Monitoring Financial Performance for your Physician Medical Practice’s Financial Success

It's tempting to put the business operations of small private medical practices on the back burner to concentrate on patient care. While patient care should always be the first priority of medical staff, you can't ignore key performance indicators that tell you how your practice is performing comparably financially. Knowing how to measure your practice among your peers is only one component in running a successful practice, however it is a large one.

A Key Performance Indicator (KPI) is a measurable value that demonstrates how effectively a practice is achieving key business objectives. Organizations use KPIs to evaluate their success at reaching targets. Selecting the right KPIs will depend on your industry and which part of the business you are looking to track.

The heart of a medical practice lies in the revenue coming in. Typically, medical practices only have two sources of income, patients and insurance companies. There are issues riddled with both methods of revenue. An excellent way to stay ahead of the game is to determine the goals for the practice, and associate a KPI for measuring those goals. Next, create a schedule to run these reports and track the progress.

Here are some recommended KPI's as a starting point:

Accounts Receivable

Understanding how much is in both patient and insurance aging is imperative for projection purposes. Also understanding how much is outstanding in days aging, top payer balances, and the understanding open AR balances completely.

Recommended practice management reports to run:

• AR Summary
• Days in AR
• Days in AR per payer
• AR by Insurance Payer
• Insurance Aging
• Patient Aging

Charges

Typically the amount medical practices charge the payer is not what actually gets paid. However monitoring total charges over periods of time can help in calculating net collection rates. Running these report regularly will also assist in projecting revenues.

Being able to identify any charges that haven't been entered, is a way to uncover potentially lost revenue.

Recommended practice management reports to run:

• Charge Summary
• Net Receipts
• Net Collection Percentage
• Missing charges reports
• Charges by Rendering Provider
• Charges per Visit
• Procedures per visit
• Work RVU per visit
• wRVU's by Provider

Appointments

How many new patients are you getting a month? Which marketing (or referral sources) are your new patients coming from? How many cancelled or no showed? Is the proper copay amounts being collected from all appointments?

Running the following reports will help you know where your patients are coming from and how many may be no-shows.

Recommended practice management reports to run:

• Copay Deficit report
• Unbilled appointment reports (or missing charges report)
• No show reports
• Cancellation reports
• Referral source reports

Payments

How long is it taking you to be paid? Are your bank deposits matching amounts collected at time of service? How much is being adjusted off for contractual adjustments and how much is just plain being written off?

Recommended practice management reports to run:

• Days in aging
• Daily deposit
• Top 20 Billed CPT codes
• Procedure code payment performance
• E/M charge / payment performance

Claims Follow up

Understanding what is happening exactly to your claims that are NOT getting paid, and more importantly, how can we get them paid. Tracking the most common rejection and denial reasons could also help prevent these from reoccurring in the future.

Recommended practice management reports to run:

• Denial reports
• Denial rate /type by payer
• Denial rates by CPT codes
• Rejection reports
• Adjustment Analysis Reports

Here are some credible resources to determine the best KPI's and healthcare industry financial benchmarks for your medical practice:

• The Medical Group Management Association (MGMA). Under practice tools section for operational and revenue benchmarks by specialty.
• The American Health Information Management Association (AHIMA).
• The Healthcare Billing and Management Association (HBMA).
• National Society of Certified Healthcare Business Consultants (NSCHBC)

Private practices are having to close their doors due to not being able to survive these along with many other financial challenges in today's environment. KPI's and benchmarks are only one part of running a successful private medical practice.

For personalized guidance on optimizing your practice's financial health and performance metrics, trust the expertise of REED TINSLEY, CPA. Contact us today to discover how we can help your practice thrive.