Your goal as a healthcare practice is — and should be — providing exceptional patient care. However, this doesn’t diminish the need to manage your practice’s finances strategically.
Medical finances are only getting more complex, and dedicating time to handle back-office accounting takes time and effort. This growing complexity only increases the need to have your practice’s finances in order.
As a professional advisory firm serving over 950 clients of all sizes and specialties in the healthcare industry, we understand your unique challenges. We know prioritizing patient care and medical accounting is complex when there’s never enough time to do both with the time and detail they deserve.
We put people first and strive to empower those who do the same, so we’re providing you with the three financial metrics to improve your practice’s long-term economic performance.
These metrics include:
- Staff Compensation Benchmarking
- Revenue Cycle Management
- Overhead Expenditures
Staff Compensation Benchmarking
Compensation benchmarking is the process of comparing your staff’s compensation rates against your industry peers. Doing so ensures your salary expenses are working efficiently for you.
Several factors play a role in determining the correct pay scale for a prospective hire. These include:
- Years of experience
- Specific job responsibilities
- Education and certifications
- The size and revenue of your practice
- Geographic location (cost of living and candidates in the hiring market)
All these metrics are analyzed so your salaries are competitive for the market and fair for your employees.
Undergoing compensation benchmarking does several key things to improve your practice. It helps you:
- Stay competitive in the job market by offering fair yet competitive salaries, as compared to other practices that might be attractive to your current and prospective staff.
- Reduce staff turnover by analyzing current employee wages and offering raises according to benchmarking results. A secondary benefit is reduced recruitment costs.
- Improve practice efficiency by retaining knowledgeable, experienced staff who understand your policies and procedures.
The results gathered from compensation benchmarking are among the most crucial metrics for your healthcare practice. By offering competitive and fair compensation, you reduce turnover costs, enhance patient care quality through increased retention, and boost efficiency with a more knowledgeable workforce.
Revenue Cycle Management
Revenue cycle management (RCM) is an essential process. It encompasses the entire patient journey, which begins once the patient makes their appointment and ends when you receive all eligible reimbursement for services provided.
At its core, efficient RCM maximizes revenue collection and minimizes administrative roadblocks.
Understanding the key performance indicators (KPIs) for the healthcare revenue cycle is crucial to understanding and improving the individual steps in your RCM.
Several metrics and KPIs to understand in the RCM include:
- Clean claim rate
- Claim denial rates
- Revenue per patient
- Revenue per provider
- Average reimbursement rate
- Days in accounts receivable (A/R) rate
- Cash collection as a percentage of net patient services revenue
There are additional metrics that play a role in the healthcare revenue cycle. However, this shows how granular the analysis can be and how many potential improvements are possible.
When should you analyze your practice’s RCM? It’s different for each healthcare provider.
Let’s create a real-world scenario: Your patients complain that the amount of time they spend in the waiting room or during the intake processes take unnecessarily long. If you hear or sense this, it might be worth the investment to look at all your RCM processes. If those areas need improvement, others likely should be addressed, too.
Our team is well-versed in conducting a thorough RCM analysis and delivering detailed recommendations. With the information to conduct industry benchmarking, we can provide insight into how your industry peers are performing in the various metrics and KPIs presented. This will show you how you stack up and where improvements are needed.
Overhead Expenditures
Overhead expenditures aren’t a foreign concept to any business. However, the healthcare industry and private practices include unique costs required to function.
Typical overhead costs in the healthcare field include: staff costs, lab and clinical supply costs, occupancy costs, service billing and EHR costs.
Why is understanding your practice’s overhead expenditures necessary? According to Western Pennsylvania Healthcare News, “Most physicians believe that their practice’s overhead is somewhere between 40% and 50% of their charges. The truth is that in today’s medical practices, it is actually between 60% and 70%.” (Catanese, 2023)
When 60-70% of a healthcare practice’s expenses are overhead costs, it is crucial to examine those expenses with a fine-tooth comb to find where improvements can be made.
Most practices have three options available to improve overhead costs:
- Increase productivity at your practice: Get more value from the same cost.
- Reduce overhead costs: Get the same value from fewer costs.
- Make your practice more efficient: Get more value out of the same costs.
To uncover your practice’s actual overhead costs, you may need to enlist the help of your accountant if you have one. If you don’t, our team is well equipped to help you find the inefficiencies in your overhead expenditures and offer improvements to reduce costs.
Using these Metrics to Improve your Practice
Now that you know which metrics will help you improve your practice’s operations and overall revenue generation, how can you turn them into a plan of action?
Using a professional advisory firm with decades of experience in healthcare, accounting, and finance is a good start. Our team is uniquely positioned to partner with you and help you understand your entire financial picture. From the practice you work to grow every day to your own personal financial journey, our team is ready to be a trusted partner you can rely on for whatever crosses your path.
Our goal is to help your practice operate better so you can provide better patient care. We also want to put you in the best position possible to leave a lasting legacy for your kids and other loved ones.
To learn how Rehmann can help you and your healthcare practice succeed, contact us for more information.
