How do you know that your medical or dental practice is on track to achieve your practice’s financial goals—and your provider’ compensation and retirement goals? Do you have a tool that helps you gauge on a regular basis how you are performing, both in relation to the practice’s historical performance and also in relation to peers?
An electronic dashboard captures key pieces of data that enable you to identify and correct negative trends before they lead to real problems, and to also identify positive trends in the practice. Whether it is built in Excel or a more customized software tool, the dashboard should ideally be displayed on a single screen or page. Using this visual tool, busy physicians and other practice staff can quickly see where the practice stands.
What Data Should Be in Your Dashboard?
Your dashboard should include a mix of revenue and expense items. Following are three key performance indicators related to billing and collections that we recommend, and that you should be able to generate directly from your billing software.
1. Gross charges and net collections.
While gross charges measure total monthly and year-to-date productivity, the percentages of those charges that are collectible vary depending on the types of services, payer contracts, payer mix of the practice and other factors. By looking at trends in this data, practice administrators and physician owners should more easily and promptly spot trends in the production and billing and collection processes that need further review.
For example, the graphs for gross charges and collections should generally correlate; as gross charges increase, collections should increase at a proportional rate. Keep in mind that collections usually lag behind charges by 45 to 60 days. If charges and collections don’t correlate, then the practice would need to evaluate the reason for the non-correlation. The practice, for example, should evaluate its payer mix and payer contracts.
There could be numerous other trends in the data that might be cause for concern. A decline in charges, for instance, might indicate a decline in provider productivity, which would need to be further analyzed. Likewise, a decline in the percentage of collectible charges might indicate that collection performance is lagging.
2. New patients.
The health and vitality of any medical or dental practice depends on a steady stream of new patients. Each practice needs to evaluate which new patient metrics are most meaningful. In addition to the number of new patients, another important factor of practice health is the type of new patients. For example, since obstetrics patients are generally more profitable than gynecology patients, an OB-GYN will want to see the proportion of OB patients rising. Generally, careful records related to new patient referral sources and contractual changes are good sources of information on trend changes in this key practice indicator.
3. Accounts receivable aging.
Monitor the breakdown of the accounts receivable balance between the aging categories (current, 31-60 days, 61-90 days and over 90 days). Approximately 50 to 60 days in accounts receivable is a typical goal for many practices. Collecting promptly is imperative because a dollar collected today is more valuable than a dollar collected in the future, and it is more difficult to collect a balance due the longer the accounts age. Because the collection ratio of accounts receivable that are older than 120 days is low
, most medical practices shoot for no more than 15 to 18 percent of AR in this category.
Get Some Perspective
A point-in-time metric provides a limited understanding of your practice’s performance. A dashboard that measures trends from year to year, as well as in relation to peers, provides a much richer view of your practice’s health. Benchmarking data is available from MGMA and AMA, as well as subspecialty groups like the American Society of Clinical Oncology.
Dashboards also can drive behavior change. Consider creating a dashboard for each physician, as well as highly paid mid-levels, to show exactly how each provider is influencing the bottom line. When you uncover problems—such as low billing performance in relation to the number of patient visits—dig deeper to get to the bottom of it. Perhaps that doctor has been coding the procedures incorrectly and needs a refresher on proper coding.
Accurate and timely information about key financial performance indicators can allow your practice to catch negative trends early so you can re-route instead of being stranded on the side of the road. Contact us to find out how we can help you create a dashboard to monitor the metrics that fuel your practice’s growth.