​Revenue Cycle Management Key Performance Indicators (KPIs) for Healthcare Finance Teams

As out-of-pocket costs rise and healthcare providers face staff shortages, managing the revenue cycle is more important than ever. By tracking revenue cycle management in the right ways, healthcare leaders can improve financial health, patient satisfaction with the billing experience, and staff efficiency.

What is Revenue Cycle Management in Healthcare?

Revenue cycle management (RCM) refers to the way a healthcare organization captures, tracks, manages, and collects revenue for patient services. With effective RCM, organizations can increase the speed, consistency, and accuracy of payments from patients and other healthcare payers.

What are Revenue Cycle Management KPIs?

Revenue cycle management key performance indicators (KPIs) are metrics for financial health and revenue-related tasks. RCM KPIs help healthcare finance teams benchmark revenue cycle performance, set revenue goals, identify sources of revenue leakage, improve point-of-service collections, and make data-driven decisions to improve finance operations.

Healthcare revenue cycle KPIs fall into a few important categories:

Patient access KPIs

• Insurance
• Verification
• Efficiency

Pre-billing KPIs

• Pre-appointment
• Check-in rate

Claims management KPIs

• Claim denial rate
• Clean claim rate

Account resolution KPIs

• Days in accounts receivable
• Discharged not final billed (DNFB) cost to collect

Financial and revenue integrity KPIs

• Net collection rate
• Coding and charging accuracy

This guide discusses several critical KPIs that healthcare organizations should track to ensure 
the efficiency of RCM processes. However, finance leaders should always consider RCM KPIs in the context of the organization’s unique needs, goals, compliance requirements, available data, and technologies in use.

Healthcare providers’ strategic priorities will vary, even for similarly sized providers in the same geographic area. Other industry resources—like the HFMA Map Keys and Patient Friendly Billing® project — can help healthcare leaders decide the best KPIs for revenue management.

KPIs for Healthcare Revenue Cycle Management

While the specific KPIs providers choose to track may vary, here are some recommended metrics for the healthcare revenue cycle:

1. Days in Accounts Receivable (A/R)

Days in Accounts Receivable (A/R) measures the average number of days it takes for a practice to receive payment after services are rendered. This is sometimes called net days in A/R.

Days in A/R helps healthcare leaders understand their overall revenue cycle. Fewer days in A/R means the organization is converting receivables into cash more quickly—a marker of efficient billing processes and healthy cash flow. In many case, this also means lower cost to collect and higher productivity among finance, billing, and patient coordination teams.

According to the American Academy of Family Physicians, providers should aim for an average of 30-40 days in A/R. Less than 1 in 10 outstanding payment cases should spend 90+ days in A/R.

Related metric(s):

• A/R over 90 days or aged A/R rate
  Is the percentage of accounts receivable that are older than 90 days. High levels of overdue accounts can indicate inefficiencies in collections and delays in the revenue cycle.
• Charge capture
  Is the process a provider uses to convert claim codes for specific services into charges to specific payers.
• Charge capture efficiency
  Is the length of time between the service and the posting date. Efficient charge capture means providers bill for the appropriate services sooner after services are delivered. Providers aim to capture all charges within 3-5 days of service.
• Time to payment posting
  Is the time it takes to post payments to patient accounts after they are received. Quick payment posting helps maintain accurate financial records and improves patient satisfaction.
• Payment posting accuracy
  Is often measured via claim denial rate and other efficiency metrics. But it is worth mentioning here because speedy payment posting is only a win if payment posting remains highly accurate.

How to calculate days in A/R:

To calculate the Net Days in A/R divide Total Accounts Receivable by Average Daily Net Patient Service Revenue.

Formula: Net Days in A/R = Total Accounts Receivable / Average Daily Net Patient Service Revenue

2. Net Collection Rate

Net collection rate is the percentage of payments collected out of total expected collections after contractual adjustments. Net collection rate measures the big-picture effectiveness of the organization’s payment collection efforts.

To improve net collections, providers can invest in patient communication tools (like patient portals) to make it easy for patients to see their bills, upcoming appointments, and ask questions. Healthcare organizations can also offer simple bill summaries, multiple payment options, and other patient-friendly billing measures that keep net collections in the target range of 95% or higher.

How to calculate net collection rate:

To calculate the Net Collection Rate divide Payments Received by Charges After Adjustments.

