Today's interlinked practice management and EHR systems can spit out reports on almost every conceivable measure of practice performance.
Want to know the number of new patient visits last week? No problem.
Want to view those numbers by payer? Easy.
Curious about the number of work Relative Value Units (RVUs) each provider produces per square foot of leased clinical space in your satellite clinic versus the main office. It's just a click away.
Now, add in all those reports from your payers, local hospitals, bank, outsourced billing vendors — can you say "information overload?"
There truly is gold in that mountain of feedback, reports, charts, dashboards, and such. The problem is selecting the numbers that best reveal the status of your practice's financial health.
We asked practice management experts and health system leaders the key performance indicators they use to keep tabs on a medical practice's financial health. Here's what they told us.
Keeping tabs on financial indicators
A medical practice needs two things to stay in business: patients and income, says practice management consultant Elizabeth Woodcock. But you won't get the income if you can't bill for it and collect it successfully. Here are the indicators that every practice needs to watch:
Days in accounts receivable outstanding (DRO). This tells you how long it takes on average to collect a day's worth of gross charges. For example, Medical Group Management Association (MGMA) surveys found that it took 31 days on average in 2008 for family practice groups to get paid, and almost 41 days for orthopedic groups.
Persistently high DRO or a big increase from month to month can signal a host of problems, Woodcock says. They include:
• Excessive claims rejections caused by patient registration errors;
• Failing to confirm patient insurance status before each appointment or service;
• Lackadaisical collection of patient copayments, deductibles, and other amounts at the time of service;
• Tardy filing of claims;
• Errors in coding;
• Incomplete documentation of services; and
• Weak efforts to rework denied claims.
• Be sure to subtract patient credits before computing the days in accounts receivables.
"A big credit balance deflates your receivables artificially and leads you to think you are doing better than you are," Woodcock says.
Administrative errors can produce those high credit balances. A common cause is when patient copayments and deductibles collected at the time of service are not linked to a specific charge. The credits problem will only get worse as more patients move to health insurance plans with high deductibles, Woodcock says.
"At the typical small family practice, it would take just one person on the front desk who isn't trained to add $1,500 to $2,000 in unnecessary credits in one day," Woodcock says.
Aging accounts receivables — balance over 120 days. The longer an account remains unpaid the more likely it will turn into bad debt that the practice will have to write off, Woodcock says. It is not out of the ordinary to have 15 percent to 18 percent of accounts receivable older than 120 days, she says. Reviewing this aging debt by payer can be helpful because you need to know if the portion owed by patients is increasing and why. Patient accounts are notoriously hard to collect and at higher risk of becoming bad debt the longer they go unpaid, Woodcock says.