The Importance of Monitoring Billing Efficiency in Healthcare Clinics

A key KPI, monitored within our Predictive Modeling Tool, is billing efficiency. Sometimes referred to as the net collections ratio, the billing efficiency will tell you the percentage of your total actual collected gross compared to your theoretical total possible gross.

It adds up your total collected gross revenue over a given period (from your bank records) and divides that by the total number of all your attended visits times each visit’s reimbursement rate. We assume each visit was reimbursed at your contractual rate with each insurance. If you actually received less than that agreed-upon rate, your efficiency will drop below 100%.

Why 100% Billing Efficiency Matters

Ideally, you want this number to be very close to or at 100%. This would indicate that you have successfully collected 100% of the money you are owed from the insurer you bill to for each visit.

It further indicates that all your insurance companies are abiding by your contracted reimbursement rates.

Factors Affecting Billing Efficiency

Your billing efficiency can fall below 100% for many reasons:

  • Insurance companies could deny claims after you’ve seen the patient
  • rivate pay patients could default on payment
  • ne or more of your payors could fail to pay your contracted rate
  • … and more.

If your efficiency drops below about 95%, you must analyze your billing team’s practices very closely and isolate the cause of the problem.

You may need to consider replacing your billing team if the problem is significant enough. Many clinic owners will respond well before the efficiency drops even that low.

Our Experience with Billing Efficiency

When we first began accepting insurance, our first biller misrepresented her capabilities and did a very poor job. Unfortunately, as the owners, we should have possessed the billing know-how to recognize her shortcomings. The problem was we didn’t know how to work with insurance reimbursements during that time.

We hovered on the verge of bankruptcy for over a year until we began bringing in new billers who identified huge holes in our billing practices. It was about that time that I began monitoring our billing efficiency and found we had been operating down below 80%.

That means over 20% of all the earnings we should have been receiving were being forfeited to the insurance companies.

What did that mean to a company financially? Assuming we should have been grossing about $500,000 per year at that time, we were turning around and handing over $100,000 of the profits back to the insurance companies due to our lack of proper oversight.

Given the very tight margins in running healthcare clinics today, that lack of oversight was nearly a death sentence for us.

How to Monitor Billing Efficiency Effectively

Using our KPI system makes this an exceptionally quick and easy KPI to monitor. It gives a very quick, but very accurate overview of your billing system’s health.

Billing problems can make even the strongest clinics go bankrupt in a matter of months. Don’t fall victim to assuming your billers are doing what they’re supposed to do. Ensure that they are!

Don’t leave your clinic’s financial health to chance—actively monitor and optimize your billing practices to secure a prosperous future.