4 Key metrics to measure how your medical practice is doing

4 Key metrics to measure how your medical practice is doing

More patients does not always equal better profitability. Delays in patient payment collections, increasing variable costs, revenue cycle management gaps, etc. can all have a direct impact on your cash flow & therefore your profitability.

To help you understand how your practice is really doing, we’ve summarised 4 key metrics that will tell you if & where your practice is leaking cash. 

 

1. Claim rejection rate

The claim rejection rate (CRR) is the percentage of a practice’s claims that get rejected on first submission.

Claim rejection rate

 

What is a good benchmark for your practice? 
Your CRR should be 5% or below. 

Why does it matter to your practice? 
CRR reflects the effectiveness of your pre-visit processes like verifying patient benefits, adding required authorisations & maintaining accurate patient demographics. Your CRR rate also points to the accuracy of post-visit tasks like coding & billing. The bottom line is that getting these things right the first time is crucial in reducing bad debt & increasing cash flow.

How to ensure your CRR is below 5%:
Ensure that staff are performing Family Checks & Benefit Checks before patient appointments using patient management software that integrates with a proven, customisable medical billing solution.

 

2. Average claim billing rate

The average claim billing rate is the average Rand value a practice collects as a claim per patient visit.

Average claim billing rate

What is a good benchmark for your practice? 
Due to variation across specialties, there is no universal industry benchmark for this metric. 

Why does it matter to your practice? 
Knowing your average claim billing rate is a powerful metric. By comparing your average billing rate with previous quarters or financial years, you can clearly see whether your business is growing, plateauing, or generating less income. 

How to use your average claim billing rate to improve your cash flow:  
If you find that your medical practice is making less money than previous years, it’s time to take steps to get back on track. For example, you can start charging patients for all consumables or regularly missed procedures that you previously overlooked or wrote-off in the cost of doing business. 

 

3. Average monthly revenue rate

The average monthly revenue rate is the average gross monthly revenue less the average total practice costs.

Average monthly revenue rate

What is a good benchmark for your practice? 
Due to variation across specialties, there is no universal industry benchmark for this metric. 

Why does it matter to your practice? 
The average monthly revenue rate is the most definitive indicator of the health of your practice finances as it lets you assess your practice’s effectiveness when all is said and done i.e. all the claims have been submitted & all your practice’s costs accounted for. 

How to use your average monthly revenue rate to grow your profitability? 
This metric is the basis to make wider financial decisions to manage or reduce costs & where to invest to increase profitability. For example, this could mean reducing or replacing staff, revamping processes, investing in new clinical or technological tools, adding services or outsourcing your revenue cycle management. 

 

4. Average debtor days

Average debtor days represents the average number of days it takes for a practice to get paid. The lower the number, the faster a practice is bringing in payments.Average debtor days

What is a good benchmark for your practice? 

Debtor days should stay below 45 days but should ideally not exceed 30 – 40 days.  

Why does it matter to your practice? 
Your average debtor days points directly to the efficiency of your revenue cycle management processes. 

How to use your average monthly revenue rate to grow your profitability? 
By monitoring this metric, you can identify factors that are hurting your finances. For example, when looking for the cause of an increase in debtor days, you may spot a problem with a certain payer. You can then address the issue & resolve it before it takes a toll on your cash flow.

 

All businesses will go through financially challenging times. A downturn does not usually mean the end, but it does call for action, as opposed to waiting it out. If you’ve measured these 4 metrics & can see your medical practice profits shrinking, consider your options to ensure that your revenue cycle management is as efficient as possible. 

Healthbridge helps over 5 000 medical professionals across South Africa streamline their processes & improve their cash flow & we can help yours. For more information about how you can improve the financial health of your practice with Healthbridge, click here, for an obligation-free business assessment. 

 

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