Establish Benchmarks to Improve your Bottom Line

7 Measurements for your Healthcare Practice

Peter Drucker, who was known for his leadership in the development of management education, once said, “Work implies not only that somebody is supposed to do the job, but also accountability, a deadline and, finally, the measurement of results —that is, feedback from results on the work and on the planning process itself.”  If you wish to manage your business effectively, it is important to establish measurements or benchmarks for the purpose of creating accountability for your company and to determine if you are meeting the overall objectives of your business strategic planning.  The measurements you define will also help  your employees more clearly identify with your goals as well as provide you with an assessment tool for evaluating performance of your team.
Most of my doctor clients would prefer to care for their patients rather than focusing on their business.  However, when they don’t care for the management of their business, the ability to manage the care for patients will be compromised.  Rather than spend hours pouring over financial data that is better left to their advisors, I suggest that doctors focus on some of the basics with their staff on a daily, weekly, or monthly basis.  Here is a listing of items that you can monitor with your staff on a regular basis.  This process need not take a lot of time, but the time you spend on these measurements will matter all the way to your bottom line.

Performance Level Conceptual Meter
  1. Daily Report on Charges and Collections – I suggest that doctors request to see the daily production and collection report.  Look through the patient listing to see that the people you saw during the day are showing up on this listing.  Note that the accounts receivable ending balance from the day prior matches the beginning accounts receivable balance on the report you are reviewing for the day.  Compare the bank deposit for the day to the reported receipts for the day to see that they match.  Compute the collections as a percentage of the charges seen for the day.  Given that patients are more responsible for the medical and dental charges they incur, this collection percentage should be higher than what you used to see many years ago when everything was left to the patient’s insurance carrier to pay.  Depending upon your specialty, this percentage should range around 35 – 50%.  In addition to providing you with an overview of what occurred in your practice for the day, spending just a few minutes each day reviewing this information will keep your staff attentive to these metrics as well.  Your staff will also be less likely to get sloppy with your financial affairs when they see you are engaged in this process.
  2. Number of New Patients – Let’s face it, every business will have some form of attrition.  Having a healthy percentage of new patients come in the front door of your practice on a regular basis is needed to grow your practice and maintain the business from those who are going out the back door.  In addition to tracking the number of new patients you see each day, ask your front desk team members to track how they heard about you and why they came to your practice.  This information can be helpful in focusing your marketing dollars in the right areas.  Too often I see practices spending money on advertisements and directories that simply have very little impact on the growth of their practice.  By having a tracking system, you will have a way to assess the rate of return on your marketing dollars.  I would also suggest that you establish a tracking system for the patients that are leaving your practice.  If you typically see a patient at least once year or eighteen months at most, have your team prepare a report that reflects those patients that are nearing the timeframe you set for your practice.  This will provide you with an opportunity to reach out to those patients that are due for a check-up or specific procedure.  Taking a proactive approach will reflect that you care for your patient, which will be appreciated and provide you with patient goodwill.
  3. Number of Patient Cancellations or “No Shows” – This area of your business can be very disruptive to your schedule and your bottom line.  Knowing the actual number of patients that cancelled during the day shouldn’t be left to a hunch.  Have your front desk provide you with a daily report that indicates not only the number of patients that cancelled during the day, but also the reason that they provided for not being able to make their scheduled appointment time.  Barring the occasional weather conditions that keep patients home, you will be able to identify specific circumstances.  This will help you work towards finding solutions and options for keeping your day filled.  For a more discussion on this topic, be sure to review the Patient “No Show” Survey that I have done on this subject.
  4. Number of Patients seen each day – Based upon your specialty, measure the number of patients you see each day against what is optimal.  And, don’t just focus on the doctor’s numbers.  Be sure to review the number of patients your other care providers are seeing each day – this would include your Hygienists, if you are dental practice, and your Physician Assistants or Nurse Practitioners, if you are a medical practice.  Recently, I reviewed this for several of my clients.  For the analysis I compared the number of patient provider hours to the gross charges being reported from one year to the next or the total patient encounters.  What I found was that the number of provider hours increased because the practice added bodies to a perceived demand for services, but the amount of charges or patient visits were either the same or lower compared to the prior year. If spreading the amount of work out to more providers is your objective to better care for your patients, then you are accomplishing your goal.  However, if you were hoping to increase your bottom line based upon the increased demand for your services, then you need to first make certain that your patient to provider capacity ratio is on target.
  5. Provider Production per Hour – Often, doctors and other healthcare providers are paid a salary and their hours are not specifically tracked.  If you are not tracking the hours of your professional providers then, simply use the full-time equivalent hours to compute the rate per hour.  Knowing your hourly production rate provides you with a benchmark against your peers within your specialty and within your practice.  If your provider production rate per hour is higher or lower than average, then you have the opportunity to ask the question – why?  Starting with the question, “Why?”,  will allow for better input to managing solutions to becoming better.  Keep in mind, as well, that excessive high or low rates could point to problematic billing issues of which you should be aware and correct.
  6. Production Write-Off Percentages – Healthcare practices, no matter what the specialty, do not collect 100% of their charges to the patient.  Participation with insurance companies, being included in a preferred provider network, patient bad debt, and professional courtesy discounts all account for reasons that a doctor will typically accept less than the full charge amount.  Accurately measuring your “Charge Adjustments” starts with the codes you set-up and use within your Practice Management System.  The codes you use should help identify the major categories of adjustments.  Occasionally I see practices that have such an exhaustive listing of categories that it renders their reports on this area of management useless.  Depending upon your specialty, your production write-off percentage could be as low as 7% and as high as 75%. You and your management staff should know the expected write-off percentage is for your specialty.  This percentage is an accountability number for your billing staff.  When the percentage is higher than the norm, then look to the major categories to determine where to focus your attention – it is possible that you are unknowingly writing off charges that could be collected.  If the percentage is lower than the norm, then this could be a symptom to other issues within your revenue cycle management.  For example, when I see lower than average write-off percentages, I often also see lack of work on the accounts receivable.
  7. Ratio of Accepted Treatment Plans – After you examine and diagnose your patient, you will likely have a prescribed treatment plan that is best for the patient.  You may communicate the importance of this treatment plan and the health ramifications that the patient may encounter if he or she avoids the prescribed treatment, but ultimately the decision to move forward with the treatment is your patient’s or his parents.  And, while the patient may make the ultimate decision, the decision is predicated upon your communication skills. Tracking the percentage of treatment plans versus the patient acceptance can help you identify if you or your other healthcare providers need assistance with improving on communications with your patients.  If you are achieving a 80% to 90% acceptance rate, then you are doing well.  If your practice is experiencing a percentage that is less than 70%, you will benefit from obtaining some coaching in this area of your practice.  Patients that trust their doctor for their care are more apt to follow instructions because they know that the doctor has their best interest in mind.

Mike DeVries is a CERTIFIED FINANCIAL PLANNER ™, Enrolled Agent,  and a Certified Healthcare Business Consultant focusing on helping healthcare professionals. If you would like to learn more about becoming a client, contact Mike at www.vmde.com.

Please note: I reserve the right to delete comments that are offensive or off-topic.

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