Pulmonology Coding Alert

Experts offer 9 benchmarks to measure your practice’s financial health.

Is your physician practice as profitable as it can be? You can begin to answer this question if you compare your financial outcomes to your own previous performance data or to data collected from peers in your specialty.

Digging down into your practice’s analytics can be overwhelming. If you don’t know where to start, begin with your gut. You may have questions like:

• Why am I making less than last year?
• Why is our overhead so high?
• Why is it that the people are always standing around in the back office? Do we have too many staffers?
• That associate over there is not productive enough.

Applied correctly, benchmarking can show you whether your subjective concerns are valid, what’s causing your problems, and how to fix them.

If your practice hasn’t benchmarked much before, here are some caveats from BSM Consulting’s Andrew Maller, MBA, COE, who presented at the annual ASCRS/ASOA symposium in 2016.

Pick two or three benchmarks to start with so you don’t overwhelm yourself, Maller advises. And don’t check numbers once a month—if you do, you’ll overreact to fluctuations that don’t impact your practice’s financial health long-term. Most experts recommend you check benchmarks twice a year or quarterly.

Comparisons Help You Know How You’re Doing—and If There’s Room for Improvement

Once you’ve chosen what to measure, you’ll want to compare your findings to data collected from your peers. Benchmarks vary greatly by specialty and even within specialties, so many specialty medical societies offer benchmarking data and guidance to their members.

Data is also available from the Medical Group Management Association and the Professional Association of Healthcare Office Management (PAHCOM).

It’s important not only to compare your metrics to other practices, but also to your own practice’s past performance, BSM Consultant Derek Preece, MBA stresses. Such comparisons can alert you to trends and tell you whether things are getting better or worse at your practice.

It’s important not to jump to conclusions too quickly. Benchmarks are like symptoms — mere indicators that something may be going wrong and that further investigation is required.

Ready to get started? Choose from the common benchmarks below.

Benchmark #1: Overhead Ratio

How to Calculate: Divide total operating expenses by total practice revenue. Exclude from “operating expenses” the salary and personal expenses for any revenue-generating provider, including MDs and physician extenders like NPs and PAs.

What to Know: If your overhead ratio seems out of whack, take a look at factors that might affect it, including payer mix, geographic location, operational efficiency, provider productivity, surgical intensity, and collections efficiency. An overhead ratio that’s really out of whack can alert you to something serious going on, like internal theft.

Benchmark #2: Provider Productivity

How To Calculate: Divide total professional fee collections by total number of full-time equivalent (FTE) providers.

Benchmark #3: Patient Visits Per FTE Provider

How to calculate: Divide annual total of patient visits by number of FTE MDs or physician extender. Include no-charge visits.

Benchmark #4: Non-Provider Staff Payroll Ratio

How to calculate: Divide total staff gross payroll (not including benefits expenses) by total collections.

Benchmark #5: Collections Per FTE Staff Member

How to calculate: Divide total collections by number of FTE staff members.

What to Know: If the number exceeds what’s normal for your specialty, you should wonder if your existing staff is overburdened and be concerned that essential tasks (like compliance) aren’t getting done.

Benchmark #6: Net Collections Per Patient Visit

Divide annual net collections by total number of patient visits

Benchmark #7: Number of FTE Staff Per FTE Provider

What to Know: Doctors who make more money for the practice than others are almost always in the higher level of this healthy range. Reason: Well-supported doctors are often the highest revenue earners.

Benchmark #8: New Patient Ratio

How to calculate: Divide the number of new patient visits by the sum total of new and established patient visits.

Insight: A number higher than what’s typical for your specialty signals that you’re doing well bringing in new patients, but not so well keeping them. A lower number may be a sign that your practice is having trouble fitting new patients into the schedule.

Benchmark #9: Gross Payroll Ratio

How to calculate: Divide gross staff wages by net collections.

Insight: This number has climbed in recent years, experts say, mostly because it takes more work to get paid than it did in the past. Practices must hire more skilled support staff than they did in the past to negotiate with payers, appeal claims, juggle compliance obligations, and more.

What Next?

Once you have these basic benchmarks, you can drill down into other benchmarks, including:

• clinical staff cost per encounter
• front office costs as percentage of collections
• clinical staff costs as percentage of collections
• billing staff costs as percentage of collections
• new patient ratio expenses per encounter
• collections per encounter
• encounters per FTE provider
• net collection ratio