by Alisa Vaughn and Gil Kochman
Pediatric practices typically have one key goal in mind: giving the best possible care to young patients. Because of this, the business operation side may fall to the wayside, at least from time to time.
While taking care of your patients is definitely the first and most important goal, office managers, practice administrators, and pediatricians must also keep a close eye on how the practice is performing financially. After all, pediatric practices are also businesses, and the last thing you want is for the office to have to close due to issues like financial difficulties.
To help determine if a pediatric practice is running as financially efficient as possible, it is important to look at several Key Performance Indicators, or KPIs, monthly so that you can see month over month, quarter over quarter, and year over year trends. KPIs provide a comprehensive look at how well a practice is meeting certain goals. With this in mind, the following five KPIs are essential for all pediatric offices to track:
To pay for the many costs associated with running a pediatric practice, office managers and practice administrators must know how many days it takes for the practice to collect for the services it’s provided. This total days in A/R should be broken down into total payer A/R and total patient A/R. This KPI is useful for many reasons. For instance, if insurance companies are not paying claims, or if the amount of patients with outstanding accounts receivable balances are extremely high, then the practice may be in an unhealthy accounts receivable situation. To remedy this, it is important to follow up on why insurance companies are not paying claims, and/or ask for payment up front from patients who pay cash-only for their appointments.
Formula: provider or practice accounts receivable balance / provider or practice average charges per day (note: average charges per day based on the last 90 days of charges)
Every time a patient visits a pediatrician’s office with his or her parent, it costs the practice money. If it costs more to have the child visit the office than is brought in, then there is an issue. For example, it is important to know the total number of charges per month, as well as the average cost per encounter. If the charges are found to be on the low side, office managers and practice administrators, in conjunction with the pediatrician, may want to reevaluate the fee schedule, as well as figuratively cut the fat from the list of practice-related costs.
Formula: total operating expense / office encounters
This KPI tracks the volume of patients that are seen in a pediatric practice per month. This number should also be broken down into well visits and sick encounters. Other items to consider include the number of patients who are new, canceled appointments or no-shows.
Formula: No formula is necessary. This should be available in your electronic health record (EHR) or practice management (PM) system.
As its name implies, this KPI refers to the grand total of money that is coming into the practice per month — it should be broken down into patient revenue and insurance revenue. As patient payment responsibility increases, medical practices have a definite interest in protecting their revenue. At the same time, collecting patient payments can be a complicated process if the right systems are not in place. By using a KPI to track revenue, pediatricians and their staff can help measure how they are doing in this critical area.
Formula: No formula is necessary. This should be available in your PM system.
Usually, the amount that a pediatrician charges a patient is not what ultimately gets reimbursed. Therefore, it’s important to calculate the net collection rate to examine the number of payments you receive from both payers and patients in comparison to what you expected. If this percentage is between 90 percent and 110 percent, you should look at your fee schedules to see if you are getting paid what you expected contractually.
Formula: total current months payments / (total charges from the previous month – current contractual adjustments)
While the five KPIs above are probably the most essential for a pediatric practice to track, there are others that you should consider tracking:
Fortunately, office managers, practice administrators, and pediatricians do not need a degree in accounting to understand how these KPIs work — in some cases, you can use a free online calculator like the one available from PMI to determine certain KPIs. In other instances, no calculations are necessary. The information is available in the technology you use every day. Tracking KPIs is necessary so that you can effectively manage your practice, but, as you can see, it doesn’t have to be time-consuming or difficult.
Office Practicum is a leading provider of pediatric-specific solutions. Our EHR, PM system, and billing services help pediatric practices improve clinical and financial outcomes. Contact us today to learn more.