Boost Your Practice Revenue By Focusing on Key Metrics
Tracking the finances of your healthcare organization is vital to ensuring profitability. If you neglect to watch your key practice indicators (KPIs), then you could lose revenue and jeopardize the success of your organization. Tracking metrics will provide you with measurements that you can then use to increase the amount of revenue that you collect from both patients and insurers. Tracking alone, however, is insufficient in terms of changing anything. You need to understand what these numbers mean. Then, if you want to see results, you must apply your findings to the way that you run your practice. There are metrics that need to be checked daily, others weekly, and some only need monthly monitoring.
There are many reasons that practices fall behind in monitoring. Any or all of the following could be factors that contribute to a loss of revenue:
- Your office staff members have not been educated about which metrics to keep track of;
- Your management software lacks the ability to easily create useful reports;
- You lack an understanding of what the values of the KPIs should be in order to reach your financial goals; or
- The company that you outsourced your billing to has failed to keep you informed concerning important metrics.
Concentrate on the following Key Metrics to Boost Your Practice Revenue:
1. Net Collection Ratio: This number will tell you, based on your contracts, how much money is actually being collected from what you are owed. This is a ratio that varies from specialty to specialty. Offices with a high ratio are generally stable and do not have very many new patients. These may also be the offices of specialists who see patients who return to them year after year. Offices that have a lower ratio may have a larger number of transitory patients. Alternatively, these offices could be surgical practices with patients who will see a doctor once or briefly and then never see him or her again. Finally, there are establishments which have a large percentage of new patients. Follow this simple formula to determine your Net Collection Ratio:
Net Collection Ratio = Payments/(Charges – Contractual Adjustments).
Strive to reach a ratio of 95% or higher; anything less should be addressed and increased.
2. Reimbursement Per Encounter: This number compares your business to other practices with the same specialty, like “apples to apples” or, rather, “dermatologists to dermatologists.” Follow this number for monthly consistency. You can request this number from your medical billing company every month if it has not been included in the software that you have been provided. If you find that your number skews towards the negative, you may be able to increase your returns by making sure that insurers will cover your services before you provide them. Also, make an effort to collect co-payments before performing services for your patients. Here is a simple way to calculate reimbursements per encounter:
Reimbursement Per Encounter = Payments / Total # Encounters for Same Given Period
3. Accounts Receivable Greater than 120 Days: This number fluctuates with different specialties. It is an indicator of how timely patients and/or insurers are in terms of providing payment. A reimbursement per encounter percentage that is high is a signal of a lag in the investigation of claim denials. This number could also be serving to reveal ineffective work on no-response claims. A rate exceeding 25% is a cause for concern. Let such a red flag serve you as a call to action, and make it your goal to drive your number lower than 10%, if at all possible. Use the following formula to calculate Accounts Receivable (AR) over 120 days:
Accounts Receivable > 120 Days = Total AR over 120 / Total AR
Aside from the AR formula, in order to calculate this particular metric properly, consider patient and insurer responsibility. Measure your patient responsibility figure against the numbers from other medical practices within your specialty because these figures will naturally vary from specialty to specialty. If your billing dips into a time-frame for patients accounts receivable that is greater than 120 days, this signals that there is a 79% likelihood that you will be unable to collect. This is a crucial indicator to follow because patient deductibles are currently at the highest rate that they have been in 20 years. Consider what front-end methods you are using in order to collect revenue from patients, to confirm insurance eligibility, and to evaluate leftover deductibles.
Regarding insurer responsibility, focus on other medical practices within your own specialty to use as benchmarks. If your number here exceeds 120, your billing company is not following up on reimbursements and denials as well as it should. Check the payer level to see who is slow in paying, who triggers massive follow-ups, and who prompts denial issues. A number greater than 25% is a warning that warrants following up. Some star performers can lower this number to a range as low as between 5% and 7%.