3 KPIs for Improving Healthcare Revenue Cycles

Thought Leadership  |  01 May 2024

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Written by: Mark Herzog, Principal Solutions Specialist, Veradigm

US healthcare organizations lose $125 billion annually on unpaid and underpaid claims. To put this amount in perspective, $125 billion is approximately 100 Gerald R. Ford-class aircraft carriers or 125,000 new MRI machines. This widely reported statistic puts a price tag on the challenges hospitals and clinics face regarding financial performance—from increasing claim denial rates to workforce shortages and rising labor expenses.

Managing revenue cycles is key to improving returns. Selecting key performance indicators (KPIs) helps healthcare organizations objectively measure the health of their revenue cycle and find areas for growth.

KPIs are like the bubble in a level used to measure whether a picture frame is square—they indicate when your organization’s revenue cycle is out of alignment. Here, we’ll discuss how to find the right revenue cycle KPIs for your practice, three core KPIs that apply across the spectrum of specialties and services, and how software solutions can improve revenue cycle management.

How tracking KPIs benefits healthcare organizations

In a broad sense, KPIs are measurable ways organizations track progress toward business goals. KPIs assign concrete measurements to intangible ideas like “growth” or “improvement.” A basic example is assessing financial growth by comparing annual profits over several years.

Finding specific criteria to track performance has many benefits for healthcare organizations like hospitals, clinics, and private practices. Tracking KPIs regularly can help organizations:

  • Identify areas of improvement
  • Catch problems early, before they affect profits
  • Compare growth with competitors
  • Recognize and reward growth
  • Adjust pricing and services to reflect changes

Regarding revenue cycles, the Healthcare Financial Management Association (HFMA) lists 29 KPIs for all hospitals and systems, ambulatory providers, physician organizations, post-acute care, and integrated delivery systems. The HFMA’s KPI list includes everything from “pre-registration rates” to evaluate how patients access services to “late charges as a percentage of total charges” to measure cash flow speed.

Finding the right KPIs for your practice

Choosing several KPIs to track is more manageable than tracking all 29 from the HFMA’s list and helps you consider which factors influence your revenue cycle most. For example, practices concerned about under-utilizing clinical capacity may choose different KPIs than those concerned about inefficiencies in their revenue cycle or problems securing funding for uninsured patients.

KPIs should align with your unique business situation and goals. Here are several questions to ask while choosing KPIs:

  • Which revenue cycle-related goals and objectives matter most to my practice?
  • Are there measurable KPIs available to assess progress on these objectives?
  • Is the chosen KPI critical to my practice’s success?
  • Is the chosen KPI clearly defined so that everyone in the practice can understand it?

Although revenue cycle KPIs will look different for each healthcare organization, a few are essential to track and monitor, regardless of specialty or situation. Here are three core KPIs to begin monitoring today.

Core KPI 1: Claim denial rate

According to a survey of healthcare leaders by the Medical Group Management Association, claim denials have increased significantly in recent years. Payers often deny claims because of incorrect information or missing details. The cost of reworking claims adds up quickly, and the time it takes to submit appeals can negatively impact revenue cycles. Common reasons for claim denials include:

  • Missed submission deadlines
  • Invalid subscriber identification
  • Non-covered services
  • Separate services billed as a single service
  • Incorrect modifiers
  • Data discrepancies

Claim denial rate, the percentage of claims denied by payers over a specified period, is a key indicator of an organization’s revenue cycle health. To find your denial rate, divide the total dollar amount of claims denied by the total dollar amount of claims billed for a given period.

Low denial rates indicate healthy cash flow, whereas high denial rates indicate revenue leakage. The industry average is 5-10%. A denial rate under 5% indicates optimal revenue cycle performance and a denial rate over 10% means it is time to look for problem areas in your organization’s revenue cycle management.

Core KPI 2: Clean claims rate

Submitting clean claims is essential to reducing denials—and the time staff spend reworking them. Clean claims are error-free and have the correct supporting documentation to be processed easily by payers for timely payment. In contrast, claims that are not clean contain inaccuracies or incomplete documentation. These claims require payers to contact providers for clarifying details and may result in a denial.

