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Critical Indicators: Importance of Monitoring Revenue Health in a Physician Practice

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Annual physical examinations are vital for a patient, enabling a physician to monitor and understand the patient’s current health condition. The physicals offer proactive steps to ward off potential health issues and prevent emergency scenarios. Do you scrutinize the financial health of your practice to include a comprehensive analysis of different metrics on a regular basis?

Several studies reveal that for most practices, the answers are negative. Most are too busy trying to keep up with daily operations, and they fall behind monitoring critical revenue factors. In some cases, Physicians and Practice Executives struggle to stay up-to-date with ongoing payment reforms, new regulations and the dramatic shifts in the healthcare industry.

To address the revenue health of your practice, RCM experts at EqualizeRCM Services (ERCM) have developed some critical indicators. Using these vital pointers would not only help you in providing some actionable insights but also propel your RCM performance to the next level.


Auditing Your Practice’s Financial Health    
For a physician practice to perform at its best, you should conduct financial health audits at least monthly, if not daily or weekly. According to ERCM experts, some of the critical indicators you should monitor are as follows:

Days in Accounts Receivable (AR)
This metric is the one of the best in showcasing the overall health of your accounts receivable. Days in AR reflects the number of days for which the AR is outstanding, based on the practice’s average daily charge volume.

Here’s How to Calculate Days in Accounts Receivable (AR)
  • Calculate the practice’s average daily charges:
    • Add all of the charges posted for a given period (e.g., 3 months, 6 months, 9 months, 12 months)
    • Subtract all credits received from the total number of charges
    • Divide the total charges, less credits received, by the total number of days in the selected period (e.g., 30 days, 90 days, 120 days, etc.)
  • Calculate the Days in AR by dividing the total receivables by the average daily charges


Net Collections
The adjusted (or net) collection rate is a measure of a practice’s effectiveness in collecting billed charges. This is calculated by dividing payments by adjusted charges for the period being analyzed.


Average Collections per Encounter (Visit, Surgery, or Procedure)
This ratio exhibits the amount of money generated for each patient encounter. By dividing revenue into the number of encounters, you can calculate this ratio.


Clean Claim and Denial Rate
Clean claim rate outlines the percentage of claims which are fully resolved by the insurance on the first submission itself. Claims which are not “clean” require rework. This results in delayed and potentially reduced payment. Most unclean claims (denials and rejections) can be prevented and can typically be fixed with a change in processes, policies or behaviors related to benefits/eligibility, coding, delayed claims follow-up or changing medical policies. To alleviate these issues, you should categorize total denials by the associated Claim Adjustment Reason Code (CARC) and Remittance Advice Remark Code (RARC), as well as make needed adjustments in processes. Our RCM bots specializes in driving up your practices clean claim rate (refer to the article on RCM Robots to learn more).


These indicators are impacted by claim rejections, denials, incorrect coding, credentialing issues and other factors. By regularly assessing these critical financial indicators, you can gain a greater understanding of the health of your practice’s revenue stream and prevent catastrophes. In addition, you can always reach out to us for help. We would develop a prescription for the appropriate actions you can take and also improve your revenue cycle.

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EqualizeRCM is dedicated to its clients. With thousands of providers and facilities served, our team has the experience and the commitment needed to address your RCM needs.