A healthcare practice does not have a collections problem or a billing problem. It has a revenue cycle — one continuous process from scheduling to cash — and a breakdown anywhere in it shows up as lower cash. The chief financial officer's job is to measure each stage so the breakdown is located, not just felt.
The cycle, in order
- Scheduling and eligibility verification
- Visit and documentation
- Coding and charge capture
- Claim submission
- Payer adjudication
- Payment posting and patient billing
- Denial management and appeals
- Collections and write-off
Each stage has a metric. Together they explain the gap between what was earned and what was collected.
The metrics
Days in accounts receivable
Total outstanding accounts receivable divided by average daily charges. Measures how long revenue sits uncollected. Trending up is the earliest signal of trouble anywhere in the cycle. Set a target appropriate to your payer mix and track it weekly.
Accounts receivable over 90 days
Percentage of receivable balances older than 90 days. Balances age because claims were denied, patients were not billed, or follow-up stopped. This figure names the backlog.
Clean claim rate
Percentage of claims accepted by the payer on first submission without rejection or correction. Low rates point to registration errors, eligibility failures, or coding problems — front-end issues that cost money on the back end.
Denial rate
Denied claims divided by total claims submitted. Break it down by denial reason and by payer. Eligibility, authorization, and coding denials each have a different fix and a different owner.
Net collection rate
Payments collected divided by charges net of contractual adjustments. This is the true measure of collection performance — it strips out the contractual discounts you agreed to and shows what share of collectible revenue you actually collected. Anything left uncollected here is a process failure, not a contract term.
Cost to collect
Total revenue cycle cost — staff, software, clearinghouse fees, outsourced billing — divided by cash collected. Tells you whether the fix for a collection problem is more efficient than the problem.
Patient responsibility collection rate
Share of patient-owed balances collected, and how much is collected at time of service. With high-deductible plans, the patient is often the largest single payer and the hardest to collect from after the visit.
Charge lag
Days from date of service to claim submission. Every day of lag is a day added to days in accounts receivable before the payer even sees the claim.
A worked example
A behavioral health group, four locations, $9M in annual charges. Cash had fallen 8% year over year while visit volume rose 5%. The metrics:
- Days in accounts receivable: 61, up from 44 a year earlier
- Receivables over 90 days: 34%
- Clean claim rate: 71%
- Denial rate: 18%, with 60% of denials for missing prior authorization
- Charge lag: 9 days
The story was clear once measured. A new payer contract required prior authorization for a service that previously did not. Front-desk staff had not been trained. Claims went out, were denied, and sat in a work queue with two people and no reporting. Fixing the authorization workflow at scheduling brought the denial rate to 7% in one quarter and recovered roughly $400,000 of aged receivables that would otherwise have been written off.
Volume was up. Cash was down. Only the revenue cycle metrics explained why.
For health-tech companies
Software businesses serving healthcare carry a version of the same problem: revenue tied to provider volumes, reimbursement changes, or payer contracts. Watch:
- Revenue per provider or per site, to catch client-side volume decline
- Concentration by client and by the payer mix behind each client
- Implementation-to-go-live time, which delays recognized revenue
- Client churn tied to reimbursement or regulatory change
Reporting cadence
- Weekly: days in accounts receivable, denials received, cash collected against forecast
- Monthly: the full metric set by location and by payer, with variance commentary
- Quarterly: payer contract review against actual reimbursement and denial experience
What to do this quarter
- Compute all eight metrics for the trailing twelve months. If any cannot be computed, that is finding number one.
- Break denials down by reason and payer. Assign an owner to the top three reasons.
- Set a target for each metric and add the set to the monthly management package.
- Review the front end — eligibility verification and authorization — before spending on back-end collections. Most cash is lost before the claim is sent.