Percent of billed charges

Percent of billed charges is a key metric used in healthcare revenue cycle management (RCM) to measure the amount of revenue generated by a healthcare provider from the services rendered to patients. It represents the percentage of the total charges billed to patients or insurance companies that are actually collected by the provider.

In simpler terms, percent of billed charges indicates the effectiveness of a healthcare provider's billing and collection processes. It helps in assessing the financial performance of the organization and understanding the revenue generated from the services provided.

To calculate the percent of billed charges, you need to divide the total amount collected by the total charges billed and then multiply the result by 100. The formula can be represented as follows:

Percent of Billed Charges = (Total Amount Collected / Total Charges Billed) * 100

For example, if a healthcare provider billed a total of $100,000 for services provided and collected $80,000, the percent of billed charges would be:

Percent of Billed Charges = ($80,000 / $100,000) * 100 = 80%

This means that the provider was able to collect 80% of the total charges billed.

Percent of billed charges is often confused with other similar terms used in healthcare revenue cycle management.

Let's clarify the differences between these terms:

1. Percent of Allowed Charges:

Percent of allowed charges refers to the percentage of the total charges allowed by insurance companies or payers that are actually collected by the healthcare provider. It takes into account the negotiated rates between the provider and the payer. This metric is particularly important for providers who have contracts with insurance companies, as it helps them understand the revenue generated based on the agreed-upon rates.

2. Percent of Net Revenue:

Percent of net revenue represents the percentage of the total revenue generated by a healthcare provider after deducting contractual adjustments, bad debts, and other adjustments. It provides a more accurate picture of the provider's financial performance, as it takes into account the actual revenue received after accounting for various adjustments.

3. Percent of Billed Charges vs. Percent of Collections:

Percent of billed charges focuses on the total charges billed, whereas percent of collections measures the percentage of the total charges collected. Percent of collections is a more accurate metric to assess the effectiveness of the provider's billing and collection processes, as it considers the actual amount collected rather than the total charges billed.

To further illustrate the concept of percent of billed charges, let's consider a few examples:

Example 1:

A hospital bills a total of $500,000 for services provided to patients. After the billing process, the hospital is able to collect $400,000 from patients and insurance companies. The percent of billed charges would be:Percent of Billed Charges = ($400,000 / $500,000) * 100 = 80%This means that the hospital collected 80% of the total charges billed.

Example 2:

A physician's practice bills a total of $200,000 for services provided. However, due to various reasons such as denials, non-payment, or patient responsibility, the practice is only able to collect $150,000. The percent of billed charges would be:

Percent of Billed Charges = ($150,000 / $200,000) * 100 = 75%

In this case, the practice collected 75% of the total charges billed.

These examples demonstrate how the percent of billed charges can vary based on the collection efficiency of a healthcare provider. It is crucial for providers to monitor this metric regularly to identify areas for improvement in their revenue cycle management processes.

In conclusion, percent of billed charges is a vital metric in healthcare revenue cycle management that measures the percentage of the total charges billed to patients or insurance companies that are actually collected by the provider. It helps in assessing the financial performance of the organization and identifying areas for improvement in billing and collection processes. By understanding this metric and its calculation, healthcare providers can optimize their revenue cycle management and enhance their financial stability.