How to Determine the Financial Metrics of Medical Practices?
Most of us would have heard this famous line popularly attributed to Management Guru, Peter Drucker, “What gets measured, gets managed!”. This saying fits healthcare finance more snugly than it fits any other domain. Most healthcare practitioners or hospitals do not pay enough attention to the financial health of their healthcare business.
Why do these Metrics Matter?
As healthcare professionals, we are not strangers to numbers. Every day we rely on counts and rates to diagnose health problems in our patients and monitor their health. A patient’s critical health parameters are measured and compared against reference values to help us understand what is wrong with the patient and plan the course of treatment.
We perfectly understand that as a healthcare professional your passion is patient care. Balance sheets and P & L statements are simply not your things. So when we say that you must pay close attention to the financial facet of your healthcare business, we do not mean that you must master CPT code assignments and claim filing parameters. You need not attempt to understand all the nuances in medical billing. What we do suggest instead is that you get a grip on some key financial metrics and how to interpret them.
Now that we know the difference that an understanding of these metrics can make to your practice, let’s deal with the next big question. What are these key metrics and what do they tell you about your practice? According to Don Rodden, Principal of Healthpro Medical Billing Inc, the following four metrics can give you a panoramic picture of how your practice as a business is performing and where it is headed.
1. MONTHLY RECEIPTS
This is a straightforward measurement that gives you the total payments you have received in any month. But to utilize this as a strategic metric to gauge your financial performance you need to compare it to reference values – the receipts of the previous months, the receipts of the same month last year and year-to-date values for the current and previous years. An increase of 4 % in receipts over the last month can indicate that you are doing better. But you also need to look at this number with the context of other metrics. For example, a 4 % jump in receipts will not be something to be happy about if your charges and RVU volume increased simultaneously by 15%
2. CURRENT RECEIPT PER RVU
In any industry, receipts are usually measured against cost and productivity to know if they are commensurate with resource inputs. If you apply this to the US healthcare system then you will be talking about Relative Value Units or RVUs. Payors determine physician payments based on these RVUs, so your income is closely tied to the term.
So as a practitioner, you will benefit from tracking the receipts of particular servi"
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