Do you know how to calculate common HME metrics? Whether you need a refresher or are new to the business, understanding key performance indicators (KPIs) is critical to your decision-making process.
Let’s dive right in! You’ll soon know how to calculate the common HME metrics below.
Before calculating common HME key metrics, you need to know the basics. We define each of these metrics for you below.
DSO is the average number of days between the date of service and the date of payment, or the average amount of time it takes for providers to get paid.
90+ A/R is the percent of A/R that is aged beyond 90 days.
Payment rate is the percentage of allowable billing that providers collect on average. For example, if your payment rate is 80%, you are collecting $0.80 on every dollar you bill.
Write-off rate is the percentage of allowable billing that is adjusted off of your A/R each month as bad debt.
Your adjustment rate has two parts:
1) Allowable adjustments taken during cash posting, and
2) Billing errors or re-billing adjustments.
Denial rate is the percentage of claim lines that come back denied each month on average.
This metric is defined as the number of days worth of orders that are tied up in your open, or non-confirmed, orders.
Hold days include the number of days worth of allowable billing tied up in your on-hold A/R.
Now that you know the basics, it’s time to calculate these metrics.
First, let’s calculate allowable billing.
Next, calculate average daily billing.
Good < 60 days; OK = 60-80 days; not good > 80 days
90+ A/R = sum of all aging buckets over 90 days / total A/R balance
Good < 20%; OK = 20-30%; not good > 30%
Let’s calculate allowable billing first.
Ensure that you use the same date range for both calculations. Alternately, you can offset the range by one month.
Good > 80%; OK = 70-80%; not good < 70%
The write-off rate = write offs / allowable billing.
Make sure to use the same date range for both metrics.
Good < 6%; OK = 6-9%; not good > 9%
The adjustment rate = adjustments / allowable billing.
Similar to previous KPIs, make sure to use the same date range for both metrics. You also need to calculate the two parts separately.
Allowable adjustment: good < 5%; OK = 5-8%; not good > 8%
Billing errors: good < 3%; OK = 3-5%; not good > 5%
The denial rate = denials / claim lines billed
For this KPI, you need to use the same date range for both metrics.
Good < 10%; OK = 10-15%; not good > 15%
Open order days = (open orders / orders created) * number of days
All open orders in the system should be included.
For orders created, set the date range the same as the number of days. For example, for a 30-day date range, use 30 as the number of days.
Good < 12 days; OK = 12-15 days; not good > 15 days
Total hold = sum of all hold types in your billing system
Hold days = (total hold / monthly average allowable billing) * 30
Good < 4 days; OK = 4-8 days; not good > 8 days
Learn more about the metrics you need to measure in your HME business. Download “KPIs for Your HME Revenue Cycle,” a free slide deck based on the webinar from Prochant’s EVP and General Manager, Joey Graham.
Prochant is the leading reimbursement firm with a dedicated focus on HME and pharmacy. We have a proven track record of helping HME and pharmacy providers meet their financial goals. Our scalable solutions, years of experience, and advanced technology provide best-in-class results to the healthcare community. Headquartered in Charlotte, North Carolina, our client base includes national HME and pharmacy providers and health systems.