For many medical practices, the idea of spending hours analyzing revenue, profitability, and accounts receivable trends is not high on the list of priorities. Nevertheless, as we are living in an environment of decreasing reimbursement and confusing new reforms, this is exactly what medical practices should do in order to optimize their revenue.
When it comes to measuring performance, medical practices have fared poorly compared to other private enterprises. The reason? A lack of resources, time, and importantly, readily-available benchmarks. It is critical, however, that physicians employ a set of quantifiable performance indicators in order to better understand their practice. If indicators are to be successful, they must be easily definable and measurable. For example, “generating more new patients” is inadequate unless your staff monitors this on a monthly, quarterly, or yearly basis and distinguishes existing patients from new patients. “To be the most trusted cardiologist in Los Angeles” is flawed because there is no way to measure the practice’s trustworthiness relative to competition.
A practice, therefore, must define a set of parameters it will use in order to assess its current financial or operational situation. If an oncologist’s collections ratio (as defined by collections divided by charges) is 35% for the last fiscal year and the national benchmark for this specialty is 45%, the team must launch a strategy to capture more revenue through greater efficiency. Just this one specific goal will set the practice on a more positive trajectory, which should lead to thoughtful questions such as (1) Are our contracts inferior to my competitors? Am I being reimbursed below Medicare? (2) Is my billing company capturing all of my charges and are my bills being submitted in a timely manner? (3) Are my collectors exhausting their resources to collect monies and are they utilizing appeals? (4) Are certain procedures worth the effort in terms of time versus reimbursement?
It is important, however, to employ more than one goal or indicator. Using merely one will only address one particular issue. Goals and their key indicators should work in concert. The practice should not be forced to choose between financial and operational initiatives but rather balance both simultaneously. Of course, the quantitative benefits of measuring performance are numerous, but one of the most important qualitative benefits is an increase in staff morale. The achievement of mutually agreed-upon practice goals builds a sense of pride and accomplishment with the team – resulting in less employee turnover. This - alone - saves the practice money.
According to Robert D. Behn of Harvard University, there are eight key purposes for measuring performance.
Evaluate: How well is my practice performing? How well is it performing relative to my peers?
Control: How can I ensure that my team is focused on the right things?
Budget: How should I allocate my cash flow?
Motivate: How can I motivate my staff to do the things necessary to improve performance?
Promote: How can I convince stakeholders that my practice is doing a good job?
Celebrate: What accomplishments are worthy of celebrating success?
Learn: What is working or not working?
Improve: What exactly should we do differently to improve performance?By: Tommy King Chief Executive Officer MedicalGroups.com