Evaluating specific KPIs can improve business performance
Most practice managers and providers are busy with daily operations of medical practice but monitoring the financial performance of a clinic is important for a medical practice to gauge its success as a business. Clinicians responsible for the business progress of the clinic must invest time to evaluate the performance from time to time. A common reason why a practice loses money is the failure to analyze the KPI’s (key performance indicators) regularly:
Other reasons include:
- Lack of knowledge of the staff about how or which financial metrics have to be analyzed.
- No options in the ‘Practice Management Software’ to provide a report that tracks the KPI’s so as to simplify the analysis.
- Even if KPI’s are being analyzed, some medical practices are not trained to measure the KPIs efficiently or analyze how they impact the business if proper benchmarks are not set.
- If a company outsources medical billing, some vendor companies do not provide essential metrics to measure the KPIs and ultimately ensure that the practice has a good/bad performance for a particular period.
The above reasons might leave you with the question of where to begin. Simply focus on the following most significant KPIs.
- Net Collection Ratio: The Net Collection Ratio clearly indicates whether all the money due is being collected. This is the first step towards analyzing the medical practice’s performance as it gives the true picture of collection against the amount owed to you and the contracts. The desirable net collection for a practice is 95% or more. If the ratio is lesser than this, it means that the business must improve its mode of operation, especially the collection. It is tricky to calculate this KPI because one must understand the charge value of the total billed charges. Charge value is calculated by deducting charges from contractual adjustments. This gives the amount of charge value collected by the medical practice.
Payments / (Charges less Contractual Adjustments) = Net Collection Ratio
- Reimbursement per Visit: It is easy to calculate this KPI and it makes it simpler to compare your practice with other practices in the same specialty. For example, if your practice is in internal medicine, set the benchmark against other internal medicine practice groups. This KPI must be evaluated continuously to check month to month consistency. If the practice is using an outsourced medical billing company, the billing company should be assigned to give this information to you along with monthly reports if this KPI cannot be tracked using the software in your office.
Payments / Total number of visit for Same Given Period = Reimbursement per Visit
- Accounts Receivable for more than 120 Days: Track the percentage of Accounts Receivable that are due for more than 120 days. This is a good KPI to make sure that insurers and patients are paying you on time. If percentage of AR is high, it indicates that there are no follow ups from your side to work out on claim denials or there is inefficiency to follow up no-response claims. The AR rate can vary by specialty. Best performers are likely to have an AR less than 10%. A rate above 25% is a point of concern that requires immediate action. In the current scenario, when there are adequate software alternatives to cross check payments, you should strive to get a rate less than 10%.
Total AR over 120 / Total AR = Accounts Receivable > 120 Days
Other methods to calculate the above:
Patient Responsibility: A patient AR over 120 days old that is less than 10% indicates good patient collections. If the billing falls into AR more than 120 days, there is a 79% possibility that the money cannot be collected. Since this KPI varies by specialty, it is important to benchmark this indicator only against your specialty. Patient deductibles are at a twenty year high and therefore it is critical to keep an eye on this KPI. Pay attention to front end processes to collect patient money at the time of service, to check deductibles and verify eligibility to keep this KPI stable.
Insurer responsibility: Insurer AR more than 120 days shows that the billing staff or the outsourced medical billing company is not following up payment denials and reimbursements efficiently. It is important to find out the list of payers which are slow to pay or are causing denial problems. This indicator can vary with specialty, so it is important to benchmark only against your specialty. Anything more than 25% indicates risk and proper measure should be taken to rectify it. The Insurer AR must be maintained at 5% to 7% to mark good business performance.
Modern Software: Training staff to calculate KPIs would become more efficient if it was coupled with the use of modern software solutions to track the financial performance in a timely manner. There are medical billing services and software that provide different levels of reporting on a continuous basis. The software should have insurance contract capabilities and advanced reporting features. The medical billing system will keep a check on the different payer rates and make sure you are receiving payments in full. For this, all the contracts must be in your computer / software system, so that none of the payment denial goes unnoticed.
