, 91-120, > 121 days / Total A/R = Aged Trial Balance / Aged Trial Balance

3. Denial Management

Denial management will become increasingly important as coding remains complex and payers tighten their guidelines. 

3.1. Denial Write-offs as a Percentage of Net Patient Service Revenue (AR-6) 

This is a staple of denial KPIs and worth monitoring after software upgrades, and changes to medical billing processes, or contractual relationships.  

Equation:

Net dollars written off as denials / Average monthly net patient service revenue = Patient Financial System / Income Statement

3.2. Remittance Denial Rate (AR-5) 

This KPI is also an efficiency and quality indicator.

Equation:

Total number of claims denied / Total number of claims remitted = Accounts Receivable / 835 Files and/or Paper Remittance

Modern CFOs move beyond monitoring and scan for opportunities in front of them. 

4.1. Late Charges as a Percentage of Total Charges (CL-2)

This KPI reveals opportunities to reduce unnecessary costs, accelerate cash flows, and improve revenue capture. 

Equation:

Gross charges with postdate >3 days from service date / Total gross charges = Patient Financial System / Patient Financial System

5. Data Governance & Data Quality

CFOs have growing data challenges so clean claims and data quality KPIs will only become more important with time. As you implement new revenue cycle technologies, these KPIs will be especially useful in maintaining data governance standards. 

5.1. Clean Claim Rate (CL-1) 

Equation: 

Number of claims that pass edits requiring no manual intervention / Number of claims accepted into claims processing tool for billing = Claims Processing Tool / Claims Processing Tool

If you’ve brought on any new software or procedures for your clinicians, this KPI will be especially useful. 

6.1. Case Mix Index (FM-5) 

Equation:

Sum of relative weights for inpatients / Number of discharged inpatients in the month = Encoder-Decision Support / Encoder-Decision Support 

7. Self-Pay Insights

Patients are now the biggest payer groups behind Medicare and Medicaid, meaning that self-pay KPIs should likely move up on your list of priorities. These KPIs highlight the self-pay gross revenue that isn’t included in your cash, charity, or bad debt metrics. 

7.1. Uncompensated Care (FM-4)

Equation:

Uncompensated care / Gross patient service revenue = AR7 + AR8 + FM3 / Income Statement

7.2. Uninsured Discount (FM-3)

Equation:

Uninsured discounts (prior to charity care and bad debt) / Gross patient service revenue = Accounts Receivable / Income Statement

8. Overall Financial Health

One thing that won’t change is the importance of consistently monitoring your revenue cycle health. 

8.1. Cash Collection as a Percentage of NPR (FM-2) 

This KPI is a trending indicator of your ability to turn net patient services into cash and points to the fiscal integrity of your organization. 

Equation:

Total patient service cash collected / Average monthly net patient service revenue = General Ledger / Income Statement

If you’d like guidance in prioritizing your hospital KPIs for this year and would like to learn more about the services we offer, start here.