The Medical Group Management Association (MGMA) standards are an authoritative reference point for performance in the medical industry. Medical practices can use these standards to establish and track key performance indicators (KPIs) for improved outcomes. Medical billing is one aspect of daily operations where MGMA benchmarks are especially useful, as they clarify what success looks like in this challenging area.
This guide will explain seven key MGMA KPI benchmarks for medical billing and how they fit into your revenue cycle optimization strategy.
This standard measures how long payments due to you remain outstanding. The chance of collection becomes very low once an account receivable (A/R) ages 120 days or more. After the 120-day mark, some collections are written off as uncollectible.
With that in mind, a basic benchmark is for more than half your accounts receivable to be aged 0-30 days. Each older category should include a smaller portion of your total A/R. The MGMA benchmark for A/R older than 90 days is around 13.5%.
If your practice has more accounts receivable over 90 days than this, you are likely running into payment collection issues. Implementing more patient follow-ups could help you progress toward the MGMA benchmarks for accounts receivable and beyond. Outsourcing the collections process is another option.
On the other hand, if the root cause is a high denial rate from insurers, you may need to adapt protocols to ensure you use correct coding and submit all the required information and documentation for each claim.
Delayed claims often become denied claims, so filing insurance claims for medical bills on time is a crucial aspect of a healthy revenue cycle. Aim to file claims with payers within 72 hours after the patient visit. Payers typically have cut-off points after which they automatically deny claims. MGMA data on medical billing shows that timely filing issues are responsible for 7% of claim denials. Keeping claim filings timely could reduce denials and help maintain healthy cash flow.
This standard refers to the percentage of your medical claims payers accepted and resolved upon first submission without requiring corrections. To calculate it, divide your total number of claims solved upon first submission by your total number of claims over the same period.
A high FPRR indicates few incidents where insurance payers reject claims based on missing or invalid information, which reflects well on your revenue cycle management (RCM) process. This bodes well for revenue and efficiency, so aim for an FPRR at the recommended 90% benchmark. If your rate is lower than this, you may need to implement more thorough checks in your claim submission process.
Your gross collection ratio is the sum of all payments you collect over a given period, divided by your overall charges during the same period and then multiplied by 100. This ratio measures your overall effectiveness in billing for and collecting funds due to you. You could measure it over a month, quarter or year. The standard benchmark for gross collection rates is 95%, though this varies by type of provider, patient population and payer mix. If your gross collection ratio is low, ways to improve it include:
Compared to the gross collection ratio, the net collection ratio accounts for contracts with payers to accept lower rates than the gross service charge. For example, you may have an agreement with a payer to accept a $200 payment for a service for which you'd normally charge $250.
Your net collection rate measures your effectiveness in collecting these adjusted rates. To calculate it, divide total collections by net charges and then multiply by 100. Medical billing benchmarking in the MGMA data indicates a net collection benchmark of 96%.
Your denial rate measures how many of your claims medical insurance payers have processed but denied. To calculate it, divide the total value of denied claims by the total value of submitted claims. The most common reasons for denied claims include:
The MGMA benchmark data indicates an 8% denial rate with rates below that being optimal. Excessive denials lead to wasted time and resources in the billing and appeals process. If your denial rate is higher than the benchmark, you may be able to improve it by verifying eligibility before patient visits and double-checking that all the required information is included before submitting bills. Track this KPI and look for patterns in your denied claims to address your key improvement areas and reduce denials.
The overhead benchmark applies to your practice's cost of doing business. To calculate it, divide practice expenses by revenue. The benchmark for overhead varies across specialties. You can compare your practice's costs to the MGMA's benchmark for similar practices to discover whether you may be overspending on operations.
If your overhead is higher than the median, it may be worth investigating a detailed cost breakdown to find key areas for cost containment. For example, you may be able to reduce administrative labor costs through outsourcing. Most practices should aim for an overhead percentage of 60% or less, though overheads up to 70% are common.
ProMD Medical Billing is an expert medical billing company in Florida. Our 100% USA-based, AAPC-certified medical coders and billers have decades of experience improving RCM solutions for medical practices in over 36 specialties. We prioritize increasing collection rates, reducing overheads and achieving 99% first pass resolution rates.
Our track record of meeting and exceeding medical billing standards has earned us a Coral Gables Chamber of Commerce Diamond Award for Best Business and testimonials from many of Florida's finest practices. Our team keeps up with the latest updates to MGMA revenue cycle benchmarks and uses KPI reporting and analysis to help our partners achieve benchmark-beating performance. This approach has helped us retain several of our clients for over 17 years.
Billing issues are at the root of many cash flow challenges for medical practices. If your practice needs to collect more payments in less time to exceed MGMA benchmarks, ProMD Medical Billing is your industry-leading partner of choice. With over 20 years of experience and expertise, our certified coding professionals will deliver a personalized solution to help your practice achieve its goals. When you partner with ProMD Medical Billing for RCM support, you could see a 20% increase in revenue within 90 days.
Contact us for a free consultation to learn more about how we can streamline your medical billing while boosting revenue.
