Made to Measure: Rethinking KPIs

Made to measure: Rethinking KPIs | NAHRI

Versalus’ Dr. Joseph Zebrowitz shares his thoughts on KPI’s to help realize revenue integrity goals.

Made to measure: Rethinking KPIs

Wednesday, January 13, 2021

What’s your measure of success? Key performance indicators (KPI) are a hot topic among revenue integrity professionals. Some swear by them, others advise taking them with a grain of salt, and many more simply want to figure out which ones might apply to their program.

Regardless of where revenue integrity professionals fall on the KPI debate, they agree that it’s crucial to make sure your KPIs make sense for your organization. Copying and pasting KPIs from one organization to another could lead your department down a dead end if the KPIs don’t mesh with your organization’s and department’s mission. And simply applying the same KPIs that have been passed down over the years can give you misleading data if those KPIs aren’t in sync with current reimbursement models and revenue integrity goals.

Whether you’re ready to dip your toes into KPIs or need to do a KPI refresh, consider why you want to measure a metric, how metrics interact, and what they will ultimately mean.

Advantageous measures

Some organizations have well-established KPIs that they’ve tracked for years—but that may be just the problem. The Medicare program, commercial payer reimbursement methodologies, clinical practice, and patient populations aren’t the same now as they were 10 years ago, said NAHRI Advisory Board member Joseph R. Zebrowitz, MD, founder and president of Versalus Health in Newtown Square, Pennsylvania, during his session “How Hitting Your Key Performance Indicators May Actually Reduce Your Hospital Performance,” on day two of Revenue Integrity and Reimbursement Strategies: A NAHRI Virtual Event, held October 6–8, 2020.

Organizations have invested time and money in creating performance dashboards that closely track KPIs, Zebrowitz said. In theory, this visibility into performance allows organizations to react quickly. However, as the industry has evolved, some of these KPIs haven’t kept up. The introduction of the 2-midnight rule in 2015 created a sea change in patient status and reimbursement, but many organizations have continued to use KPIs such as observation rate, denial rate, appeals overturn rate, and case-mix index without updating or adjusting them, he said.

“Unfortunately, because so many variables contribute to these KPIs, and sometimes they influence each other, they fail to give a true picture of performance,” Zebrowitz said. “What ends up happening is you end up chasing your own tail. You have a drive to optimize KPIs because it makes the department look good, but at the end of the day they actually have a negative impact on overall revenue cycle performance.”

Another factor that influences how well these established KPIs perform is the growing Medicare Advantage (MA) population. Some organizations may believe they have great MA contracts, but what they look like on paper isn’t always what they turn out to be in practice, Zebrowitz cautioned. Often, once organizations drill down they discover that they receive less reimbursement for their MA population than they do for their traditional Medicare fee-for-service (FFS) despite having contractual rates at or over Medicare rates. The fact is that these populations should be at least comparable in reimbursement. Therefore, to understand how MA is truly performing, Zebrowitz recommends benchmarking it against FFS Medicare. Analyze your data to answer these three questions:

  1. How does contract performance vary among payers vs. FFS Medicare?
  2. What are the drivers of performance variation by revenue cycle component and how do they roll up to reflect overall performance?
  3. What is the opportunity to improve and how?


“Medicare Advantage is a minefield where optimizing traditional of KPIs that actually drives poor financial performance,” Zebrowitz said.

Consider, for example, denial rate. This KPI is often distorted because it doesn’t capture the whole picture, Zebrowitz said. MA payers frequently contact utilization review (UR) nurses, physician advisors (PA), and business office staff to say that they plan to deny an inpatient stay or downgrade a DRG. They’ll add that it will be paid immediately if the reduced reimbursement and, for example, downgraded DRG or switch to observation is accepted. Because UR nurses and PAs are incentivized encouraged to avoid denials (a KPI) and business office staff are incentivized to reduce days in accounts receivable, they will often accept the payers’ offer. The organization then starts to proactively downgrade and downcode to avoid the hassle of a dealing with an anticipated denial.

“The fact is that we then self-deny ourselves far more than the payer would ever deny us,” Zebrowitz said. “When I’m looking at hospital data and I see a dramatic spike in observation, […] the answer almost always is [the hospital] had a drive to reduce denials. And all you’re doing is denying yourself.”

So, what’s the alternative to these traditional KPIs? One option is net inpatient realization: the percentage of cases that are paid as inpatient, Zebrowitz explained. Generally, for hospital stays of greater than two midnights under FFS Medicare, the net inpatient realization should be about 96%. However, for many payers MA it’s far lower, he said. This is due, in part, to payer tactics and how the organization’s other KPIs interact.

In this example, Payer 1 is generally considered to be a difficult payer. Why is that? And is that perception true?

Payer 1 denies 29% of inpatient cases. That’s much higher than most of the other payers. Why? A look at the data shows that Payer 1 is starting off with more inpatient cases.

“They start out behind the game,” Zebrowitz explained. “Only 10% of their greater-than-two-midnight cases are statused as observation, so 90% of the cases that come in the door are statused as inpatient.”

Of the 770 inpatient cases that are denied, only 510 are appealed through peer-to-peer. That gives the appearance that 61% of those cases are overturned after appeal, which is good, although the actual overturn rate is only about 40%, Zebrowitz pointed out. Of the 238 inpatient cases that go through a written appeal, 17% are overturned. How does that stack up?

“At the end of the day, their net inpatient over the total volume is 76%,” Zebrowitz said. “So, 76% of patients who walk in the door are ultimately paid as inpatient. That’s way different, way worse performance than for FFS Medicare.”

