Management expert Peter Drucker famously said, “If you can’t measure it, you can’t improve it.” Within a medical practice, it’s possible — though not necessarily desirable — to measure anything and everything, ranging from the number of patients per day to the amount of time spent on phone calls. So what should your medical practice measure?
Pick your data points wisely
While measurements and potential improvements are limited only by your imagination, it’s easy to fall prey to information overload. Pick your data points carefully. Here are some common, practice-related key performance indicators ("KPIs"):
Monthly charges. This involves charges for patient visits and ancillary services before any discounts or contractual allowances.
Monthly collections. How much the practice actually received, compared with how much you actually billed.
New patients. Depending on the type of practice, new patients can be the lifeblood of your business. Pay particular attention to results related to marketing efforts. Being able to tie bumps in new patients to specific marketing practices is critical to determining the return on investment.
Total patient visits. Tracking how many patients come in for appointments weekly, monthly, quarterly, and annually is especially important to track year to year. Look for trends related to your marketing efforts or other factors, such as seasonal changes.
Accounts receivable ("AR"). This is monies owed the practice, which is also a measure of how long claims are overdue. Typically, the most useful metric is how many “days in AR” accounts remain — or the average number of days it takes for payments to arrive. There are specific best-practice metrics for AR, but a rule of thumb is that claims that remain unpaid for more than 90 days should be less than 20% of the practice’s total AR.
Per visit value ("PVV"). Sometimes called revenue per visit, PVV is how much money the practice receives per visit. This is calculated by dividing the collections by total patient visits. It underlines how each provider in a practice is doing compared with others on clinical protocols and services utilization.
Net collection ratio. This is collections divided by the sum of production less contractual obligations. A healthy practice typically has a net collection ratio of greater than 93%.
First-pass denial rate. This indicates what percentage of claims are billed correctly. A healthy practice has a first-pass denial rate of less than 5%.
Of course, collecting data and doing nothing with it is a waste of time and energy. Use your KPIs to track trends — weekly, monthly, quarterly, and yearly.
A trend can indicate where there’s a problem so the practice can fix it before it becomes a major issue. Keep in mind that some trends are seasonal; events such as flu pandemics, blizzards, and hurricanes need to be taken into account. Also, don’t just look internally. Benchmark your KPI trendlines against other, similar practices in your area. We are able to tap into a national repository of data to help you benchmark your practice against those of similar revenue and healthcare sector.
Create an action plan
Every industry, including health care, has been affected by the heightened capabilities of data collection and analysis. Choose your KPIs carefully and create an action plan for using the data to increase profits and patient satisfaction.
Find out more information from one of our healthcare group professionals.