Inspired by a recent post from Family Practice Management, here’s a list of 8 metrics to watch and assist your with developing financial discipline and measuring your practice finances.
1. Time Worked
You may gain a better understanding of a decrease in charges if you are keeping track of hours worked and vacation/sick days during the time of the decrease. If the hours worked are normal you will know you need to look at other aspects of your finances for a cause.
2. Practice Charges
Charges are influenced by many factors and it’s one of the most significant metrics to review for checking the pulse of your practice. High fee schedules, ancillary services, and medical coding skill level are listed examples that impact practice charges.
Most practices track monthly collections, although, not every practice looks at the amount collected in relation to other key metrics. Track your collections as a percentage of charges if your practice is not already doing so. Be mindful that reimbursement lag by several weeks depending on the type of practice, payors and more. Monitoring this percentage will help your practice identify changes such as payor mix, poor follow up and failure to collect co-pays.
You should pay attention to variations in charge adjustments. Fluctuation could be a sign of an underlying problem such as embezzlement, changes in billing patterns, payor mix, data entry errors or other issues. Adjustments, like collections, will lag behind charges several weeks. Compare adjustments for the current month, to charges and collections from the previous month or later based on the billing patterns for your practice.
5. Accounts receivable
AR is another metric that will vary in significance based on the individual practice. A fully capitated practice has little to no AR, and a practice with a high volume of obstetrical care and PPO enrolled patients will have significantly more AR. Make sure your practice has best practices in place for things like writing off bad debt so AR is not impacted and misleading. High AR rates must be investigated.
6. Relative value units (RVUs)
Tracking and reporting RVUs will vary by specialty of the practice. This metric can be used as a measure of productivity for the month since it adjusts for acuity.
Expenses should be tracked separately regardless of whether your a family practice or anesthesia practice. A rise in expenses or an unexplained expense could lead staff to unveil embezzlement schemes, mistaken expense reimbursements, or mishandling of supply orders. This article recommends using a chart of accounts or general ledger categories approach so more detail is provided. Practices can then compare their total expenses to collections, staff, supplies, etc. to determine if expenses are in line with these metrics based on the nature of their practice.
8. Net income and Total Physician Compensation
Net income is another go to metric practices are familiar with. A common error when reviewing net income is excluding the total physician compensation package. Physician benefits like retirement, travel, CMEs, computers, etc. should be included in the total physician compensation number.