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Cost-to-Collect KPI | Enjoy the journey, not just the destination

October 6, 2021 by JTS Health Partners

There is little argument that the healthcare industry is an always changing environment. Understanding exactly what is changing and why is a lot tougher.

 

To assist in the discovery journey, a helpful element to focus on is Key Performance Indicators (KPIs). KPIs demonstrate at a glance where your facility stands, either within or outside of the acceptable ranges.

Most of the time an organization pays close attention to cash collections. Whether it be POS or after visit. But fewer organizations know the actual Cost to Collect those dollars. HFMA defines the Cost to Collect as the following:

  • Total Revenue Cycle Cost / by Total Cash Collected.
  • Total Cost:  includes cost of patient access, patient accounting, HIM, outsourcing, software (optional), and hard IT (optional).
  • Total Cash: includes patient and insurance related payments as well as bad debt recoveries.

The HFMA has included all the terminology and foundation to understand how to calculate the Cost to Collect metrics. How your organization is setup may not be intuitive for the calculation.

Take for example, patient access and registration. You may need to consider:

  • Is patient access centralized with scheduling and pre-access duties?
  • Is registration combined with patient access?
  • Are there receptionists at each of the different clinics? They often are the first point of contact and play a crucial role in documentation of insurance or benefit changes that affecting the entirety of the revenue cycle.

Due to all the variability across organizations, Cost to Collect can be a challenging metric to create. Due to the complexity, the industry usually defines Cost to Collect in three major areas.

Always Included:

  • Patient Access
  • Billing
  • Collections/Posting
  • Vendor Fees

Usually Included:

  • Pre-Access Financial Clearance
  • Revenue Integrity
  • CDI
  • HIM
  • Software Cost

Occasionally Included:

  • Benefit Cost
  • Overhead
  • Patient Accounting Software
  • IT Support and Infrastructure

Regular factors that have a significant impact in Cost to Collect include employee production, labor rates and vendor fees. Other environmental and economic impacts should be considered as well, such as client base being served, payor mix, payor contracts, case mix and services offered along with many other factors.

Tackling Cost to Collect is a great way to start understanding the health of your revenue cycle organization. Cost to Collect not only impacts future planning sessions, but it can also impact day-to-day operations as well because staff productivity plays such a large role in this metric.

So, while most metrics can be calculated rather easily, Cost to Collect can be a little daunting when you first begin.  It’s not just about the final calculation of Cost to Collect (the destination), but embracing the journey of the calculation can provide measurable benefit to the organization.  Understanding the contributing factors and how they perform is as important as the metric itself.  So, if you find yourself avoiding understanding this metric, reconsider it and its meaning to the entire revenue cycle.

 

 

 

Category: Articles

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