I recently visited a practice that had close to one million dollars in charges each month with expected revenue of $500K coming into the practice. I asked the owner if he had a set of business indicators that he reviewed on a monthly basis. He responded in somewhat of an embarrassed tone that no, he didn’t know what he should be looking for.
Unfortunately too many independent and employed physicians are not watching their key business metrics. They look at the checking account to see if there is enough money there to make the payroll or if they can take that trip that they are planning, but there is very little knowledge of how the business is doing or how it is shifting.
What are the reports? Revenue, of course, cash is the lifeblood of every business. If there is no money coming in, the business cannot survive. So just knowing how much money is coming into the business is one key report, but that report should also show charges and adjustments. So we know how much was billed, but we also want to know how much was received and how much of that was adjusted off. If we hand you that report, what does that tell you? It tells you one snapshot of what the practice did last month. Would you know what that number means? Probably not. Just like one CBC doesn’t tell you the history of the disease progression, one snapshot of charges, collections and adjustments doesn’t tell you the trend of the practice.
We recommend that you look at the CCA (charges, collections and adjustments) over time. What is the trend and what is the relationship between them? Just looking at the trend can tell you what is happening. Of course there is interpretation that must take place, like seeing a jump from a new physician, a new procedure, or a change in payor mix can all affect this graph, but at least it is the first high level report to examine.
Accounts Receivable- AR is the lifeblood of the practice. How do you know whether your billers or billing company are doing their job at getting the claims out and following up and ultimately collecting on those claims. How days in accounts receivable is calculated is important. Simply dividing the amount in AR divided by a typical months charges is not an effective way to calculate. Your AR is affected by productivity. What if you took time off last month, AR of course should be lower so how do you know that the billers did their job? One way is to take your total AR and subtract the actual charges for the previous month. That would be one month. The next step would be to take the remaining AR value and dividing that by the previous months’ charges. This would more closely correlate the amounts to the actual work that was performed.
Key indicator report – What is your practice key indicator? This is one of the most difficult to identify. For OBGYN’s it may be deliveries, for Gastroenterology it might be scopes, Ortho it might be total joints etc. You get the picture, but for your practice, you need to know what it is. If your employment compensation is based on Work RVU’s then that is what you need to watch. Sometimes billing departments do not get charges entered timely for the month of your compensation calculation so you need know that so that you are not surprised when you need that tuition payment based on that bonus that you were expecting.
The reports listed above should not take more than an hour to create on an excel spreadsheet on a monthly basis. If your office manager or billing coordinator cannot produce them, you may want to invest in some training for your staff, or outsource the reporting to an offshore administrative assistant that could provide for a minimal investment each month.