KPIs are essential statistics or metrics that can help you identify, track, and analyze your private medical practice's success and potential growth.
Monitoring your practice's financial KPIs is vital to the business success of your private medical practice. By doing so, you will make more informed and strategic business decisions. Here are some key business performance KPIs that you should track.
1. Accounts Receivable Turnover
Your accounts receivable turnover (AR turnover) ratio measures how long it takes your business to collect outstanding payments from either patients or insurance companies.
A high AR turnover rate means that it takes a considerably long time to collect these payments, which could affect your cash flow. A low AR turnover rate means that you are collecting payments quickly and efficiently. To reduce this ratio, have someone regularly review your accounts receivables and regularly follow up on outstanding payments.
2. Net Collection Ratio
The net collection ratio helps you understand how much of your payments are actually being collected.
It is recommended that your net collection ratio never falls below 95%, meaning you are always collecting at least 95% or higher of the money that is owed to you. To improve this KPI, follow up on outstanding payments on a regular basis or have patients pay for your services upfront and have them submit the claims to their insurance companies themselves for reimbursement.
3. Days in Receivables Outstanding (DRO)
Days in Receivables Outstanding (DRO) measures the average number of days it takes your practice to collect outstanding charges.
The higher the number of days, the less efficient your collection process is. A DRO figure of less than thirty days shows an excellent receivables process, which should be your practice's aim. To improve your DRO, look into ways to minimize rejected claims, such as ensuring patient information is always correct, finding ways to make it most convenient for your patients to pay their bills, and following up on outstanding payments regularly.
4. Cost Per Encounter
When a patient enters your practice, it costs your business money. The goal, however, is to ensure that you are making more money than it costs to serve them. Your cost per encounter is basically the cost to provide care for a patient.
To improve this figure, take a look at the price structure of your services for ways to increase, and look for ways to decrease your expenses.
5. Claims Denial Rate
The claims denial rate KPI is an important metric to track because it shows you the percentage of your claims that insurance providers deny.
The average claims denial rate for healthcare providers is approximately 5%-10%. To improve this rate, look for ways to automate the claims process to reduce manual submission errors.
6. Net Profit Margin
Your Net Profit Margin helps your practice determine its profitability. It measures net profit as a percentage of total revenue.
The higher the percentage, the more profitable your business is. Increase your profitability by expanding the services you offer, adjusting your pricing, and reducing unnecessary expenses in your clinic.
Tracking your practice's KPIs will allow you to see how well you are performing in several key areas. Enkel can help you determine which KPIs your clinic should investigate, and we can assist you with these calculations.
At Enkel, we know just how important it is for you to have complete visibility of your medical practice's financial situation, and we can help. Contact us today for more information.
