You could ask 10 different medical practice owners, administrators and executives and get 10 different answers about which are the most important financial Key Performance Indicators (KPIs) to monitor your practice's financial health. Top performing practices surveyed recently, however, were found to track the following metrics on a monthly and annual basis:
- A/R Aging
- Cost reports by department, provider, and location (if applicable)
- Income statement and balance sheet
- Cash Flow
Practice Management Reports:
- Collections summary analysis
- Encounter forms reconciliation
- Un-billed revenue
- Billing summaries
- Procedures analysis
- Managed care profitability/capitated contract analysis
In many cases, the most effective managers used an analytics dashboard with real-time access to key metrics including number of visits and number of procedures, for example.
David Gans, MSHA, FACMPE, takes it one step further in his article "Data Mine: What matters and what doesn't." With all the information available in today's practice management systems, Gans suggests these are the essential financial KPIs for medical practices:
Revenue Cycle Indicators:
- Total A/R per provider
- Percent of A/R at 120+ days
- Days in A/R
- Adjusted Fee For Service (FFS) collection percentage
- Total medical revenue per provider
- Total operating cost per provider
- Net revenue per provider (total revenue minus total operating cost)
- Operating cost as a percentage of total revenue
But accessing and analyzing this data at the practice level is just the first step toward getting control over your financial health and performance. To understand how your practice stacks up and to find opportunities for improvement, you need to advance to the benchmarking stage.
The Value of Benchmarking in Medical Practice Management
Your practice's individual numbers are useful in setting performance goals and measuring your progress, but to identify areas of weakness in your financial health, comparing your KPIs with national averages by practice specialty is essential.
|Specialty|| % of A/R
|Months Gross FFS Charges in A/R|
|Better Performance||All Respondents||Better Performance||All Respondents|
If your Accounts Receivable numbers don't stand up compared to better performers in your specialty, you can and should investigate your payment and collections policies and procedures.
- Which carriers are you having trouble with denials and adjustments?
- Are your window collection policies lax?
- Is your data collection, documentation, and coding accurate and up to speed?
- Are you using automated features in your medical billing or practice management system to help manage your A/R?
- Are you devoting enough resources to following up on adjustments, denials, and collections?
- Do you offer arrangements and financial counseling to help patients struggling with their bills?
Related Article: Assess Medical Billing Performance in Your Medical Practice
Take a look at bad debt per provider benchmarks for more insight into your A/R management:
|Specialty||Better Performance||All Respondents|
If your bad debt is out of control, it's time to investigate:
- Is the problem mostly due to payers or patients? If payers, is there one that stands out?
- If payers are the problem, what steps are you taking to work denials? Have you consulted with the payer to identify potential problem areas?
- If patients make up the bulk of your bad debt, are you promptly working late accounts? Do you offer payment by credit card? Is there face-to-face financial counseling available?
- Are you working accounts in a timely manner? You have less than a 70% chance of collecting debts past 90 days, and that drops to about 50% at six months.
If you'd like more information about benchmarking your practice's financial performance, contact us today to speak with one of our Medical Billing and AR Specialists today and request a free medical billing analysis.