RCM Benchmarks: How Close Does Your MSO Come to These Ideal Measurements? 

In the evolving world of healthcare, revenue cycle management (RCM) is the backbone of financial stability. 

Yet, many healthcare management services organizations operate without a clear understanding of how their RCM processes perform when compared to industry standards, different departments, different assets (physician groups or practices) in their portfolios, and – possibly most importantly – competitors. When organizations fail to utilize RCM benchmarks, they miss opportunities to increase revenue and cut costs.

Without benchmarks, you risk inefficiency in workflows and poor resource allocation, making it difficult to pinpoint areas for process improvement. This inefficiency can leave organizations struggling to measure their performance against peers, falling behind in a competitive industry where it takes precision to optimize margins. 

Explore how leveraging benchmarks helps you identify weaknesses, streamline processes, and ultimately ensure you remain competitive. The importance of RCM benchmarks cannot be overstated—they are essential for maintaining financial health, improving operational efficiency, and achieving long-term success in the healthcare sector.

What are RCM benchmarks?

An RCM benchmark is a reference point that allows you to compare your own levels of performance with the performance levels of others. Unlike KPIs, RCM benchmarks are measurements of how the performance of various revenue cycle activities compares with those of your competitors or industry standards. You can also compare benchmarks internally, such as between portfolio assets within your MSO portfolio or among departments in one of your practices. 

The most common reason to measure and compare your RCM performance is to identify opportunities for improvement. Another benefit of benchmarking is that it can help you assess just how your competitors are outperforming you. Organizations’ ultimate goals for benchmarking can range from making improvements to dominating their market. 

The difference between benchmarks and KPIs

Benchmarks and KPIs are often confused. They are not interchangeable. 

While a benchmark compares an entity’s processes, products, and operations with outside competitors or among internal departments or entities, key performance indicators (KPI) or RCM metrics measure how well an individual, business unit, project, or company performs against its own strategic goals. KPIs take baseline measurements (of bad debt percentage, coding errors, days to pay, etc), establish goals, and then measure progress toward those goals. Ultimately, benchmarks help healthcare organizations determine the specific KPIs they need to reach their overarching business goals.  

The benchmark is the figure to aim for. The KPI or metric is the calculation required to determine where your practice or physician group currently stands. 

For example, a company might have a goal of improving days in accounts receivable (A/R). To measure performance, the company decides to find the industry standard for days in A/R for that specialty. They might conduct an internet search for case studies that feature a reduction of days in A/R. Many RCM automation companies have success reducing 120 and 90 days A/R by 50 percent or more. According to HFMA, days in A/R should be between 30 to 40. A/R over 90 days should stay less than 10 percent. An MGMA Stat Poll of 519 medical groups reveals that most (42 percent) wait  91 to 120 days before sending a bill to collections. A surprising 32 percent wait 120 days or more and 10 percent never send bills to collections. 

With this data, you can benchmark against industry practices. Maybe you should send all 90-days+ bills to collections. Maybe, given your payment history, a personal phone call explaining that the bill is 90 days overdue has a better chance of getting you paid a reasonable amount (better than collections which may get you 4 percent or less than the original bill).

What are the different types of benchmarks?

Comparing your organization to another healthcare entity is “competitive benchmarking,” which focuses on two or more organizations in the same industry.  For instance, an MSO might explore the efficiency of a practice group’s patient collection rate to industry standards. They could turn to Kodiak’s 2024 study of 1,850 hospitals and 350,000 physicians nationwide that shows patient collections at 47.8 percent in 2023, a seven percent drop from 54.8 percent in 2021. 

Knowing that – across the industry – patient collections are falling could spur this MSO to double down on upfront collections.  After all, with the increase in high deductible healthcare plans and self-pay patient volume, patients are now responsible for more than 30 percent of provider income. In this case, benchmarking provides the rationale for implementing upfront collections, a step that physicians and staff could push back on. 

Other types of benchmarking include: 

Internal benchmarking focuses on the departments or branches of the same organization. For instance, the company might want to know the denial rates of the practices within its portfolio. Let’s say one of the physician groups in your portfolio has a denial rate that is significantly higher than other acquisitions. 

Resist your first instinct that workflows or processes are faulty at that location. Instead, the physician group or practice with the highest denials could need additional revenue cycle staff. Tallying RCM staff numbers among acquisitions and comparing those to denial rates could lead to the real root cause behind denials. 

