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Key Performance Indicators (KPIs) – Measurement to Management

Edward Townley, Founder, Cogent9 Consulting

This auditing and compliance “Tip of the Week” was originally published by the National Alliance for Medical Auditing Specialists (NAMAS), a division of DoctorsManagement.

There is an adage attributed at different times to many people: “You can’t manage what you can’t measure.” We have seen this credited to Michael Bloomberg, Peter Drucker and many more. This quote is taken out of context from a quote to the contrary from W. Edwards Deming, the father of the continuous quality improvement [CQI] movement. He actually said, “It is wrong to suppose that if you can’t measure it, you can’t manage it – a costly myth.” This statement is not to be construed as evidence of the shorter quote being incorrect, but Dr. Deming’s point was that there are certain things that are not directly measurable that must also be managed.

Through extensions of Dr. Deming’s concepts, such as Lean and Six Sigma process improvement efforts, we find that measurements are key to determining baselines, making incremental improvements and monitoring the effectiveness of changes to processes and procedures.

The action cycle for process improvement may be defined by the Plan-Do-Study-Act [PDSA model] (aka the Deming cycle1 or Shewhart cycle2).

Lean3 / Six Sigma4 process improvement uses another acronym DMAIC (an acronym for Define, Measure, Analyze, Improve and Control). All of these processes are data driven, and measurements of critical data points can assess baselinesand improvements.

For our practices, we can develop specific Key Performance Indicators (KPIs) that assist with time and personnel management as well as management of the revenue cycle.

Let’s examine the first steps – define and measure the current state (establishment of the baseline). The KPI baseline measurements let us know the current state and identify where we may choose to investigate the process and possible defects. These lists are not comprehensive but are just examples of baseline measurements.

Process of Care baselines may include:

  • Identification of the desired study period – per working day, week, month, quarter or year
  • How many new/established patients were seen per study period per physician
  • How many new patients are referred by which referral sources?
    • Review current YTD, month, quarter periods to the last period
    • Identify new referral sources
    • Identify previous referral sources that no longer refer
    • In larger groups this may include internal vs. external referrals
    • How many patients seen in the study period go on to have a surgery or other procedure or treatment?
    • Number of non-billable (due to global period) follow-up patient encounters seen per study period
    • Number of long-term follow-up patients previously treated (monitoring or surveillance)
    • Productivity as measured by RVUs billed per study period by group, physician, division or department

Once these baselines are defined and measured, they may be evaluated in terms of process improvement or identification of process defects. For example, if we see over a few months that a valued referral source has tapered off or stopped referring, we can investigate and see that the root cause may be.

This could be that the referring physician has retired or moved, a new staff member is referring elsewhere, or a patient may have reported some issues to the referring physician, or a change in physician association with a given payor group now restricts referrals. In any of these cases we may take some corrective action or evaluate other options.

Business Operations baselines may include:

  • Dollar value of total claims per period (work day, week, month)
  • Denial rates by payor, physician, and category
    • Denied services written off
    • Denied services still in A/R (under appeal)
    • Days in A/R (aka Daily Sales Outstanding or DSO) in total and by payor, physician, and category
    • Contractual Allowances by payor, physician and category
    • A/R over 90 days aged by payor, physician and category
    • Credit balances by payor (government > 60 days and non-government >90 days)
    • Bad Debt and Charity adjustments by period by payor and referral source
    • Self-pay balances as a percentage of total A/R
    • Daily cash collections over the counter (point of service collections)

Business operations baselines may also show areas needing more attention.

  • High contractual allowance rates, for example, may be a reflection of base pricing, or may mean that there are specific payor contracts that are not particularly favorable.
  • High number of days in A/R may indicate slow-pay contracts or if the high volume is in self-pay after insurance, this may indicate problems in point-of-service (POS) collections or financial counseling or A/R collections processes.
  • High credit balance totals can have long-term compliance implications and may result in fines. Government payors with identified overpayments must be refunded within 60 days, managed care payors may require that overpayments be processed in 90 days.
  • Denied services may be indicative that physicians are performing services ‘off-label’ or lacking pre-authorization. These may also be a specific payor issue and a contract review may be necessary.Who among the management team receives which sets of KPIs may differ. A nursing supervisor, for example, may be more interested in the process of care KPIs for staffing, timing and productivity. Business office management may be more interested in the claims, denials and A/R management.Establishment of baseline KPIs will allow for benchmarking; these measurements over time will show trends. As we determine specific and actionable process defects, we can intervene, make a process improvement, and measure the effectiveness of the “fix” to see that it is working in both the short and long term. Many of the KPIs will have some overlap between departments and work areas.Some KPIs will be monitored “forever” while others may be for the identification of a short-term problem and may no longer be useful after an intervention has resolved the issue.Ideally, a revenue cycle team will meet periodically to review KPIs, determine a strategy for identifying process defects, and prioritize an action plan to correct them. Ongoing measurements show trends that may need attention. Having the clinical and administrative teams work together on this will establish better communications and enhance ongoing process improvement.LINKS:
    1. https://www.deming.org/theman/theories/pdsacycle
    2. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC2464836/
    3. https://en.wikipedia.org/wiki/Lean_manufacturing
    4. https://en.wikipedia.org/wiki/Six_Sigma

    This Week’s Audit Tip Written By:

     

    Edward Townley 

    Founder, Cogent9 Consulting

     Edward Townley is a long-time medical office administrator and revenue cycle director with background in internal medicine, family practice and orthopedic surgery. He has served as a business office manager for a large academic Internal Medicine group of 200+ physicians and 7 independent labs.

    Over ten years at the US Oncology network, Ed served as a revenue cycle director and subject matter expert for auditing and education on radiation oncology and diagnostic imaging (CT, PET, Ultrasound).  Additionally, he created billing and coding guides and answered Ask the Expert queries from across the 14-state network.  While there, he completed Lean/Six Sigma

    Green Belt training in process improvement.

    Currently, Ed teaches the full Anatomy/Physiology, Medical Terminology, ICD-10 and Advanced Medical Coding program at Tarrant County College Trinity River campus in Fort Worth. He presents annually at the Southern Association for Therapeutic Radiation Oncology [SATRO] where he also sits on the Panel of Experts for radiation oncology billing and coding. In April, he will present at HealthCon 2020 AAPC conference in Orlando.

What to do next…

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