5 Accounts Receivable Performance Metrics for a Thriving PT Clinic

Keeping patients healthy is a physical therapist’s number one priority, but a physical therapy owner’s priority is the bottom line. There are five essential accounts receivable metrics to monitor as part of your revenue cycle management best practices. Keep your practice fit and vibrant with these five accounts receivable performance metrics.

1) Reimbursement

When starting a physical therapy clinic, the most typical way to attract clients is to credential with area insurers. Some of these contracts are at a fixed rate and cannot be negotiated, but the ones that can be need careful consideration. Make sure that you have figured your cost per visit before accepting a contract. In order for your clinic to be profitable, the net revenue per visit must be larger than the cost per visit.

To calculate your net revenue, you will first need to figure out your reimbursement per encounter:

Divide total payments by the total number of encounters for the given period.

The more data you have, the more accurate your average will be.  Once this number is known, subtract the cost per visit. This will give you an idea of the potential profitability of your new clinic.

2) Adjusted collection rate

Once the contracts are signed and your practice starts seeing patients, discard the reimbursement per encounter rate and use net adjusted rate. This rate takes the payments for a given period and compares them to the original charges. If the software you use cannot specifically identify the original charges for the payments, you can use charge data that is aged at least six months. These claims will have been adjudicated and provide a net collection rate closer to your actual number. Once the data has been collected you should:

Divide payments (minus credits) by charges (minus contractual adjustments) to achieve the net collection rate. 

If any other adjustment types (PR, OA) have been taken, they should not be included for the purposes of this calculation. Revenue cycle management best practices indicate that a rate of 95-99% is average performance.  If you are noticing less, an assessment of your billing practices may be warranted.

3) Denial Rate

Start analyzing your billing practices by figuring out the denial rate of your processed claims. You should pay closest attention to the therapy codes that are denied. Modalities and supplies are often not covered, so should be looked at separately from this average calculation. To compute the denial rate:

Take the total dollar amount of claims denied divided by the total dollar amount of claims submitted.

Use at least 6 months of data to complete this calculation. If your denial rate is greater than 10%, perform further research into specific denial reasons.

4) Days in A/R

Another report that you should become familiar with is your Accounts Receivable report. This report will show you which claims have paid, and which are still out at the insurance company. Some payors that turn claims around quickly, while others will hold on to the claim as long as they possibly can before releasing funds to the provider. The latter are the ones to watch.

The Days an account spends in A/R is important. It helps to determine patterns that lead to discovering which category specific payors fall into. To calculate an average of the total days claims have taken to process:

Take the total accounts receivable divided by 12 months of gross charges, further divided by 365.

You can perform this exercise by insurance, or as a whole. Any total over 50 days that cannot be explained by an extenuating circumstance should be thoroughly reviewed. Keep a close eye on this top help prevent these claims from becoming stale or missing their timely filing deadline.

5) % over 120 days

The percentage of claims in A/R for over 120 days should, at most times, be around 15-20%. You will always have claims that are awaiting the review of an appeal, have a lawsuit pending, require a peer review, etc. To work out the percentage:

Take the total dollar amount of the 120+ A/R bucket and divide it by the Total A/R dollars.

If your ratio is over the recommended amount, then a review/investigation of each claim in the 120 bucket is imperative.

Feeling Better Already

While the accounts receivable performance metrics can be time consuming to calculate, the results are the reward. These revenue cycle management best practices will not only improve the clinic’s bottom line, but the act of reviewing will help you to feel better about the viability of your venture.