Medical Practice Management
Oct 21

Managing by the numbers – Part 2

You also want to look at productivity, such as: the number of patient visits (office versus hospital), how many diagnostic tests or other in-house services were provided, and the percentage of available time that is being booked for patient services. You should also look at payer mix revenue distribution, physician work RVUs, collection percentages broken down by individual payer class, and a variety of different accounts receivable agings.

When looking at per-patient numbers it is helpful to look at per-new-patient numbers as well as per-encounter/claim. This distinction provides valuable information about the breakdown of a practice by diagnostic or referral segments. For example, in a clinic such as a physical therapy practice whereby a clinician may see the same patient 12 times per incident, it helps to know the revenue/expense/profit on a per-new-patient basis in order to determine which segments of the practice add to and subtract from the bottom line. Knowing the rev/exp/profit on a per-encounter basis can illustrate the relative efficiency, coding, and diagnostic trending of the practice as a whole, or a segment of the practice. For example, a practice may show increasing profits at the clinic level, however when segmented, it is possible to see that only one or two diagnoses (or referral sources) are really "floating" the practice, and the rest of the diagnoses cause an incremental loss. This is not necessarily good or bad in absolute terms, but is very useful information when managing the operations and marketing efforts of a clinic.

Another area look at and manage per-patient revenue, expense, and profit. While overall revenues and expenses can yield valuable information about the profitability of an entire practice, the evaluation of per-patient financial metrics can yield great understanding about the efficiency by which their practice operates. Furthermore, by segmenting patients by diagnosis, referral source, payer, or other meaningful classifications, one can glean valuable information about the patient groups that have a positive and negative impact on the practice's bottom line. This, of course allows practices to use profitable patients as a means by which to subsidize the care of those with a negative impact on the bottom line.

Finally, look at these metrics on a per hour basis – look at the hours available for patient visits, and divide the total revenue, expense, etc by the number of hours available. Physicians sell their time, and since pricing is pretty much controlled, the way to raise profitability – other than working longer – is to increase revenue (and profit) per hour.

All of these numbers are most useful when put in a context. My main advice to you is always to look at variations over time. You should want to see two years worth of monthly data before getting comfortable making a lot of significant decisions or changes. Usually, the practice hasn’t been capturing data, so you have to start recording data on a monthly basis and build from there. Once you have the basic building block of monthly data, you can look at changes on a quarterly basis. Looking at a data on a quarterly basis smoothes out the month to month variations that occur because of number of days worked (20, 21 or 22), weather, vacations and other factors that impact the workload. Pretty soon, you can see patterns emerge and compare one year to the one past, and then two years and so on.

Remember this: Data vs. information – One leads to the next, but they are not the same thing.

About Reed Tinsley, CPA

As a top advisor to physicians, I help increase practice profits by delivering hands-on, expert medical accounting/tax support, practice counsel, and revenue-building strategies. Read more →