Tracking Medical Practice KPIs

Medical Practice KPIs

If you’re like most providers and practice managers, you’re already busy enough keeping up with the day-to-day operations. But monitoring your practice’s financial performance remains vital to your medical group’s success as a business. It is not only worth investing your time, it is critical that you do it. One of the top reasons practices lose money is failing to track key performance indicators (Medical Practice KPIs) consistently.

Reasons can include:

  • Staff members don’t know how or which financial metrics to track
  • Your practice management software doesn’t provide a reporting capability that makes this easy
  • Even if you can look at KPIs, some practices don’t really know what those KPIs need to be, or what it means to their bottom line if they are not in line with the benchmarks
  • If you outsource your medical billing, not every company provides these essential metrics so that you truly know how well your practice is performing

So where should you start? Begin by focusing on a few of the most important medical practice KPIs:


This metric truly tells you if you are collecting all of your money. I put it first because it provides the truest picture of whether you’re collecting all the money according to your contracts and the amount owed to you. The MGMA recommends a net collection ratio of 95% or higher; anything below that figure generally means you have room for improvement. This KPI can be tricky to calculate because you need to understand the charge value of your total billed charges. Charge value can be calculated as charges less your contractual adjustments. This really tells you how much of the charge value you collected.

Net Collection Ratio = Payments / (Charges less Contractual Adjustments)


This medical practice KPI is simple to calculate and makes it easy to compare your medical group with others in the same specialty. So if you’re an internal medicine practice, you can benchmark against other internist groups, for example. This KPI should be trended to see consistency from month to month. If you currently outsource your billing, your medical billing company should be providing this information to you on a monthly basis if you can’t already track it in your software.

Reimbursement Per Encounter = Payments / Total # Encounters for Same Given Period


Keep an eye on the percentage of your AR that falls into this category. This is a nice indicator to see if patients or insurers pay you in a timely manner. A high percentage of AR over 120 days can also point to issues with the timely working of claim denials or to the effectiveness of following up on no-response claims. This rate varies by specialty. Some best performers will have less than 10%, and anything greater than 25% is a red flag that you need to take action. In today’s landscape, you should really strive to get that number below 10%.

Accounts Receivable > 120 Days = Total AR over 120 / Total AR

Calculate this metric in two ways:

Patient Responsibility:
The Patient AR over 120 reflects the success of your patient collections. This is important because once your billing falls into patient AR greater than 120, there is a 79% chance that you will not collect that money. This KPI can really vary per specialty, so it’s important to benchmark against your own specialty. With patient deductibles at a 20-year high-it’s critically important to watch this KPI. Look at your front-end processes for collecting patient money at the time of service, verifying eligibility, and checking deductibles remaining.

Insurer responsibility:
The Insurer AR over 120 indicates that your in-house billing staff or outsourced medical billing company is not tracking reimbursement and denials efficiently. It’s important to look at AR over 120 at the payer level to determine which payers may be slow to pay or cause serious follow-up or denial problems. This KPI can really vary per specialty also, so again it’s important to benchmark against your own specialty. Overall, anything greater than 25% is a risk indicator and should be investigated. Benchmarks vary per specialty and some best performers will have this number as low as 5%-7%.

Modern software Solutions

In addition to training staff about how to calculate medical practice KPIs, modern technology can help you efficiently track your financial performance. Look for medical billing software or services that provide the level of reporting you to need on an ongoing basis. Again, consistency is key.

When you’re looking for the best medical billing software, make sure to ask about advanced reporting features and insurance contract capabilities. When your medical billing system can easily access the different payer rates in your contracts, you’ll have the tools to make sure you’re getting paid what you’re owed in full. For example, you may charge a patient $100 for a service. BlueCross BlueShield pays $80; Aetna pays $75; and Medicare pays $67. With all the variability, if the contract is not in your system, it’s harder to know if you’re getting paid appropriately.

Resources for Medical Practice KPIs

Have questions? I’m here to help.