What financial metrics guarantee the health of your HME business? While there are countless metrics to consider, focusing on a few key indicators can provide a reliable pulse on your organization’s financial well-being.
Let’s explore five essential metrics that every HME business should monitor to ensure long-term success.
1. Revenue: The Starting Point
Revenue represents the total booked sales for a given period. To accurately track revenue, your fee schedules must be up to date. Once this is in place, you can:
- Trend your revenue over time to monitor growth.
- Spot potential declines early and address issues proactively.
Remember, understanding revenue is foundational—it tells you what’s coming in but not when it will arrive.
2. Accounts Receivable: Closing the Gap
Accounts receivable (AR) reflects the delay between a booked sale and actual payment. AR is typically divided into five aging buckets, and claims in the 91-to-120-day bucket should be aggressively worked to avoid timely filing denials.
Key metrics for AR include:
- Collection Rate: The percentage of AR collected monthly.
- Days Sales Outstanding (DSO): The average number of days it takes to collect AR.
By keeping a close eye on AR, you ensure cash flow stays steady and predictable.
3. Cash Deposits: The Lifeblood of Your Business
Cash flow keeps your business running. Regularly track:
- Monthly cash activity
- Bank deposits and payer payments
- Cash categorized by HCPC codes
Understanding your cash inflows allows you to manage operations effectively and make strategic decisions about future growth.
4. Denials: Tackling Revenue Roadblocks
Denials, whether by payer or HCPC code, can significantly impact your revenue. By trending and analyzing denials, you can:
- Identify operational issues causing denials upstream.
- Take corrective action to prevent future revenue losses.
At SOS, we often find new clients with aged AR exceeding 150 days. These old claims are typically filled with preventable denials that weren’t addressed due to communication gaps or process inefficiencies.
To combat this, we take a proactive approach:
- Enhanced Communication: We communicate denial reasons directly to front-end staff, helping them address the root causes of these issues. This reduces future denials, increases cash flow, and ultimately boosts revenue.
- Dedicated Project Teams: Our specialized project teams focus on cleaning up old AR, ensuring even the most challenging claims are worked effectively and efficiently.
This dual approach not only tackles aged AR but also prevents future bottlenecks, creating a more streamlined and profitable operation.
5. Profit Margin: Knowing What Works
Profit margin can vary widely depending on payer allowables, annual fee schedule changes, and vendor price adjustments. Without clear insight, it’s hard to know what is profitable and what isn’t.
A well-configured EMR system can track costs and give you a clear view of:
- Which payers are most profitable.
- How changes in fee schedules and vendor pricing impact margins.
Knowing what is making you money allows you to focus and do more of that. Identifying areas that are losing you money helps you address the problem and create a truly valuable enterprise.
A Preview of the HME CFO Guide
At SOS, we’ve identified a significant gap in financial literacy for HME businesses. That’s why we’ve developed the HME CFO Guide—a resource designed to empower HME providers with the tools and knowledge to master their metrics.
Here’s a sneak peek at what the guide will include:
- Detailed metric breakdowns: How to track revenue, AR, cash flow, and profit margins effectively.
- Common pitfalls: Avoiding issues like outdated fee schedules, incorrect payer mapping, and aged AR.
- Best practices: Setting up your EMR system to collect and analyze data seamlessly.
- Practical tools: Checklists and templates to simplify financial tracking.
- RCM solutions: Insights into how outsourcing RCM services can streamline operations and improve cash flow.
By focusing on these elements, the HME CFO Guide will help providers fill the knowledge gap, improve financial health, and make better-informed decisions.
Your Metrics Partner
At Strategic Office Support (SOS), we don’t just help you track metrics—we help you master them. Our Revenue Cycle Management (RCM) service provides a turnkey solution for HME businesses looking to improve cash flow, reduce denials, and increase profitability.
Ready to get started? Contact us today to learn how we can help your business thrive by the numbers.
