5 Must-Know Metrics To Build A Thriving Medical Practice
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Managing a private practice can sometimes feel overwhelming because your role is both clinical and operational. You may choose Gentem Health since it’s what we do, but either way, here are the key metrics that will ensure success for your operation.
With this guide, you’ll learn how to measure performance in your medical practice. You will also learn what are the key metrics that inform your practice’s financial status and how best to optimize them to support practice growth.
A proper medical practice KPI dashboard is the first step to building a successful and thriving practice. This allows you to:
- Reduce operational stress
- Decrease reporting time
- Plan for growth
- Better goal setting
- Improve time management
You don’t have to drive blind. These metrics ensure that you keep the most important goals in focus as you scale your practice.
97% of practices have experienced a negative financial impact directly or indirectly related to COVID-19.
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Patient Volume
At Gentem, we support medical practices by reducing their cost to collect and ensuring that no money is left on the table. We understand the imperative need for cashflow to support a growing practice. And that’s why we’ve created the 5 Must-Have Metrics You Need to Know for Thriving Medical Practice. These are the major indicators that measure the financial health of your practice.
This document guides you through core metrics and considerations your practice needs to take in order to support the growth of your practice.
What are Performance Metrics in Healthcare?
Practice owners need to have control over the performance of each professional, the integration between internal processes, the speed of care, and the quality of care provided. This is done by using performance metrics.
Medical performance metrics are fundamental management instruments for monitoring and evaluating the services provided by organizations. They subsidize the formulation and scope of objectives, the identification of the need for changes, the reduction of costs, performance evaluations, and, in the last analysis, the fulfillment of the organization’s mission.
Aging Analysis and Account Receivable (AR) Days
Improving your accounts receivables days is the most effective way to improve your practice finances.
- The best tool for providers to determine the value of their AR is the Aging Analysis Report
- Aging Report indicates the amount of practice revenue that has been billed and the length of time without payments. Aging Analysis report:
- Identifies opportunities to improve cash flow;
- Target areas that can produce cash based on payer and age criteria;
- Determine where timeliness limitations (i.e. timely filing requirements) are reaching critical stages
- By breaking down AR aging reports into payor-specific age groups, the provider can quickly identify issues that may be specific to the respective payor in the billing process. Providers should also know the primary, secondary and tertiary payers.
- Aging Report can be broken down into the following age brackets: 0 - 30 days; 31 - 60 days; c) 61 - 90 days; d) 91 - 120 days
- Growth in the 31 – 60 aging bracket could be caused by an increase in revenue from baseline in the preceding month. It could also mean a delay in the billing and/or turnaround time of claims due to erroneous coding, rejection, or denial.
- Growth in the 61 – 90 aging bracket may indicate that the secondary insurance claims are not filed on time or that payer correspondence is not responded to in a timely manner.
- Growth in the 91 – 120 aging bracket may indicate a slow down in follow-up routine or bad debt write-offs have not been processed.
- As accounts roll over to the 120+ bracket, they tend to be neglected. Once an account reaches approximately 180+ days (6 months), it is worth around 50 cents on the dollar.
- Days in Account Receivables (AR) is a calculation of the average revenue charges for the last 30 days divided into the total AR equaling the number of days of outstanding billings
- Higher AR days are linked to lower payment amounts
- Lower chance of getting paid when claims stay in AR
- Poor management also leads to a lower collection rate
Collection Rate or Net Collection Percentage
Collection rate helps you monitor your billing and collection efficiency
- Net Collection Percentage is the revenue received (actual collections) divided by the total charges less contractual and other adjustments. This number should be over 90%.
- Net Collection Percentage is closely related to Underpayment analysis
- Gross Collection rate (revenue received divided by total charges) is also sometimes calculated, however it does not always give an accurate picture of billing/collection efficiency.
- Using national and regional benchmarks, a practice should measure itself against other practices within the same geographic area.
