The Complete Guide to Healthcare KPIs for Accountants and Physicians
Every modern medical practice owner has to do two things: provide excellent healthcare and grow a thriving business.
Most physicians have the first part covered - they started their practice because they believe they can offer a higher quality of care than the next physician.
The second part - growing and managing a thriving business?
Most providers want to focus on what they love, what they’re good at. Accountants who work with medical practices are uniquely positioned to provide value as a business advisor, and the two parties working closely is a recipe for success.
KPIs help management and physicians understand the practice’s position and identify irregularities, guiding future decisions. Financial statements may be the source of truth for every business, but tracking the most relevant KPIs to your practice empowers healthcare providers to focus on what’s driving their business.
Fitting the right KPIs with your goals as a practice owner is a crucial step to review with an accountant or advisor.
Running a tight ship
You’re improving the life of every patient while running a business. It’s important to maintain a clear view of the business as it relates to each patient. That’s where operational KPIs come into play.
Patient Appointments: You can’t understand the unit economics of your business without first understanding your units. Having a clear way of tracking patient appointments is crucial to the success of tracking virtually any KPI in your practice.
Patient Wait Time: Calculates the average amount of time a patient must wait between checking in and seeing a provider. This can help with staffing and scheduling and provide insight into patient satisfaction. It’s also a general measurement of productivity. Low patient wait time with large capacity? You can bet you’re running a profitable organization.
Physicians Practice highlights 11 ways to improve patient wait times, but here are a few of our favorites:
Employ an organized front office strategy
Schedule similar appointments together
Utilize web-based technologies
Encourage patient portal usage
Bed Or Room Turnover: This KPI demonstrates how fast patients are moving in and out of the facility. This is an obvious KPI related to efficiency, but in the interest of providing the best care, you might want to consider tying this KPI closely to
Readmittance Rates: to make sure you that you are not letting people leave the facility who are not well.
Missed Appointments and no-show rates: Did you know four missed appointments a day can cost a practice up to $150,000 a year per physician? To calculate this rate, divide the number of missed appointments by the total number of patients scheduled for that time period.
Improve your no-show rate by improving patient scheduling practices and patient loyalty, here are a few ideas for improvement:
Use scheduling software to ask patients what days and times work best for them, better fitting their schedules.
Follow up with no-shows with surveys and phone calls to find out how you can avoid it in the future. This insight can not only improve your operation, but marketing to the right patients.
With a solid grasp on your operational data and KPIs, let’s look at the foundation of every business: finance.
Managing profitability through the noise of financial statements
At a high level, you’ll want to glance at Income and itemized expenses as a total percentage of income. Plain and simple, this will show you where your money goes.
For most businesses, people are typically the highest expense. Medical practices are no different.
Your staff is expensive.
Staffing costs are inching upward toward an all time high of nearly 30% for primary care physicians. Managing these costs is essential to improving your bottom line.
Not only do you need to look at the variable salaries across your staff, you’ll also want to look at overtime trends. Healthcare lends itself to working long hours. It’s the doctrine instilled in every young care provider.
But remember, when people work overtime you are paying a premium pay rate for the hours they are tired and likely to be less productive. This is a real business concern.
Monitoring your top expenses and how they relate to revenue will give you a better understanding of how to manage them.
Beyond revenue lines and expenses, it’s important to monitor cashflow
Deposits: It’s important to keep track of how much money is received by your practice. At the most basic level, you need to track exactly what hits the bank account so that you always maintain the funds required to run your daily operation. As we’ll get to later, some payers pay faster than others, so cash flow can be a real issue for some practices.
Outstanding A/R (billed, value and days): How long is it taking you to get paid? This will show you what to optimize for in the future.
Charges: Keep track of what charges were created, and also track where those charges are in the process. What’s the breakdown of these charges? Private insurance or patient collections?
Payables: What do you owe? You need to maintain that bank balance to pay what is owed to your various vendors and financiers.
Monitoring key performance drivers
Monitoring your cashflow from a high-level is important for identifying problem areas, but how do you fix problem areas? You’ll need to dive deeper.
Average Insurance Claim Processing Time & Cost: This KPI averages the amount of time and money your practice spends processing insurance claims. When low, it indicates that the facility receives payment faster and there is less cost to the patient. This data should influence which insurance companies you market toward (or even accept).
Costs by payer by type of stay: Look even deeper into payer processing to analyze the correlation to type of stay or care provided. Are certain areas resulting in certain fast payers? You may want to double down on that area, from staffing to facilities.
Net Collections Rate: This number excludes write-offs from the payments you receive and shows you the percentage of total potential reimbursement collected out of total allowed amount.
To calculate Net Collections Rate: (payments – credits) / (charges – contractual adjustments)
Claims Denial Rate: The claims denial rate is a great way to align the interests of providers and business advisors since a low claims denial rate means that the organization has more time to focus on patient care and spends less time on paperwork. That’s good for everyone.
Resolution Rate - This is a great reflection of the overall effectiveness of your revenue cycle management process - from eligibility to coding and billing. The calculation for resolve rate is: Total number of claims paid / Total number of claims for that period
Motivate each physician to improve your overall practice
Identifying the most profitable providers on your team (as well as those with the highest patient satisfaction) enables you to build a playbook for future providers. This leads to a top-performing, profitable practice and starts with understanding production by each doctor.
Analyze KPIs by Doctor like:
Number of patient visits
Total number of appointments
Number of new visits
Revenue per provider
Cost of staff per case: Measuring the cost of labor per case can identify physicians who are taking longer to complete a case, using more staff per case or using more expensive staff, such as all RNs and no techs. This isn’t necessarily an issue if more expensive staff is required to perform the best level of care, but it’s something to monitor if the trend becomes significant.
Speaking of care quality, there are KPIs for that, too
If you’re a physician, by now the thought may have crossed your mind, “How does this relate to care?”
Healthcare providers, unlike most businesses, don’t technically produce anything. Rather, they work with patients to diagnose, prevent, treat, and (hopefully) improve the quality and longevity of the patient’s life.
So why should your practice have a focus on profitability and sound business practices?
Ensuring practice profitability ensures you have the resources to provide the best possible quality of care.
Having a sole focus on care without tending to profitability is a guarantee that your care will suffer over time. There’s a balance to be struck.
So with financial and operational KPIs on lock, you’ll want to balance this with care quality indicators:
Patient Vs. Staff Ratio: Demonstrates the number of staff available per patient. May indicate whether the facility is overstaffed or understaffed. The good news? If you have a deep understanding of your margins like we’ve listed above, you can afford to overstaff at certain times, ensuring high quality care.
Patient Follow-Up: Measures the number of patients who receive follow-up after their visit to the facility. This is key to patient satisfaction and could be from a physician, nurse, or other staff member asking about the visit and how they might improve before their next visit.
Talk to your accountant and advisor about your goals
Even though KPIs are designed to distill financial and operational data into meaningful figures, we’ve covered a lot of ground in this post.
If you're feeling overwhelmed, start with a focus on quality and track KPIs that will heavily impact your financial performance.