Blog Post

5 Essential Billing Benchmarks for Your PT Practice

If you're using Essential Billing Benchmarks by setting goals and monitoring your PT practice’s progression, you’re flying blind.

Erica McDermott
5 min read
July 1, 2019
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You set goals—and track outcomes data—for your patients, right? And you tweak plans of care as you go to ensure patients are moving in the right direction, optimizing your approach to bring them closer to the results they want. Otherwise, you’d be treating blind, hoping that your patients were progressing, but not really knowing for sure. The same holds true for your practice’s billing health. If you're not benchmarking, setting goals, and monitoring your practice’s progression toward those goals, you’re flying blind—and when it comes to billing, you need to know whether you’re heading toward a successful future of treating patients or a less-ideal fate of closing up shop. With that in mind, here are five essential billing key performance indicators (KPIs) for outpatient clinics (as well as target ranges for each and a bonus five metrics, because we’re cool like that) to ensure your practice is heading in the direction you want it to. But first, a note about benchmarking:

How to Benchmark

Here are six steps to successfully benchmarking anything—whether that be your practice’s progress on billing KPIs or marketing ones (adapted from this MGMA resource):

  1. Select what you’re going to measure.
  2. Collect current and past data from your practice to serve as a baseline.
  3. Gather comparative data (if available).
  4. Establish a SMART (simple, measurable, achievable, realistic, and timely) goal based on industry or best practice standards.
  5. Identify the gap between your baseline measurement and your goal.
  6. Set an action plan for achieving that goal (specifically, one that includes how and when you plan to measure your progress along the way).

 Now, without further ado, here are those billing key performance indicators for outpatient clinics:

Essential KPIs

1. Top Payers, Costs per Patient, and Payer Revenue per Patient

As we explained in this blog, you’ll want to know the reimbursement amount you receive per patient from each of your top five to ten payers. That way, you can weigh those numbers against the cost of providing your services. While there is no across-the-board target here—payers and costs will differ by specialty, region, and contract—you will, at the very least, want to ensure that what you’re bringing in more than covers what you’re spending to provide care. Otherwise, you may need to consider renegotiating your contract or going out of network. (Check out this post to learn exactly how to calculate your net cost per visit.)

2. Percentage of Receivables over 120 Days

This KPI measures timely collection—in other words, how quickly, in general, you’re receiving the money you’re owed. To calculate, divide your total receivables over 120 days due by your total receivables. As for a target, aim for less than 10%. Anything more than that means you may have a few bugs to work out in your A/R process. Curious about other A/R targets? While these may vary by practice, general guidelines dictate that “75-80% of AR should be under 60 days, and no more than 15-20% of AR should be over 90 days.”

3. Daily Sales Outstanding (DSO)

Piggybacking on the KPI above, DSO—also known as days in receivable outstanding—measures the average amount of time it takes for you to collect payment from a payer or patient. To calculate your DSO, divide your total current receivables at month-end by your payments and adjustments for that month divided by 30 days. (In other words, Current Receivables / (Payments + Adjustments / 30 days)) According to our in-house experts, you should be aiming for fewer than 35 days—with a range of 20 to 40 days, depending on your state. Compliance expert John Wallace notes that some states—like Washington and Minnesota—have Electronic Data Interchange (EDI) regulations that can result in DSOs as low as 20 days.

4. Net Collection Rate

Your practice’s net collection rate measures the effectiveness of your collection process. To calculate, divide your total payments by your total payments plus adjustments over a set time period (the previous six months is a good place to start). Then, multiply this number by 100. Typical collection rates should be 50% to 65%—and this number should be very stable from month to month. If it’s not, you may want to review some collections best practices—and that includes implementing a policy that ensures you’re collecting all patient balances at the time of service.

5. Denial and Rejection Rates

Your practice’s denial and rejection rates represent the percentage of claims that your payers either reject or deny. Because clean claims are crucial to getting paid in a timely manner, understanding how often payers are accepting your claims can show you where you need to shore up internal process to reduce errors. To calculate your denial and rejection rates, divide the total dollar amount of all denied claims in a set time period (we generally recommend going with a three-month period to start) by the total amount of all claims you submitted during the same time period. Then repeat for all rejections. Your target is a number under 10%.

Bonus KPIs

While those five billing KPIs are unquestionably essential, there are five more (adapted from this post) that you’ll want to add into your repertoire once you’ve gotten a handle on the ones above:

  1. Date of Service vs. Date of Charge: Quite simply, this is the time it takes for your staff to enter a charge into your billing system. Obviously, the faster, the better. Once you begin tracking this metric, you can establish a benchmark and then goals for improvement.
  2. Expected vs. Actual Collections: This metric compares the payment you expect to receive from your services against what you actually receive. It can help you level-set your expectations—and see where you may be missing opportunities to collect.
  3. Unreconciled Visits: This is the number of services that are never billed. Without question, this number should be as close to zero as humanly possible, but occasionally, write-offs may occur.
  4. Copay Collection Percentage: This shows the percentage of patient copays you’re able to collect on the date of service. As mentioned above, your front office staff should be collecting patient copays at the date of service—and you’ll want to shoot for a target of at least 90%.
  5. Claims Adjudication Rate: According to Wallace, this represents the resolution percentage of your claims, and it is calculated by dividing the payment plus adjustment by the charges associated with those payments and adjustments. In some cases, it can take six months or more for all parties—primary and secondary payers as well as the patient—to complete processing on a claim. Thus, it’s best to calculate your adjudication rate going back at least six months. As for an average benchmark, Wallace recommends that at least 95% of all charges be accounted for by payments and adjustments on those charges. The remainder (less than 5%) is your bad debt (i.e., charges you are unable to collect). High-performing billing and collections operations should have an adjudication rate of greater than 98% and bad debt of less than 2%.
  6. First-Pass Claim Acceptance Rate: This metric reveals the number of billed services that make it from the clearinghouse to the payers for processing—and you can get this number directly from the clearinghouse. It is calculated by dividing the number of claims that the clearinghouse rejects by the total number of claims submitted in a month. In most cases, your clearinghouse will provide this number by batch and in your month-end dashboard report. It should be greater than 95%.

There you have it: all the essential billing benchmarks you need to ensure your PT practice is thriving. To learn more about benchmarking for your practice, including how to benchmark in WebPT, check out this post. If you have questions on the above billing KPIs—or others—please don’t hesitate to drop them in the comment section below. We’ll do our best to provide answers.


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