KPIs are essential statistics or measurements that can help you identify, track, and analyze your medical practice's success and potential expansion.
Monitoring your practice's financial KPIs is vital to the success of your medical practice as a business. By doing so, you will make more informed and strategic business decisions.
1. Accounts Receivable Turnover
Your accounts receivable turnover (AR turnover) ratio measures how long it takes your business to collect outstanding payments from either customers 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 owing 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) looks at the average number of days that it takes your practice to collect outstanding charges.
The higher the number of days, the less efficient your collection process is. A DRO figure 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 which insurance providers deny.
The average claims denial rate for healthcare providers is approximately 5%. 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 just how profitable it is. It looks at 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 just how well you are performing in a number of key areas. Enkel can help you determine which KPIs will be most valuable for your clinic to investigate, and we can assist you with these calculations.