Functional benchmarking involves comparing your RCM activity performance to organizations in non-related industries. For instance, a dentistry clinic might compare its charge capture rate to that of a similarly-sized ophthalmology clinic. Best practices indicate that, for all specialties, all complete charges should be captured within three to five days after the time of service, no matter the industry. These KPIs are centered on assessing the financial health of your organization, covering key areas such as revenue, costs, and profit margins. 

Generic benchmarking explores the subjects and patterns existing in all industries. For instance, benchmarking your patient management against how hotels handle their guest management could reveal some insights. Generic benchmarking can lead you to some excellent work processes. 

How to find benchmarks

Below, we list the most common benchmarks according to industry publications and organizations. They are not the only places to find and measure against benchmarks. Consider also: 

• Data Analytics Platforms: Some RCM analytics platforms offer benchmarking features that allow you to upload industry and peer benchmarks. These platforms can automatically compare your performance against these benchmarks, providing a clear picture of where you stand.
• Consulting Services: Engage with consulting firms that specialize in healthcare RCM. They can provide tailored benchmarking services and access to proprietary data that might not be publicly available.
• RCM publications: 
  • 1. HFMA MAP Key Connect Program - The Healthcare Financial Management Association (HFMA) provides benchmarking data through their MAP (Measure, Apply, Perform) Key Connect program. HFMA 29 includes MAP Keys (KPIs) for revenue cycle benchmarking divided into Patient Access, Pre-Billing, Claims, Account Resolution, and Financial Management.
  •  MGMA DataDive - The Medical Group Management Association (MGMA) offers extensive benchmarking data, including revenue cycle metrics, through their DataDive platform.

These reports and platforms are widely used in the healthcare industry to provide context for revenue cycle performance, set goals, and identify areas for improvement. They offer a mix of broad industry data and more specific, granular metrics depending on the needs of the healthcare organization.

The most common healthcare revenue cycle management benchmarks focus on key performance indicators (KPIs) that measure the efficiency and effectiveness of the revenue cycle process. Here are some of the most critical RCM benchmarks:

Overall revenue cycle benchmarks

Cost to collect - measures the costs incurred by the practice or physician group to collect revenue, including billing, collections, and other revenue cycle expenses. 

Benchmark: keep your cost to collect below 3-4% of net revenue.

Contractual allowance measures the difference between the provider’s standard charges and the payer reimbursement rates listed in the contract. 

Benchmark: contract dependent.

 Gross revenue yield - measures the average revenue per patient visit. Net revenue yield reduces that amount by adjustments and contractual obligations. 

Benchmark: organization dependent. Providers should compare their revenue yield against industry norms and track it over time for performance assessment.

Front-end RCM benchmarks

Efficient front-end processes lay the foundation for accurate billing and reimbursement. Monitoring the key metrics related to accurate registration, eligibility verification, and upfront collections enables practices and physician groups to identify areas of improvement.

Registration accuracy -  measures patient demographic and insurance information accuracy entered during registration. Only the most current, accurate information limits denials.

 Benchmark: aim for a registration accuracy rate of 95 percent or higher. 

Eligibility verification rate - is the percentage of patient insurance eligibility successfully verified before services are provided. 

Benchmark: Aim for an insurance eligibility rate of 80-90 percent of patients before services are rendered. 

Pre-authorization rate - gauges the percentage of preauthorizations approved by insurance payers.. 

Benchmark: Best practices recommend obtaining pre-authorization for 90-95 percent 

Upfront collections - improve revenue capture with patient payments collected at the time of service, including copayments and deductibles. Collecting patient financial responsibility keeps revenue out of accounts receivable. 

Benchmark:  with patients now responsible for 30 percent of practice revenue, aim for collecting 35 to 50 percent of patient financial responsibility at the point of service. 

Eligibility denial rate - measures the percentage of claim denials stemming from patient eligibility issues. This metric is a window into the efficacy of eligibility verification processes. 

Benchmark: Aim to keep the eligibility denial rate below 5 percent of total claim denials. 

Mid-Cycle RCM benchmarks

Coding accuracy - assesses medical coding accuracy, including diagnosis and procedure codes. 

 Benchmark: aim for 95 percent accuracy or higher. 

Charge capture rate - measures the percentage of services accurately captured and billed for reimbursement. 

Benchmark: Industry benchmarks for charge capture rate can vary, but a commonly recommended target is to achieve a capture rate of 95% or higher.

Days to bill - the average number of days from the date of service to claim submission. Minimizing this time period establishes prompt reimbursement. 

Benchmark: aim to bill within three to five days of service. 

Clean claim submission rate - measures the claims submitted without errors or omissions.

