When it comes to healthcare revenue cycle management (RCM), it’s easy to lose sight of metrics that matter. With almost one-hundred metrics to consider, pay most attention to the key performance indicators (KPIs) that measure your revenue cycle success. There are industry-standard indicators for a reason! One of the KPIs Prochant believes is crucial to track is your Credit Adjustment Rate metric.
What is a Credit Adjustment?
A credit adjustment (CA) is an adjustment applied to an invoice as the result of billing error. These are allowed amounts that should never have been billed. This includes adjustments for things such as billing after equipment has been picked up or returned, billing after date of death, adjustments taken in order to rebill to correct a charge, or HCPC/Procedure Code.
What is CA Rate?
The Credit Adjustment Rate (CA Rate) represents the percent of recorded allowable billing that is adjusted as an error.
How is CA Rate calculated?
Step 1: Identify the total amount of CA based upon payment posted date
Step 2: Calculate the Allowable billing*
Step 3: Calculate the CA Rate
CA Rate = CA / Allowable billing
*Allowable billing = Purchase Charges + Rental Charges – Contractual Adjustments
Why is CA Rate important?
Billing errors inflate Accounts Receivable and revenue, and result in inaccurate revenue and payment projections.
What is considered Good, Okay, At Risk?
- Good: Less than 3%
- Okay: Between 3-5%
- At Risk: Greater than 5%
Role based questions to ask
Executives and middle-level managers should be concerned about the CA Rate when it is not in the “Good” category, or less than three percent. If concerns are surfacing, these are questions to ask your team:
- Is the rate trending up or down?
- What is the rate by payer?
- Are all credit adjustments really Credit Adjustments or Write-Offs?
Tips to reduce the CA Rate
Analyze credit adjustments by specific reason, such as:
- Billed incorrect item
- Billed incorrect insurance
- Patient Deceased
- Patient in SNF
Work with front end billers to address each reason category and add or modify processes to reduce CA volumes.
What might we look for in terms of correlation/causation?
If overall billing is down, and credit adjustments remain the same, the CA Rate may temporarily spike even though there has been no net change in CA occurrence.
Tools to Help Track
Even though you now know how to calculate your CA Rate and ask the right questions, managing spreadsheets and tracking metrics on your own can lead to errors. Use a platform to keep track of KPIs like our revenue cycle tool Prochant Analytics, which is designed for quickly managing your processes.
Having received certification by HITRUST—the gold standard in information security and risk management—Prochant Analytics protects your patient data and files. Prochant Analytics also comes with a Prochant expert client support team to help you. Want to learn how it works? Read the white paper here or schedule a free demo here.
Prochant is the leading reimbursement firm with a dedicated focus on HME and pharmacy. We have DME/HME clients from all over the country and handle front-end and back-end billing functions. 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.