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:
The above reasons might leave you with the question of where to begin. Simply focus on the following most significant KPIs.
Payments / (Charges less Contractual Adjustments) = Net Collection Ratio
Payments / Total number of visit for Same Given Period = Reimbursement per Visit
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.