February 24, 2022

Pay Rate: A Statistic You Can Count On

A technology partner that’s truly committed to improving the patient experience and your fiscal success should not be afraid to tell you the truth. That begins with regular accurate measurements of Key Performance Indicators (KPIs) and an honest use of data analytics to show how a revenue cycle program is performing.

Yet all too often, payment application providers tout impressive statistics that have nothing to do with the true performance of the healthcare provider’s collections program. These statistics frequently are the result of other factors, such as provider acquisitions, growth in elective procedures, and other organizational changes that expand a health system’s overall patient or procedure base.

Credible declarations of results due to technology solutions should be grounded in consistent baseline metrics that cannot be influenced by unrelated external factors. These metrics should include pay rate, digital conversion to self service, time-to-payment, and payment plan conversions, among others.

Let’s take pay rate as an example. Pay rate refers to how much a patient is paying as compared to what they owe. On an organizational level, pay rate reflects how much is collected as a percentage of what is billed on a monthly basis. It can be parsed further to show what percentage of patients are paying in full, paying a portion, or not paying anything at all. Watching these numbers and how they trend over time is essential to an authentic measurement of the success of your payment platform and technology solution.

Pay lift—a measure of how dollars collected improves over time—is often misrepresented by vendors. Some calculate lift based on a change in dollars collected from one month to the next. Others might track year over year increases without accounting for other business factors that have no bearing on a true increase in pay rates. As such, purported results can be misleading, if not outright deceptive.

For example, if your health system grows by 30 percent after an acquisition, and your collections increase by a corresponding 30 percent, it’s not realistic for your financial collections software to take all the credit for that increase. By contrast, if your organization has a slow month but collections are still strong, an increase in pay rate (% of dollars collected / dollars billed) will accurately reflect that.

It’s obvious why vendors avoid accurate measures for pay rate improvements. Less accurate measures make their solutions look better. Yet a pay rate increase of even 1 percent can mean millions of actual dollars in increased collections—and a significant reduction in bad debt—that can be directly attributed to your payment technology solution.

We use pay rate as a key metric because it honestly shows how effectively our solutions are delivering for clients. For example, RevSpring clients using PersonaPay, on average, experience an increase of 1.55 percent in their pay rate, which translates into many millions of dollars in additional collections and reduced debt.

How do you know if your payment collections investment is delivering as promised?

Here are some key questions to ask your vendor:

  1. What is your baseline metric that accurately reflects what’s happening in collections?
  2. Do the metrics that measure collections screen out other variables—such as acquisitions, growth in patient count, changes in number of elective procedures—that could inflate the success of collections and have nothing to do with technology solutions?
  3. Are statistics generated by your sales or marketing team or by a separate department that uses an honest and consistent methodology?
  4. How do you differentiate between pay rate and pay lift?


The Proof is in the Pudding

Healthcare systems invest substantial amounts in revenue cycle technology solutions. Revenue cycle leaders deserve to know exactly how well those investments are performing and how they can be improved. If the statistics your vendor is reporting seem too good to be true, consider whether you are experiencing other positive results, such as lower postage and printing costs, decreased need for call center agents, and staff having more time for doing other work. If not, the vendor’s process for assessing results may not be tied to their product performance.

To really know what’s working and what’s not, insist that collections performance be measured in quantifiable terms with pay rate as the leading performance indicator.