Formula: Net Collection Rate = Payments Received / Charges After Adjustments

Related metric(s):

• Gross collection rate
  Is the percentage of payments collected out of gross charges measured before contractual adjustments. This measures the overall potential for revenue generation, before accounting for contractual agreements with payers. This can vary widely depending on the organization's payer mix and specialty, but many providers aim for gross collection rates somewhere between 40% and 60%.
• Net adjusted collection rate
  Is the percentage of charges received as payments by payer type (including patients as a payer type). Net adjusted collections help identify which payers drive the most revenue and the biggest opportunities for improvement per payer. For example, if patient payments make up a large share of the provider’s revenue, but patient collections lag behind other payer collections, the provider knows where to focus its operational improvements.
• Average reimbursement rate
  Is the average amount reimbursed by payers for services rendered. Tracking reimbursement rate helps monitor payer contract performance and potential underpayment issues.

3. Bad Debt Write-Off Rate

Healthcare finance leaders know the challenges of bad debt management all too well: increasing out-of-pocket costs for patients, economic pressures on patients, inflation, and other factors are driving up bad debt levels.

In general, improving an organization’s RCM strategy can significantly reduce the rate of uncollectible payments. Interventions in patient payments (e.g. financial counseling and automated reminders) and payer relationships (e.g. automated coding reviews to improve charge capture efficiency) can help reduce the rate of bad debt. But managing and improving bad debt is a complex project with many overlapping factors—only some of which the provider can control.

Bad debt is a prime example of how KPI targets vary among healthcare settings. Industry best practices say bad debt and unnecessary write-offs should be less than 3% or 5% of total expected collections, but some providers see naturally higher rates than others. For example, hospitals that serve a high rate of uninsured or underinsured patients will face higher bad debt levels than clinicians who see mostly insured patients or those able to pay out-of-pocket costs. To set realistic goals, look to other providers that are similar in terms of clientele and the mix of payers involved.

Related metric(s):

• Underpayment recovery rate
  Measures the organization’s ability to recover payments that were initially lower than expected. Underpayment recoveries indicate an agile and organized RCM system that can monitor and promptly address payment issues.

4. Claim Denial Rate

Claim denial rate is the percentage of claims denied by payers. This is sometimes measured as claim denial volume.

Claim management is an essential part of the healthcare revenue cycle. It is a process that requires clear staff training, a high level of accuracy, and several systems working together. When claims require rework and resubmission, it costs valuable time and money.

Healthcare providers can invest in process improvements and technology that makes billing, coding, and insurance eligibility verification easier for staff members. This reduces avoidable errors in claim submissions, like patient information inaccuracies or coding errors, that result in revenue leakage.

Claim denial rates have increased in recent years, sometimes reaching 10 percent or higher. At the same time, providers face shortages in key staff roles, resulting in more average days in A/R and higher outstanding payer balances. To combat these trends, providers are using automated claim reviews, process improvements, new training methods, and tools that check payer requirements before claim submission to decrease claim denial rates.

Related metric(s):

• Claim Rejection Rate
  Is the percentage of claims rejected by payers before they are processed. High rejection rates may indicate errors in claim preparation or submission.
• Coding accuracy
  Is measured by tracking the rate or volume of claim denials resulting from coding errors. Accurate medical coding is an important part of revenue integrity, compliance, and claims management. Healthcare providers may use coding audits, automated review tools, and new training methods to support medical coders in their day-to-day work.
• Insurance verification efficiency
  Measures the rate of claims denied due to incorrect or missing patient information. It is a subset of the overall volume of denied claims that provides insight into the insurance verification process specifically.

5. Clean Claim Rate (CCR)

Clean claim rate (CCR) measures the ideal claims process — the percentage of claims that pass through clearinghouse or payers on the first attempt without errors. This number excludes claims flagged with warnings and needing intervention, claims “warned” for print submission, and claims submitted directly to a third-party payer.

When CCR is high or increasing, the provider is improving claim handling efficiency and avoiding costly rework.

To calculate CCR, divide the number of “clean” claims by the total number of claim submissions.

How to calculate clean claim rate (CCR):

To calculate the Clean Claim Rate divide Number of Clean Claims by Total Number of Claims Submitted.

Formula: Clean Claim Rate = Number of Clean Claims / Total Number of Claims Submitted

Related metric(s):

• First-pass resolution rate (FPRR)
  Is the percentage of claims paid after the first submission without additional follow-ups or resubmission. This is closely related to CCR, but FPRR is focused on the payment outcome specifically, helping organizations assess their billing and claims submission processes. Top-performing organizations often seek an FPRR of 90% or higher.

