Ask the Expert Answer: Calculating Cost-to-Collect
Q: We are basing staffing decisions on your benchmark of 2% of collections for cost-to-collect. Would you explain how you arrived at this percentage? We would like to obtain the facts and background that went into that research since it will be utilized at our facility for important decisions.
What is the current benchmark for “cost to collect”?
Throughout the last five to seven years, the best-practice standard for cost-to-collect has dropped from 3% to 2%. This is primarily due to the positive impact of deploying bolt-on software, which has dramatically increased employee productivity. This reduction is documented in the Hospital Accounts Receivable Analysis (HARA) Report, published by Aspen Publishers. This is the best-available industry-standard source for cost-to-collect data.
Cost-to-collect is calculated by adding the total expenses of patient access and patient financial services departments, then dividing that figure by monthly cash collections. If the patient access total includes scheduling, etc., the related department costs are included in the patient access expenses. If outside vendor fees are included in patient financial services expenses, the related costs are included in the patient financial services total.
The health information management department is excluded from the calculation, although it is widely considered to be a revenue cycle department. This is because the HARA Report does not include the figure in its CTC calculation. Obviously, if this department is included in an organization’s revenue cycle management structure, its costs should be tracked and the best-practice target should be adjusted accordingly.
Unfortunately, neither I nor any other source (HFMA, HIMSS, HARA Report, etc.) has further detail on the KPI, such as other possible CTC sort keys, including patient type, hospital type, organization form, etc. Perhaps as HFMA expands the MAP Initiative/Project, we’ll have breakout data in the future.
What is the formula for calculating the cost per claim?
To calculate the cost per claim, take the total revenue cycle cost (calculated by the formula discussed above) and divide by the total number of claims submitted in the same period (typically monthly or annually).
What is the factor to determine the additional cost for rebill?
The factor to determine the additional cost for rebill is difficult to calculate. The most widely cited figure is $25 per rebill, as made known by the Health Care Advisory Board. To be as accurate as possible, this would need to be the subject of a time and motion study by an organization’s internal audit department.
David Hammer, McKesson, answered this question