- Telehealth: Technology meets HealthcareApr 11 , 2019
- Integrated Care: The Future of Behavioral HealthMar 29 , 2019
- Troubles with Getting Mental Health Help and InsuranceMar 15 , 2019
- 7 Things to do to Protect Against Ransomware AttacksAug 08 , 2018
- Oh EHR, how can we love thee?Apr 20 , 2018
- What’s in Store for Practice Fusion UsersJan 31 , 2018
- What is precision medicine? And how can EHR help?Jan 05 , 2018
- What’s the SOAPware alternative?Dec 15 , 2017
- Artificial Intelligence, EHRs and the future of health technologyNov 02 , 2017
- ACA Executive order’s impact on EMR and eHealth technologyOct 25 , 2017
- EHRs and Mental Health: What Needs to Change?Sep 29 , 2017
- American Medical Association (And Others) Unhappy With EHR ProvidersSep 22 , 2017
- A Celebration of Citizenship DaySep 18 , 2017
- Amazon’s Stealthy Foray Into the World of EHRAug 18 , 2017
- Google, the Gender Gap and Personal ResponsibilityAug 10 , 2017
- Neal Patterson and the Mission of Health ITJul 21 , 2017
- The Myth About Motivating People To PerformJul 14 , 2017
- Fragmented health data and personalized medicine: What to do?Jul 07 , 2017
- Apple’s Venture Into the World of EHR SoftwareJun 23 , 2017
- What does the U.K. health record hack mean for eHealth security?Jun 15 , 2017
- Why Doctors need an All-rounder Healthcare Solution?Mar 19 , 2016
- Are we ready for data-driven healthcare?Mar 12 , 2016
- Using Medicare And Private Sector Claims Data for Patient care QualityFeb 26 , 2016
- The Doctor must “Evolve” with the TechnologyFeb 26 , 2016
- The 2015 Practice Profitability IndexFeb 25 , 2016
- Telemedicine – Benefits and ChallengesFeb 24 , 2016
- ‘Mind Your Risks’ – The NIH health campaignFeb 22 , 2016
- Middle East and Arab Health 2016Feb 03 , 2016
- Medical Billing in 2016Jan 08 , 2016
- CMS publishes 2014 National Health ExpendituresJan 02 , 2016
- Results from the Practice Profitability Index 2015Dec 16 , 2015
- This National Diabetes Month, you have a role in diabetes education and supportNov 26 , 2015
- Safe Texting in HealthCare: Do’s & Dont’sNov 18 , 2015
- Is TeleMedicine the future of healthcare ?Nov 13 , 2015
- Evaluating specific KPIs can improve business performanceNov 09 , 2015
- 50 Years of Medicare: More than 55 million Americans covered by MedicareSep 23 , 2015
- How Much Does Healthcare Cost Matter To A Patient?Sep 18 , 2015
- How does Affordable Care Act Change Your Practice?Sep 11 , 2015
- A ‘Don’t Do’ List to avoid patient no-showsAug 21 , 2015
- Add more patients and grow your medical business in 5 easy stepsAug 05 , 2015
- Medicare Trust Fund is now protected by the Fraud Prevention SystemJul 16 , 2015
- ICD-10: A Short StoryMay 19 , 2015
- Patient portals and patient engagement: Is there a link?Apr 21 , 2015
- Meaningful Use Stage 3: First LookApr 07 , 2015
- 6 Ways Physicians can Free Patient RecordsMar 17 , 2015
- Is the EHR market saturated?Dec 04 , 2014
- 5 Benefits of healthcare information exchanges for small practicesApr 22 , 2014
- New Study shows EMR Adoption Increases Patient Confidence, Loyalty and SatisfactionApr 22 , 2014
- Cloud-Based EMR Vendors and Patient Data SecurityApr 22 , 2014