It’s easy to lose sight of important healthcare revenue cycle management (RCM) metrics with so many of them to monitor. One of the key performance indicators (KPIs) Prochant believes is crucial to your revenue cycle success is your Write-Off Rate metric.
What are Write-Offs?
A write-off is also known as bad debt (uncollectable). This represents revenue recognized that will not be collected. Common write-off reasons include:
- Past Timely Filing
- No prior authorization
- Not Medically Necessary
- Missing documentation
- Patient Bad Debt
What is Write-Off Rate?
This is the percentage of your allowable billing that is adjusted off of your Accounts Receivable (A/R) each month as bad debt.
How is Write-Off Rate calculated?
Step 1: Identify the total amount of Write-Off (WO) based upon Payment Posted Date
Step 2: Calculate the Allowable billing:
Allowable billing = Purchase Charges + Rental Charges – Contractual Adjustment
Step 3: Calculate the Write-Off Rate: WO Rate Percentage = WO / Allowable billing
Why is Write-Off Rate important?
Invoices that are written off are considered legitimate revenue for services performed or products provided. A high write-off rate indicates that we are providing said services/products free charge.
What is considered Good, Okay, At Risk?
- Good: Less than 6%
- Okay: Between 6-9%
- At Risk: Greater than 9%
Role based questions to ask
Executives are most concerned about the Write-Off Rate when it is not in the “Good” category as stated above as less than six percent.
These are questions an executive or middle-level manager should be asking themselves when there is concern:
- Is Write-Off Rate trending up or trending down?
- Are the write-off reasons specific enough to drive process improvements?
- What are our top write-off reasons?
- Are there specific payers with high write-off rates?
- Are there specific product groups with high write-off rates?
Tips to Reduce Write-Offs
1) FOCUS ON FRONT END
“Fall in love with the process and the results will follow.”
Focus on your front end by separating administrative work from the clinical setting. Once an order has been received, a staff member should be notified to begin verifying insurance information and eligibility, evaluating documentation received against medical necessity requirements, requesting pre-authorization, if necessary, and estimating patient liability.
Obtaining pre-authorization upfront prevents rejected claims and helps keep A/R days under control. If your front-end staff does their work efficiently, you don’t have to worry about patient collections.
2) FOCUS ON CLAIM DENIALS
When denials are permitted to accumulate, opportunities for collection can be missed altogether, and A/R days increase. Denied claims represent a major lost revenue opportunity. Denied claims represent the 10 percent to 20 percent of claims that cause most missed revenue opportunities. For this reason, it is critical to analyze denials and learn whether there is a root cause that can be eliminated to reduce or eliminate denials.
Tools to Help Track
Looking for a platform to help keep track of important KPIs like Write-Off Rate? Our new billing tool, Prochant Analytics, is guaranteed to supercharge your payment velocity. Read the white paper here.
Headquartered in Charlotte, North Carolina, Prochant’s client base includes national HME and pharmacy providers and health systems. Our scalable solutions, years of experience, and advanced technology provide best-in-class results to the healthcare community.