6. Days to Final Bill

Days to final bill measures the average time it takes to generate and send the final bill after service. When bill submission times are shorter, collections happen faster and cash flow is healthier.

Days to final bill requires recording the services completed, coding them accurately, preparing an estimate for the payer(s) involved, and communicating the bill. Providers can take action to decrease the time spent in “limbo,” like optimizing coding, improving claims management, and using tools that accommodate payer(s)’ preferred methods of communication.

Related metric(s):

• Discharged Not Final Billed (DNFB)
  Is another term for the time between the patient’s discharge and the final billing submission.
• Charge lag time or payment posting speed
  Is the average number of days from the service date to the posting date. Days outstanding is another way to measure the amount of time between service delivery and payment.

7. Cost to Collect

Cost to collect is the total cost associated with the collections process—including staffing, technology, and other operational costs—as a percentage of total revenue. A lower cost to collect indicates a finance team is being cost-effective in its revenue management efforts.

The industry standard for cost to collect is 2% or less of net patient revenue; for every dollar collected for patient services, the provider should spend 2 cents or less on revenue cycle management operations.

Keep in mind, the cost to collect should include all of the expenses related to paying for patient services. Consider expenses in these areas:

• Patient access - eligibility and insurance verification, centralized scheduling, pre-registration, admissions and registration, financial clearance, Medicaid eligibility, and financial counseling
• Patient accounting - billing, collections, denials, customer service, subscription fees, collection agency fees, revenue integrity, cash application, and payment variances
• Health information management - transcription, coding, clinical documentation improvement, chart completion, and imaging

How to calculate cost to collect

To calculate the Cost to Collect divide Total RCM Expenses by Total Collections.

Formula: Cost to Collect = Total RCM Expenses / Total Collections

8. Patient Payment Rate (Post-Service)

Post-service patient payment rate is the percentage of payments received from patients after services are rendered. This measures how well the practice is managing patient financial engagement and collections after service.

Better follow-up processes, automated notifications, and collection process optimization typically lead to higher patient payment rates.

Related metric(s):

• Point-of-service
  Collection rate and upfront collection rate measures the percentage of payments collected before or during the patient’s visit.
• Cash collection rate
  Measures the amount of cash collected as a percentage of net patient services revenue. The target cash collection rate should be close to 100%, and values lower than 95% can indicate revenue leakage.
• Patient collections as a percentage of revenue
  Is the portion of total revenue collected directly from patients. These KPIs indicate how well a practice manages out-of-pocket costs, payment plans, and patient engagement in billing.

How to calculate cash collection percentage

To calculate the Cash Collection Percentage divide Cash Collected by Net Patient Services Revenue.

Formula: Cash Collection Percentage = Cash Collected / Net Patient Services Revenue

Other Operational Metrics

Several other operational metrics contribute to RCM efficiency:

• No-show rate
  Tracks the percentage of patients who fail to show up for appointments. High no-show rates lead to revenue loss and inefficiency.
• Time to schedule
  Is the time between a patient's request for an appointment and the actual appointment. Reducing this gap improves efficiency and patient satisfaction.
• Patient satisfaction
  Measures overall patient sentiment toward the billing process, care experience, and interaction(s) with the healthcare provider. High satisfaction rates can result in faster payments and better patient-provider communication.

How to Use RCM KPIs in Healthcare

By tracking RCM KPIs, healthcare organizations can compare their revenue performance against industry benchmarks and peer organizations. Providers can also isolate specific areas of improvement, like reducing claim denial rates, increasing point-of-service cash collections, or addressing aged accounts receivable by payer.

Collectly is changing the patient financial experience in major ways. Time-saving automations simplify patient billing and patient A/R processes. Self-serve payment plans and 24/7/365 patient billing support from Collectly empower patients to get the support and information they need. Omni-channel payment options and patient reminders increase the convenience of paying outstanding balances.

With Collectly, healthcare leaders drive major improvements in important KPIs: Collectly users report increasing post-service payments by 75-300%, improving patient satisfaction by an average of 95%, and reducing paper billing statements by 90%. Real-time reporting and revenue analytics gives CFOs, practice managers, and finance teams KPI the ability to monitor cash flow and spot trends in revenue data.

Request a demo to see how Collectly can improve the billing and payment experience for your patients.