- You will miss the opportunity to catch underpayments from insurance companies
- You have no visibility into the efficiency of your operation
- A leading indicator of the financial health of your practice
Denial Rate
The denial rate is the percentage of claims denied by payers during a specific period of time. This metric quantifies and helps the practice understand how effective they are at submitting clean claims. A low denial rate translates to healthy revenue and cash flow and lower administrative costs (due to fewer resources spent on reworking the claims). Following guidelines like documentation, and proper coding for claims.
- Calculated by the number of claims denials divided by overall claim submission
- Denials increase account receivable (AR days) and effectively reduce collections/revenue if they are not addressed
- Denials can be due to a number of factors
- High denial rates means there is a problem.
- Practice needs to be able to pin down the root causes of denials and address them immediately
- Adds to the administrative burden of getting paid, meaning higher cost to collect
- As delinquent claims accumulate, staff become overwhelmed and lose track of claims that can be resubmitted - ultimately leading to lost revenue
- Poor management increases the amount of money written off at the end of year
Looking for a way to implement analytics into your practice and get paid more, faster?
Days Cash on Hand
Cash is the lifeblood of any medical practice.
- Days cash on hand is the number of days that a practice can continue to pay its operating expenses, given the amount of cash available.
- This metric is often ignored.
- There is a difference between revenue and cash on hand. This difference can be dramatic. Many physicians and practice owners are often unaware of the difference and falsely assume that charges (billed amounts) will match their cash dollar for dollar.
- Sole focus on maximizing revenue is somewhat misplaced. The goal should be CASH as it enables you to make payroll and pay the bills.
- The COVID-19 pandemic highlighted the importance of cash on hand. Due to reduced patient visits and procedures, many providers found themselves on the brink of collapse. In fact, many laid off or furloughed employees in order to survive. These providers simply did not have enough cash on hand to sustain their organizations.
- Cash on hand is also important for new practices that may not have the patient volume to drive revenue and cash flow.
- In the event of an unforeseeable decrease in volumes, your practice might be forced to file for bankruptcy or furlough workers because sufficient cash reserves are not available
- You may fall short on the cash necessary to hire new staff or equipment requires to expand into new service lines
- The profitability of your practice is directly related to days cash on hand; It doesn't matter if your starting bank account balance is 10K or 100K - if your cost to operate exceeds your revenue from the operation, your days cash on hand suffers over time.
Unbilled Days and Days to Submit
Time is money and if your claims are not being submitted efficiently, you are definitely leaving money on the table.
- Unbilled days is another important metric of billing performance. A final bill (or claim) is produced once the account has had all coding and charges captured. Until that final claim is produced, the charges are classified as unbilled.
- The earlier the final bill (or claim) is produced and sent, the earlier that payment will be received. This improves the aging of AR and cash flow. Therefore, reducing the time to bill and submit is a critical target for improving cash and AR performance.
- High unbilled days can stem from: 1) delays in providers coding, completing and signing off on their notes; 2) delays in billing team scrubbing and submitting the claims.
- There needs to be close coordination and optimal workflow between the providers and billing teams. The most favorable results will be attained through a cross-functional team approach to receivables management, where every member has visibility of the entire process.
- In addition to not getting paid on time, providers also stand to lose revenue for claims that are not filed in a timely manner (due to timely filing requirements by most payers)
- It is unacceptable to have a billing backlog. Combination of the right people, processes and workflows; and technology can prevent this.
- In the event of a backlog, submitting claims with the highest and most immediate cash impact should be prioritized and done first. Organizations should also determine the root causes of the backlog and what can be done to minimize the likelihood of recurring.
- Traditional billers prioritize the “low hanging fruit” which can delay submission more difficult or lower value claims
- Can be a hidden contributor to high AR days
- Track how quickly / efficiently your billing operations.
Take control of your medical practice by using analytics to define strategic objectives that put you ahead of your competition.
At Gentem Health, we use artificial intelligence and analytics to increase the visibility of your billing operations so that you can identify problem areas and make the right operational decisions necessary to grow your medical practice.
Our platform integrates across your information systems to create one source of truth that ensures that the correct metrics are always in view. We use powerful analytics to distill insights that your practice can use to get paid more, faster. Guaranteed.
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