How to Calculate Common HME Metrics

Keep a close watch on KPIs such as DSO, 90+ A/R, open orders, and holds. 

Do you know how to calculate common HME metrics? Whether you need a refresher or are new to the business, understanding key performance indicators (KPIs) is critical to your decision-making process.

Let’s dive right in! You’ll soon know how to calculate the common HME metrics below.

Defining Common HME Key Metrics

Before calculating common HME key metrics, you need to know the basics. We define each of these metrics for you below.

Days Sales Outstanding (DSO)

DSO is the average number of days between the date of service and the date of payment, or the average amount of time it takes for providers to get paid.

90+ A/R Percentage (90+ A/R)

90+ A/R is the percent of A/R that is aged beyond 90 days.

Payment Rate

Payment rate is the percentage of allowable billing that providers collect on average. For example, if your payment rate is 80%, you are collecting $0.80 on every dollar you bill.

Write-off Rate

Write-off rate is the percentage of allowable billing that is adjusted off of your A/R each month as bad debt.

Adjustment Rate

Your adjustment rate has two parts:

1) Allowable adjustments taken during cash posting, and
2) Billing errors or re-billing adjustments.

Denial Rate

Denial rate is the percentage of claim lines that come back denied each month on average.

Open Order Days

This metric is defined as the number of days worth of orders that are tied up in your open, or non-confirmed, orders.

Hold Days

Hold days include the number of days worth of allowable billing tied up in your on-hold A/R.

Calculating Common HME Metrics

Now that you know the basics, it’s time to calculate these metrics.


First, let’s calculate allowable billing.

  • Allowable billing = purchase charges + rental charges – contractual adjustment

Next, calculate average daily billing.

  • Allowable billing / number of days = average daily billing
  • So, DSO = total A/R balance / average daily billing

Good < 60 days; OK = 60-80 days; not good > 80 days

90+ A/R

90+ A/R = sum of all aging buckets over 90 days / total A/R balance

Good < 20%; OK = 20-30%; not good > 30%

Payment Rate

Let’s calculate allowable billing first.

  • Allowable billing = purchase charges + rental charges – contractual adjustment
  • So, payment rate = payments received / allowable billing

Ensure that you use the same date range for both calculations. Alternately, you can offset the range by one month.

Good > 80%; OK = 70-80%; not good < 70%

Write-off Rate

The write-off rate = write offs / allowable billing.

Make sure to use the same date range for both metrics.

Good < 6%; OK = 6-9%; not good > 9%

Adjustment Rate

The adjustment rate = adjustments / allowable billing.

Similar to previous KPIs, make sure to use the same date range for both metrics. You also need to calculate the two parts separately.

Allowable adjustment: good < 5%; OK = 5-8%; not good > 8%
Billing errors: good < 3%; OK = 3-5%; not good > 5%

Denial Rate

The denial rate = denials / claim lines billed

For this KPI, you need to use the same date range for both metrics.

Good < 10%; OK = 10-15%; not good > 15%

Open Order Days

Open order days = (open orders / orders created) * number of days

All open orders in the system should be included.

For orders created, set the date range the same as the number of days. For example, for a 30-day date range, use 30 as the number of days.

Good < 12 days; OK = 12-15 days; not good > 15 days

Hold Days

Total hold = sum of all hold types in your billing system

Hold days = (total hold / monthly average allowable billing) * 30

Good < 4 days; OK = 4-8 days; not good > 8 days

Learn more about the metrics you need to measure in your HME business. Download “KPIs for Your HME Revenue Cycle,” a free slide deck based on the webinar from Prochant’s EVP and General Manager, Joey Graham.

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Prochant is the leading reimbursement firm with a dedicated focus on HME and pharmacy. We have a proven track record of helping HME and pharmacy providers meet their financial goals. 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.