by Alisa Vaughn

Five Essential KPIs Pediatric Offices Need to Track

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:

Essential KPI 1: Total Days in Accounts Receivable (A/R)

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)

Essential KPI 2: Cost per Encounter

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

Essential KPI 3: Number of Visits

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.

Essential KPI 4: Total Revenue

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.

Essential KPI 5: Net Collection Rate

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)

Additional KPIs to Track That are Also Beneficial

While the five KPIs above are probably the most essential for a pediatric practice to track, there are others that you should consider tracking:

• Total expenses – This goes beyond the cost per encounter to look at the total number of office-related charges you are making in a month; if you are not making enough money or have too many extraneous charges, it will affect your bottom line.  
• Revenue per encounter – Similar to cost per encounter, it’s important to know how much revenue you are bringing in each time a patient visits.
  • Formula: total revenue per month / office encounters per month
• Charges per encounter – Similar to cost per encounter, it’s important to know how much gross charges you are producing each time a patient visits.
  • Formula: total charges per month / office encounters per month
• Total number of newborns and new patients – In a pediatrician’s office, patients will “age out” when they reach the age of 18. As a result, you need a steady stream of newborns to replace these older patients. Ideally, these infants will become patients for the next 18 years. This information should be available in your PM system.
• Total number of patients that transferred out – Sometimes you will lose patients — it is a good idea to track if the families moved out of town or if it was something else that caused them to leave (e.g., poor quality of care, unprofessional staff). This will help you determine what types of retention strategies, if any, you need to put in place. Hopefully, you are capturing this information in your PM system. If not, this can be tracked in a simple spreadsheet.
• Overhead rate – This KPI shows how much it takes to run the practice compared to how much revenue you generate. Note: the entire cost to run the whole office, including salaries, electric and other bills, rent, supplies, etc. is included in this calculation.
  • Formula: total operating costs / total revenue generated
• Clean claim rate – How many of your claims make it through the clearinghouse and to the payer cleanly – no rejections or denials? This KPI shows this as a percentage. Tracked over time, the clean claim rate will show whether or not you’re addressing rejections and denials adequately and updating your practice workflow to prevent these from happening in the future.
  • Formula: clean claims / total claims submitted
• Charge lag – This refers to the amount of time that transpires between the date of service and date charges are entered.
• Payment lag – This KPI measures how long it takes between sending the bill and receiving payment. You should measure both patient and payer payment lag.

No Accounting Degree Required

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.