Balancing the responsibilities of one-on-one patient care and managing the business side of practice is one of the toughest challenges physicians face. While physicians are not particularly overwhelmed by the idea of taking care of people, they may become so when it comes to keeping tabs on the financial performance of the business. Look at the following 10 essential financial indicators once a month. Your manager should be able to provide you with these data for the previous month by the tenth business day of the current month.

Profit & Loss Statement (P&L) may also be referred to as the Income & Expense Statement. At the top it shows the income by source. Just below the total income, there will be a new heading that says “Expenses” with a listing of the overhead expenses. This report helps you keep an eye on the expenses of your practice. Insist that overtime paid to staff be reported as a separate line item from staff salaries/wages. Looking at overtime paid separately will help you determine when it might be time re-evaluate the schedule or create and fill another part-time or full-time position.
 

Gross Collection Rate (GCR) is the percentage of gross charges that are actually collected. The calculation is:

Total Net Receipts
Total Charges

Because it compares total charges to collections, without any contractual adjustments, it can be quite low. The GCR is dependent on a practice’s fee schedule and contractual rates so there are no benchmarks on what a GCR should be for a practice.

Net Collection Rate (NCR) is the percentage of the charges that are collected after the contractual adjustments have been taken. The calculation is:

Total Net Receipts
Total Charges minus Contractual Adjustments

The NCR, tells the percentage of collectible dollars actually being collected. While highly dependent on the accuracy of contractual adjustments being made by your staff, reviewing this data point helps you determine the success staff is achieving in collection efforts. This number should be 95 percent, or higher.

Days in Accounts Receivable (A/R) is the number of days that accounts spend in A/R receivable before being settled. The calculation is:

 Total A/R minus (External Collections + Liens)
Average Daily Charges*
*Annualized Charges divided by 365

The lower the days in A/R, the better. A practice’s payor mix, specialty, and previous collections performance will have an impact on this number. For example, if you have a significant Medicare population, your Days in A/R will likely be lower because Medicare is required to pay in 18 days on clean claims. A surgical practice may have lower Days in A/R than a medical practice because the claim amounts are larger and when they pay, larger amounts come off the A/R. If you have not “cleaned up” old A/R in a long time or regularly with standard adjustments and write offs, the Days in A/R will be higher because of the “stale” amounts that are in the A/R.


Percentage of A/R Over 90 Days tells the percentage of the A/R that is greater than 90 days. The more time accounts spend in the A/R, the less likely and more difficult they are to collect, thus the A/R decreases in value with age. Actively keeping down the percentage of A/R Over 90 Days, means staying on top of collections, which optimizes the value of the A/R by keeping it current.

Non-contractual Adjustments Summary tells the reasons for the non-contractual adjustments. Contractual adjustments are taken because of the difference between your fee schedule and that which the payor has agreed to pay. The practice charges $120, the contract says the payor must pay $90 for the service, so the $30 difference is a contractual adjustment. A non-contractual adjustment might be needed after the contractual adjustment if, in that example, the payor paid $72 or 80 percent of the contractual amount and the patient did not pay the 20 percent co-insurance. Thus, $18 would be adjusted off for “bad debt.” Or something more specific like “Co-insurance not collected.”


Payor Mix tells what percentages of revenues come from each payor type. While the pie chart is the ideal graphic for this information, simply looking at the percentages each month is very helpful. Keeping tabs on Payor Mix allows you to understand the impact of dropping contracts or the need for marketing to a particular demographic. It is important to know which categories your “customers” fall into, Payor Mix helps determine that.

Impact of Time Off. All a physician has is time and skill; there are only so many business hours/days in the month. There are acceptable, standard business days and hours for elective and non-emergent care. Once a business day is done it is gone, never to contribute any more or less to the bottom line. While it is essential to take time off for vacation and CME, it is equally important to recognize the impact of that time off on productivity. Have staff calculate the number of business days in the month, the number that the physician did not see patients, therefore the percentage off. Physician time off has the most direct impact on revenue of any of the indicators. The staff cannot be more effective at collecting on charges not generated.

New Patient Visits and Consultations is the indicator of “new business.” For primary care physicians New Patient Visits are the key indicator of new business. For specialists it may be a combination of both, although the use of the Consultation codes is diminishing now that Medicare and many other payors are not recognizing them. A simple total of the number of each done year-to-date and perhaps a comparison to last year at the same time is an important indicator of business growth.

Next Available Appointments. Do you know when your next available appointment is? Next available appointments data are key to practice growth. When people conclude it is time to see the doctor about something, there is often a sense of urgency (even when the symptom(s) have been bothering them for some time). Your ability to get them in for a new or established patient visit is an essential practice management indicator and one that physicians have some control over. This feature helps you make important decisions about adding clinic time or changing scheduling templates.

Ask your staff, accountant and/or billing service to put these 10 indicators together in a one-page summary report and give it to you each month. There is no reason using Microsoft Excel or a standard form for this information cannot be covered in one sheet. Short and understandable is important because that will increase the likelihood that you will review it each month. At first, understanding and reviewing these data may take a little getting used to but before you know it, you will be doing 10 in 10 – 10 key indicators in 10 minutes.


Jennifer A. O’Brien, MSOD , has been in practice management consulting for 24 years and is currently the Executive Director of Arkansas Specialty Orthopaedics in Little Rock, Arkansas where fellowship trained orthopaedic subspecialists help Arkansas’ physicians help their patients. Visit us at arspecialty.com.
 

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