Now, consider the next payer, Payer 2. The UR team believes they have a great relationship with Payer 2, and that seems to be borne out by an 8% denial rate. But what’s going on below the surface? What’s actually different about Payer 2?

Digging into the data reveals that Payer 2 has 18% of patients with stays longer than two midnights in observation status, and only 82% of stays longer than two midnights are inpatient. That’s far lower than Payer 1’s 90%.

Of the 82%, only 8%, or 120 cases, are denied. Because the UR team is incentivized to maintain what looks like a good relationship on paper, only 18 cases out of 120 are appealed. Of the 18, six are successfully appealed through peer-to-peer, giving them a 67% overturn rate. But that’s not as good as it looks because 95% of the cases aren’t even being appealed, Zebrowitz said.

“Even though they have an 8% denial rate vs. Payer 1’s 29% denial rate, because we’re not appealing cases and because [the number of stays longer than two midnights in observation status] starts out so high, they have the same net inpatient realization,” he said. “Stop looking at percentage of denials. By eliminating that as a KPI, you eliminate the incentive for your UM nurses to accept observation or, even worse, proactively place the patient in observation to avoid the denial.”

The net inpatient realization KPI allows you to understand how well the organization is being paid for the services it provides and whether payment is appropriate, Zebrowitz said.

Custom made

Although most revenue integrity departments share common ground, differences in responsibilities, department structure, and focus mean KPIs aren’t one-size-fits-all.

At Grady Health in Atlanta, one of the unique KPIs the revenue integrity department tracks is charge audit work queue (WQ), said Bruce Preston, CPC, executive director of revenue integrity at Grady Health, during the April 2020 NAHRI Quarterly Call. This KPI allows Preston to monitor outpatient pre-bill charge audit activity and holds.

After outpatient cases are coded, Grady’s coders conduct brief charge reviews of the accounts, Preston said. If a coder determines that a charge is missing or was posted incorrectly, the coder places a manual bill hold on the account and contacts the originating department to correct the error.

By monitoring the charge audit WQ, Preston can keep an eye on the volume of charge errors and bill holds and the length of time they take to resolve.

Sometimes, new KPIs need to be introduced to ensure the department is in sync with other organizational benchmarks. The revenue integrity department at Sanford Health in Sioux Falls, South Dakota, recently began monitoring a new KPI: hospital-based (HB) charges on time percent within three days of service. The data for this KPI comes from the revenue integrity dashboard and financial pulse metric in Epic, says Kim Amundson, MS, RHIA, senior director of revenue integrity at Sanford Health.

Although Sanford Health’s HB charges on time percent before minimum days and before bill are high, they are working to improve the percentage for charges within three days of service date to align with other Epic organizations, Amundson says. The revenue integrity department meets with clinical areas that fall below a 95% threshold to dig into the root cause.

“We sit down and try to determine what their process is to make sure charges are entered on time,” Amundson says. “Some questions asked are ‘Do you have backups in place for when people are on vacation?’ ‘Are there WQs out there that you’re not aware of that you should be working?’ ”

The revenue integrity department also compares high- and low-performing departments on this KPI to identify best practices, she says.

The decision to focus on this KPI wasn’t made in a vacuum, Amundson explains. It was spurred by an overall revenue cycle goal to closely review the Epic financial pulse metrics and find opportunities for improvement that would benefit the entire revenue cycle.

“We selected this metric since we work with a lot of these departments when they’re missing charges,” she says. “It fit with the work that we do and was one that we thought we could have some impact on.”


As revenue integrity staff pivoted to working from home to help mitigate the spread of COVID-19, managers and directors looked for methods to ensure that staff were staying engaged and productive. Although working from home made sense, staff often found themselves faced with a fresh set of distractions and technical challenges that could negatively affect productivity.

When Grady’s revenue integrity department switched to working from home, Preston used the HB billing and claims supervisor scorecard in Epic to keep tabs on his department’s productivity. The scorecard shows how much time each staff member spends in the system each day. It displays detailed activity, such as the number of discharged not billed (DNB) accounts and stop bills resolved, the amount and types of claim errors resolved, and the number of accounts worked in each WQ.

“I looked at that to determine whether or not someone didn’t spend that much time in the system today and, if so, whether or not I had them working on something else that required them to be outside of the system for a certain point during the day,” Preston said. “I’ve also set up certain parameters and thresholds that everyone needs to hit X number of accounts every day in terms of a DNB or a stop bill resolution.”

Preston is also able to drill down by staff member and review granular activity information, such as the number of unique charges posted or WQ activity amounts touched that day. The report can be exported into a spreadsheet.

Keeping perspective

KPIs can be an invaluable tool—but make sure you’re using the right ones in the correct way. Each KPI should serve a specific purpose and should yield information that’s truly valuable to your department and your organization. Choose KPIs that are based on your department’s responsibilities and that don’t duplicate another department’s KPIs, Amundson says. Don’t try to track everything—pick a few that you believe will have the most impact.

“I think having three to five metrics is good, but it depends on how you’re set up,” she says. “I think if you get beyond that, it becomes difficult to make meaningful impact on focus areas if you have too many different items you’re trying to report on.”

As your KPIs evolve, review them to make sure they still make sense, Amundson adds. “Your department’s and your organization’s priorities will change over time. Periodically reevaluate your KPIs to ensure they’re providing relevant data and can be tied to your department’s focus and the organization’s strategic goals,” she says.

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