 Benchmark: aim for 95 percent of your claims to be submitted clean. 

First pass resolution rate - gauges the claims accepted and paid upon the first submission, free of follow-up or appeals. 

Benchmark: Aim for a first-pass resolution rate of 90% or higher. 

Back-end RCM benchmarks

Monitoring and benchmarking denial resolution rate, collection rate, bad debt ratio, accounts receivable aging, average reimbursement turnaround time, accounts receivable days outstanding, collection effectiveness index, cost to collect, contractual allowance, and revenue yield allows hospitals to assess the effectiveness of their revenue cycle management and identify areas for improvement. 

Coding accuracy - assesses the correctness and precision of medical coding, including diagnosis and procedure codes. Accurate coding is essential for proper billing, claims processing, and reimbursement.

 Benchmark: aim for 95 percent coding accuracy or higher. 

Collection rate - gauges the percentage of outstanding patient balances that get collected within a limited period. 

Benchmark: A commonly suggested benchmark is to achieve a collection rate of at least 95% of outstanding patient balances. 

Bad debt ratio - calculates revenue written off due to unpaid patient accounts

Benchmark: maintain a bad debt ratio below 3 percent.  

Accounts receivable aging - analyzes the percentage of outstanding accounts across 30-day, 60-day, 90-day, and 120-day buckets. 

 Benchmark: have no more than 10-15 % of accounts receivable outstanding beyond 90 days. 

Average reimbursement turnaround time - measures the time it takes for a practice or physician group to receive reimbursement from payers after submitting a claim.

 Benchmark: Keep A/R days outstanding to 30 days or less. 

Accounts receivable days outstanding - determines how long it takes to collect outstanding accounts receivable. 

Benchmark: keep A/R days outstanding to 40 to 50 days. 

The collection effectiveness index - calculates the percentage of outstanding balances collected over a specific period. It helps evaluate the efficiency of the organization’s collection processes. 

Benchmark: keep your collection effectiveness index at 95% or higher.

Benchmarking enables MSOs to ensure high-quality service delivery, make informed strategic decisions, strengthen negotiating positions with payers and vendors, and maintain regulatory compliance. Additionally, benchmarks provide valuable context for employee performance management, guide technology adoption decisions, and support risk management efforts. Ultimately, benchmarking empowers MSOs to take a data-driven approach to optimize their performance across all aspects of their business.

Who carries out healthcare organization benchmarking?

Benchmarking for physician groups and practices is conducted by a variety of entities, 

External consulting firms, like Crowe LLP, provide comprehensive benchmarking services. These firms have access to extensive databases and industry-specific knowledge, allowing them to compare a practice's performance against a wide range of peers. It and others offer benchmarking tools and surveys that provide insights into physician compensation, productivity, and financial performance across many specialties and regions. 

In addition to external firms, some physician practices employ part-time specialists or consultants who focus on specific aspects of benchmarking. These specialists interpret data, identify areas for improvement, conduct competitive research, and implement changes based on benchmarking results. They bring an outside perspective and can offer targeted recommendations without the need for a full-time commitment.

Internal staff can also play a crucial role in the benchmarking process. Practice managers and financial officers often gather and analyze internal data, such as billing, payroll, and patient volumes, and compare it with external benchmarks. This internal analysis is essential for establishing a baseline and understanding how the practice performs relative to its peers. By leveraging both internal resources and external expertise, physician groups and practices can effectively use benchmarking to enhance their operational and financial performance. 

Use contract management and modeling software to improve practice performance 

Benchmarking both internally and externally against top performers enables physician groups and practices to uncover successful best practices and become leaders in their specialties. 

Of course, robust benchmarking requires investment. When you need the additional revenue it takes to put a benchmarking system in place, start with your contracts. Are payers underpaying you? Are they sending along unfavorable changes during the year that you haven’t responded to? At renewal time, do you struggle to determine if the new contract provides sufficient reimbursements?

MD Clarity's RevFind offers a solution for practices, physician groups, and management services organizations (MSOs) to understand and aggressively negotiate contract fees and terms. After digitizing and centralizing all agreements in one location, the system meticulously checks each actual payment against the contract's terms, highlighting any discrepancies for staff to address with payers. RevFind locates millions in payer underpayments every year.  Additionally, it compares your reimbursements with national benchmarks, such as those set by Medicare. RevFind provides the insights necessary for proactive negotiation and identifies costly trends for meaningful revenue recovery. 

Schedule a demo that can show you how RevFind can help capture the net revenue you have already earned.

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