6 Aging
6.1 PARB\(x\)
PARB\(x\), or the Percentage of Accounts Receivable Beyond \(x\) Days, resolves the sensitivity issues of the Days in AR metric. It offers a simple billing process metric that’s not dependent on the charge.
Its graphic representation has a skewed bell shape. Its steepness represents billing process quality; a steep curve and thin tail mean a healthy billing process, while a flat bell and fat tail also mean billing problems.
According to the MGMA survey, 25%-35% of the average family practice’s accounts receivables were more than 120 days old in 1997. This number has improved down to 17.7% in 2004.
The probability of getting a claim paid shrinks by approximately 1% per day.
The most important version of PARBX is the Percentage of AR Beyond 120 Days. It is one of the best indicators of your billing performance. This is the percentage of your AR that you have not been paid for more than 120 days since you submitted the claims. Since the probability of getting a claim paid shrinks by about 1% per day, the claims waiting longer than 120 days are unlikely to be paid at all.
To calculate PARBX 120, simply divide the AR amount that is 121+ days old by the overall AR amount. Suppose your overall AR is $150,000 and PARBX 120 is $30,000. PARBX 120 is 30,000 / 150,000 = 20%. That means that you’re treating every fifth patient for free.
6.2 Billing Performance Index
The Billing Performance Index (BPI) is a benchmarking technique inspired by prominent Wall Street firms that have little tolerance for walking away from money. When evaluating trader performance, Wall Street uses the context of the entire market to give a more accurate picture. The profit or loss for a given company may or may not mean success or failure of that company’s market-traded securities, depending on the direction and movement of the markets in which those instruments trade. It’s all about context because in market trading, markets are every bit as influential as profits on stock price in the short term. Most large sell-side brokerage firms on Wall Street compute various indices on a daily basis. By comparing the performance of a trader’s investment portfolio with that of an entire index, one can immediately determine if the trader has been successful or is failing relative to the entire market; this can be more meaningful than absolute numbers for a given security or portfolio.
The most popular indexing technique on Wall Street is rule-based; pre-defined rules select the instruments to include in an index, depending on specific parameter values of those instruments at the time of computation. The advantage of rule-driven indexing is that participation is dynamically determined at a point in time, reflecting the dynamic nature of the entire market. Today’s top 10 list of index performers may not include the same names next week.
A financial instrument’s specific performance is recomputed every time the index itself is computed, reflecting the dynamic nature of performance relative to the market itself. If an instrument performs well in a strong market, the index takes this into account, since most participants are also doing well. The same is true on the downside - if a financial instrument performs poorly in a down market, the index clarifies that this may not be because of some inherent weakness in the company itself; rather, performance is reflected in the context of the entire market environment in which that security trades.
An indexing approach can help to redefine the payer-provider standoff in healthcare. A payer might be considered for inclusion in an index if total processed volume in the past month exceeded a certain amount (say, $100 million). Participation in the index would be driven by multiple criteria, starting with a necessary minimum threshold of submitted claims, and including the all-important billing performance index. Payer participation in the index is defined dynamically at the time of computation, not by a static listing of specific payers. Therefore, any specific payer may or may not be included in the index for a given month, depending on that payer’s performance.
For example, let’s say in June 20xx, the Billing Performance Index (BPI) stood at 14.8, almost 3% below the national average of 17.7% (a BPI of 14.8 mean that the average of the 10 top-performing payers that work with ABC Billing Company clients have 14.8% of Accounts Receivable beyond 120 days).
BPI is a key billing performance characteristic because it’s an indicator of claims that are never paid. Obviously, the lower the index, the better the billing performance. But this statistic is meaningful only when considered in the context of the relative performance of other payers. Let’s look at a comparative example. The December 20xx BPI improved 0.8% from its November mark, reaching 18.8 - but this was still 6.2% worse than the national average of 17.7. The December index, just like the October and November indices, maintained both its membership (the same top-performing payers) and the two lead positions: Medicare Illinois and Blue Cross Blue Shield of Illinois.
| RANK | CHANGE | PAYER | Nov BPI | Dec BPI |
|---|---|---|---|---|
| 1 | NONE | Medicare Illinois | 5.8 | 6.8 |
| 2 | NONE | BCBS Illinois | 7.9 | 8.1 |
| 3 | ▲ from 4 | Cigna | 15.7 | 10.7 |
| 4 | ▲ from 4 | Horizon BCBS New Jersey | 20.7 | 13.9 |
| 5 | ▲ from 4 | Aetna | 20.0 | 14.8 |
| 6 | ▼ from 5 | Medicare New Jersey | 19.4 | 18.8 |
| 7 | ▼ from 5 | UnitedHealthcare | 15.0 | 21.2 |
| 8 | ▲ from 4 | GEICO | 36.2 | 35.2 |
| 9 | ▲ from 4 | BCBS Georgia | 39.9 | 43.3 |
| 10 | ▼ from 5 | BCBS Pennsylvania | 30.5 | 43.4 |
| —- | ——– | Average of Top 10 Payers | 19.6 | 18.8 |
In summary, simply comparing a payer’s performance metric with a national benchmark determines if that payer performs well. This approach to benchmarking also allows ranking within an entire set of payers; you can sort them according to the same performance metric. And benchmarking allows you to identify elite payers - those that perform best compared with every payer in the country, as shown by the index-driven ranking. Finally, since the billing index represents the performance of an entire set of participants, the number of times a given payer has been selected determines its historic performance.
