What do profitable practices measure?
Your practice’s financial health determines its ability to grow. When you understand the numbers that drive your revenue cycle, you can make smarter changes that boost revenue and cut costs.
Independent medical practice owners and financial executives wear many hats. The most successful ones focus on the areas that make the biggest impact. Tracking the right metrics can help you see where your revenue cycle stands, and where you can improve.
Below are five key metrics every practice should measure regularly. Each one can have a major impact on your financial performance.
1. First pass resolution rate
The first pass resolution rate (FPRR) measures how many claims get resolved the first time they’re submitted. It’s one of the best indicators of how efficiently your revenue cycle runs, from scheduling and coding to billing and payment.
Most rejections happen because of missing or incorrect data. Getting claims right the first time saves your staff time, reduces rework, and speeds up payment, all of which strengthen your bottom line.
How to measure it: Divide the total number of claims resolved on the first submission by the total number resolved during that same period.
Benchmark: Aim for 90% or higher.
2. Net collection rate
Your net collection rate shows how effectively your practice collects the money it’s owed. It’s the percentage of payments you’ve received out of the total you’re allowed to collect under payer contracts.
This metric tells you how much revenue you’ve actually collected versus what you expected and how much is still out there.
How to measure it: Divide payments received by charges (minus adjustments) for a specific time period. We recommend using a 12-month rolling schedule to keep your data consistent.
3. Denial rate
Your denial rate is the percentage of claims rejected by payers. A low denial rate usually means a healthy cash flow. A high one signals internal issues that cause delays and lost revenue.
Common reasons for denials include missing authorizations, incorrect information or non-covered procedures.
How to measure it: Add the total dollar amount of denied claims for a given period and divide by the total amount of claims submitted during that time.
Benchmark: The industry average is 5–10% but keeping it below 5% should be your goal.
4. Days in accounts receivable
Days in A/R tracks how long it takes your practice to collect payment. The fewer days, the faster you’re getting paid. This metric helps forecast income and measure how efficient your billing process really is.
How to measure it: First calculate your practice’s daily charges for a set amount of time. For example, say you decide to evaluate days in A/R every quarter. Add up your practice’s total amount of daily charges over a three-month period. Then divide the total charges by the number of days, in this case, 90 days. Next, divide your total receivables by your average daily charges to get the days in A/R.
Benchmark: Aim to keep days in A/R below 50. R1 has helped clients cut their A/R time by up to 15%, significantly improving cash flow. (Learn how at contact@R1rcm.com.)
5. Cost to collect
Collecting money costs money—but how much? Your cost to collect measures what you spend to bring in each dollar of revenue. An efficient revenue cycle minimizes those costs. R1 clients often see a 20–40% reduction in collection costs.
How to measure it: Divide your total revenue cycle costs (including administrative, IT, labor, and third-party fees) by your total cash collected.
Benchmark: The industry median is 3%.
Track the metrics that matter
If you’re not measuring your key revenue cycle metrics, you’re guessing about your financial health. Regular tracking helps you spot issues early, make targeted improvements, and boost profitability.
R1 helps physician practices improve all these metrics and more.
How R1 can help
Managing your revenue cycle on your own can drain time, money, and resources. R1’s scalable operating models integrate seamlessly with your existing systems, delivering measurable improvements and a better patient experience.
With advanced technology and one of the largest healthcare databases in the industry, R1 helps practices drive efficiency and precision across the revenue cycle.
Improved revenue cycle with proven results
R1 is ranked #1 by KLAS for Ambulatory RCM Services.
- Up to 20% reduction in cost to collect
- Up to 30% reduction in coding costs
- Aged A/R decreased by up to 15%
- Up to 30% faster payment velocity
- 4–6% increase in revenue from better payer contract management
- Up to 99% clean claims rate