A clean claims rate is the percentage of submitted claims accepted on their first submission to the payer. Steps for finding your organization’s clean claims rate:

  1. Calculate the total number of claims accepted
  2. Calculate the total number of claims submitted
  3. Divide the accepted claims by the submitted claims
  4. Multiply by 100

The industry average clean claims rate is 95%, and the desired range (according to Becker’s ASC) is 98% or more. Healthcare organizations can fix low clean claims rates by evaluating the reasons for denials and implementing new processes to avoid future rejections. Tracking clean claims rates helps organizations assess the efficiency of their claim submission process and identify areas for improvement, reducing the number of denied claims.

Core KPI 3: Days in accounts receivable

Measuring accounts receivable (A/R) performance can be challenging for medical billing staff because the relevant metrics and benchmarks often aren’t well understood. Tracking days in A/R is a simple way to evaluate whether A/R is doing poorly, well, or above average. The metric provides insights into the overall efficiency of your revenue cycle and helps identify delays in payment collection.

Days in A/R is the average number of days to collect payments for services provided. This KPI measures revenue an organization has generated but has not yet collected. How to find days in A/R:

  1. Calculate average daily charges
    • Add up the total charges over the past six months
    • Count the total number of days in the past six months
    • Divide total charges by total number of days
  2. Calculate the total dollar amount in accounts receivable
  3. Divide the amount in accounts receivable by average daily charges

The industry average is 35 days—a little over a month. The average varies by practice because it depends on many factors, such as payer mix, percentage of out-of-network claims, outstanding litigation, and billing and collections staff performance. Tracking days in A/R according to individual financial classes (e.g., separating in-network and out-of-network claims) can help identify problem areas.

Healthcare organizations should aim for between 30 and 40 days in A/R. More than 40 days in A/R means it is time to reevaluate processes.

Veradigm solutions for improving revenue cycle KPIs

Monitoring key performance indicators for your organization’s revenue cycle doesn’t have to be difficult. Software solutions simplify tracking and reporting metrics for your practice so your team can spend less time on spreadsheets and more time caring for patients. Veradigm’s Ambulatory Suite and Revenue Cycle Services can help monitor KPIs and improve processes within healthcare organizations.

Veradigm Ambulatory Suite improves clean claims rates

Veradigm’s Ambulatory Suite is designed for provider practices and includes Veradigm EHR, Veradigm Practice Management (with Predictive Scheduler), and Veradigm FollowMyHealth. This collection of solutions supports these ongoing practice needs:

  • Administrative tasks
  • Billing and collections
  • Smart patient scheduling
  • Patient care during visits
  • Patient engagement
  • Clinical documentation
  • Clinical workflow
  • Telehealth consultations

While these capabilities impact the revenue cycle in some way, the Practice Management software directly impacts core claim denial rates and clean claims rates. According to internal data from Veradigm, the software delivers a 98% first-pass clean claims rate.1 Getting claims right the first time eliminates the need for expensive, time-consuming rework.

Veradigm Revenue Cycle Services streamlines practice operations

Veradigm’s Revenue Cycle Services include software solutions and support from a team of professional billing experts. These services help healthcare organizations solve administration and financial management challenges—from recruiting and training staff to maintaining a healthy revenue cycle.

The Revenue Cycle Services has served over 29,000 providers over 30 years (and going). Outcomes include:1

  • $4.2 billion annual payments
  • 98% first-pass clean claims rate
  • 98% net collections
  • 2% to 5% revenue improvement

Optimize financial performance with often-overlooked KPIs

Tracking KPIs for your revenue cycle can greatly improve your practice’s efficiency, patient satisfaction, and profitability. Which KPIs you choose to track depends on your business goals and specific situation, but a good starting place is monitoring claim denial rate, clean claims rate, and days in accounts receivable. These three core KPIs will help you find and fix problem areas in revenue cycle management.

Consider also looking into critical but often overlooked KPIs to optimize your practice’s financial performance. Monitoring charge per encounter, revenue per encounter, and non-completed visits will help ensure you are charging what your services are worth and finding ways to reduce missed appointments.

Download our Revenue Cycle Services eBook to learn more about KPIs that are easy to overlook but can significantly impact your revenue stream.


  1. Internal Data on File, April 2024.
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