6.2.1 Billing Quality
Comparative Analysis Using Performance Index
It’s good to have choices. And if you’re a provider staring at a list of accounts receivable that are creeping up on 120 days, those choices become meaningful. The way to choose is by using the power of indexing to compare payment performance among insurance companies on a level playing field that ranks payers according to selected criteria. The same indexing concepts that quantify and rank payers can also be used to rank medical billing services. There are two limitations to consider:
Scope: Since each medical billing service submits claims only to a defined subset of payers - those that insure the patients of the providers served by that billing service - the scope of an individual billing service index is limited by those claims. For example, if a service works with only three payers, its index has an entirely different scope than that of a service that works with 12 payers; one bad apple in a field of three can skew the whole picture.
Perspective: Scope isn’t the only variable in understanding indexing. The perspective of the billing service is also important. Since each of the providers served by a biller sees only a subset of the total patient population insured by a given payer, the provider’s perspective is limited by the number of patients that the provider sees. Data obtained from 19 patients is more easily skewed by aberrations than data from a patient base of 3,000.
These indexing limitations, scope, and perspective drive the distinction between “ideal” and “partial” payer performance indices.
6.2.2 Partial vs. Ideal BPI
An “ideal” medical billing performance index is computed from comprehensive statistics across all providers nationally, irrespective of the billing service that helped process the claims.
A “partial” payer’s performance index is computed from statistics across all providers who are served by a specific billing service or individual provider.
So, using the “ideal” index, healthcare providers can see which payers perform best across the board, and by using a “partial” index, providers can ascertain how a payer is doing with a specific billing service’s claims.
In other words, the rule of thumb is to know your index to understand your payer. Obviously, index quality is directly proportional to scope and perspective: the wider the scope and the broader the perspective of the billing service associated with an index, the better the resulting data. While the “partial” performance index, computed on the basis of a specific biller’s observations, only approximates the “ideal” index, it’s the only realistic payer performance index available today.
Since medical billing services use different billing processes and technologies, such partial indices rank the same payers differently - and, in fact, they may contain different payer members at different points during the same month. In this sense, the “partial” medical billing index becomes a characteristic of the billing service, instead of the payer; this allows providers to select the best medical billing service available based on this data, and it challenges billers across the nation to continuously improve their service quality.
6.2.3 Compute Medical Billing Index
- Compute the percentage of your AR that has aged beyond 120 days for each individual payer
- Weight-average them across all your payers. This emphasizes the payers to whom you submit the most claims versus those lesser-used insurers
- Compare your payer index results with the monthly Billing Performance Index
- If your index is higher, then your office billing process might benefit from improvements
6.2.4 Annual BPI Summary
The Billing Performance Index (BPI) reflects payer performance stability over time based on CPT codes. The monthly BPI lists the 10 best-paying insurance companies in that month, selected according to multiple criteria - e.g., minimal processed claim volume. In contrast, the annual BPI simply counts the frequency of the payer’s participation in the monthly BPI for that year.
A low percentage of accounts receivable beyond 120 days is critical to being included in the billing index. However, the frequency of inclusion in the index is a more robust performance metric, because it measures billing performance consistency over a longer time period. The following example table lists the insurance companies that made the BPI listing for 20xx, along with their average, low, and high billing index for the year.
| Rank | Months Included | Payer | BPI Avg | BPI Low | BPI High |
|---|---|---|---|---|---|
| 1 | 12 | BCBS Illinois | 10.9 | 7.1 | 16.0 |
| 2 | 11 | Cigna | 13.4 | 8.9 | 24.1 |
| 3 | 11 | Medicare New Jersey | 15.7 | 7.5 | 20.5 |
| 4 | 10 | Aetna | 16.6 | 8.8 | 22.1 |
| 5 | 10 | UnitedHealthcare | 17.2 | 11.3 | 23.2 |
| 6 | 7 | Medicare Illinois | 14.0 | 5.8 | 30.4 |
| 7 | 7 | Horizon BCBS New Jersey | 18.0 | 13.9 | 24.3 |
| 8 | 7 | BCBS Pennsylvania | 23.5 | 12.4 | 43.4 |
| 9 | 5 | BCBS Georgia | 34.1 | 22.9 | 43.3 |
| 10 | 4 | BCBS South Carolina | 19.1 | 12.4 | 34.1 |
| 11 | 3 | BCBS Michigan | 6.8 | 3.2 | 13.6 |
| 12 | 3 | BCBS Texas | 15.2 | 10.3 | 20.0 |
| 13 | 3 | GEICO | 34.9 | 33.4 | 36.2 |
| 14 | 2 | Anthem BCBS Colorado | 9.6 | 6.8 | 12.3 |
| 15 | 2 | Humana | 9.9 | 7.9 | 11.8 |
| 16 | 2 | Medicare Wisconsin | 29.4 | 29.1 | 29.7 |
