The Use of Key Performance Indicators: Keeping an Eye on Your Business
As a physician who is also a business owner, I have learned (sometimes the hard way) about “keeping an eye on the ball.” Through almost 8 years as an Medical Practice owner, there have been many successes….and misfires. Along the way, through various courses such as the Success Summit and the MPS Board, I have learned much about day-to-day operations and becoming a better owner. One of the lessons relates to watching certain metrics and defining important factors to watch on a regular basis. Key Performance Indicators are an important part of monitoring any business. KPIs are data points, identified by management, which can impact the success of a business. They can and should be watched on a regular basis as they can guide daily and weekly decision making, leading to business success or pointing out upcoming problems. Your KPIs give you a perspective of your business; your perspective leads to decisions, which drive your actions, which create results. The frequency of review of key performance indicators varies, depending upon one’s level of comfort and what is found to be useful guiding a particular business. This, however, is true: what is monitored and what is measured will improve, and conversely what is ignored can (and may) sink the ship.
In my business of three Medical Practices, we divide key performance indicators into daily, weekly, monthly and annual metrics. Daily metrics that I closely monitor include charge per patient, deposits, time through the clinic, and daily volumes. Weekly metrics include staffing ratios, cash position, and weekly summary (by provider) of patient evaluations. Monthly metrics include volumes by clinic, financial statements provided by our accountant, and provider performance data. Annually, we look at volume trends year to year, deposit trends year to year, as well as charges and collection data year to year. In all of these, trends are monitored. Let’s look at some of these in greater detail. On a daily basis, we watch: Charge Per Patient – This is sent to me by a daily email from our coder, based upon prior day charts. The total amount billed is divided by the number of charts to get an average charge per patient. This number should be in a fairly narrow range day to day, but some potential causes of variability include: Provider Documentation – Are they rushing through charts and not documenting what they actually did, or are they checking all the boxes and over documenting? Patient Acuity – Certainly changes charges, and typically goes up during flu season and down in the summer at out locations. Coder Variability – Do your providers code your charts, or is it done by certified coders? Billing Company Errors – Did they use the correct fee schedule? I know our average daily charge, which remains within a fairly tight range, so I don’t get too excited about occasional fluctuations of less than 5% up or down. However, when I see a significant change which extends over several days, I start asking questions and looking at reasons for the changes. What you don’t want to happen is to find a significant drop in charges over the course of a month, which happened to us years ago (before I had learned about KPIs)! Imagine the effects of a drop of $50 per chart on 1,200 visits, on which you expect to collect 60% of charges!
Daily Deposits – Which are just that – the monies that were deposited the day prior. You will begin to see patterns from certain insurance companies and anticipate “big days” and “slow days” related to deposits. You can track how the month is shaping up, and more importantly see any significant, unexpected downturns. If you see a sudden drop below your average daily deposit history and it persist for several days, it’s time to start looking for a reason. Did some insurance company stop paying you? Could there be a credentialing issue? Have you been excluded from payment somehow? There could be a variety of reasons, but discovering the issue and getting on top of it early is important. Daily Volumes and Through Times – We watch volumes to adjust staffing, and watch times through the clinics to assure we are delivering the product we promise. Daily volume allows us to estimate monthly volumes and project income three to six weeks later. As volume goes up, we adjust staffing to deliver through times, and conversely, staffing is reduced as volume goes down. On a weekly basis, we watch: Staffing Ratios – Our time sheets get tabulated every Monday, and are broken down by “front desk,” “floor staff” and “providers.” Total hours per category and total patients for the week are entered on a spreadsheet, and from that a ratio is developed. We strive for a range of 0.3 hours of registration staffing per patient, 0.75 hours of floor staffing per patient, and 0.4 hours of provider coverage per patient. There is no scientific basis for this, but we have found if we are close to these ratios, we can deliver our desired through times without stressing our staff. As patient numbers increase or decrease seasonally, we see the ratios change and alter coverage accordingly. These numbers, as mentioned, have no science to them. They are unique to our clinics and may vary in your operation. The point is to find a level at which you are delivering the through times you desire for your patients, delivering great care, and keeping a good work environment for your team. Cash Position – Every Monday our financial manager updates a cash spreadsheet, showing the current balances of cash on hand in all accounts as well as loan balances. This is probably the most important report we monitor, as the trend of accumulating cash or depleting cash must be watched. Remember: Cash is king. Without cash, it’s hard to run a business. You must know your cash position and trends of cash on hand, and begin to develop cash flow projections (another article and lecture). Again, trends are the key. Like many Medical Practices, we tend to accumulate cash in the winter and spring and deplete cash in the summer.
Provider Scores – We use a commercial product which provides us with data on patient satisfaction, rated on a 1-to-5 scale, as well as time through the clinics from walking in to discharge. We combine this with the hours a provider worked, and number of patients seen, to develop a really simple report distributed to all providers every Monday. It includes number of patients seen, hours worked, patients per hour, average time to get patients “in and out,” and average satisfaction score. Monthly monitoring includes: Financial Statements – These are from our accountant and are absolutely critical to the success of any business, and as an owner/operator, you must understand how to interpret them. We “common size” line items; that is, in addition to an actual number (for instance, medical supplies), we note what percentage of that line item is related to total revenue. In this way, you can compare month to month if you are reducing or increasing expenditures as a percentage of income. I actually look at the percentage of revenue more than I look at the actual number! Another method, which I don’t do yet, is to calculate a line item cost per visit. Knowing what percentage of revenue you spend on items such as labor or medical supplies allows you to benchmark against industry standards and identify where you may need to make adjustments. Provider Performance Data – We look at several factors and provide the data to our NPs, PAs and physicians. We routinely look at: - Code distribution by each provider - Patients per hour per provider - Time through the clinic per provider - Average patient satisfaction scores Volume Data and Trends – - Private visits - Employer Health Services visits (drug tests, pre-employment exams) - Worker’s Compensation visits In each of the above, we look not only at total visits per category, but also at each category as a percentage of total visits, and compare that month over month and year over year. Annually, we look at: - Year-end financials, compared to prior year reports - Average charge per patient, compared to prior years - Collection per patient, with trends over the past several years As you may see, we look at a lot of data. If you were to ask where to start, I would say daily volume, daily charge per visit, daily deposits and cash on hand would be great starting points. The most important factors, in my opinion, are the trends. Are you increasing volume? Are you increasing collections? How do you look now compared to prior months and year over year?
In summary, there are many things to watch, and the point of developing Key Performance Indicators for your business is to avoid unpleasant surprises and to allow you to prepare for the good times as well as the tough times which all businesses experience. This topic and many others related to financial success will be discussed at the MPS Success Summit. Dan Phillips, MD is a former Emergency Physician and is now owner of MedAccess Medical Practice, a three-clinic system based in north central North Carolina. [email protected].