How do you track practice financial performance? Part 2

| January 29, 2018

How do you track practice financial performance? Part 2

This is the second article in our series on tracking practice financial performance, and today we’re focusing on practice efficiency and revenue collection metrics.

So why are efficiency and revenue cycle metrics important? Efficiency metrics help you understand the level of expenses in your practice. Revenue cycle metrics help you understand how well and how quickly your practice is collecting the money it’s owed. Key efficiency and revenue cycle metrics identified by the College’s Practice Management Committee are shown below.

Be sure to also check out Part 1 of this series on key metrics for revenue and profitability and Part 3 on key metrics for provider performance!


Efficiency and Revenue Cycle Metrics

Overhead ratio – this measures the level of expenses in your practice. Specifically, for every dollar that comes in, how much goes out in expenses?

Accounts receivable (A/R) (before insurance adjustments) per FTE physician – this reflects the amount of revenue that needs to be collected.

A/R over 120 days – this measures the amount of A/R that is old and hard to collect.

Adjusted fee-for-service collection percent – this tells how successful your practice is at collecting the money it is owed.

Median figures for allergy/immunology practices from the MGMA 2017 Cost and Revenue survey are included below.

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Allergy/Immunology Efficiency and Revenue Cycle Metrics
Overhead ratio = Median total operating cost as a % of median total medical revenue 57.5%
Median total A/R per physician $107,900
Median % of A/R over 120 days old 11.9%
Median adjusted fee-for-service collection percent (total collections) / (gross charges – contractual adjustments) 98.7%

Source: MGMA DataDive™ Cost and Revenue 2017 (based on 2016 data). Copyright 2017. 34 Allergy & Immunology practices of all sizes participated. Not all practices reported all data.

When choosing metrics for your practice, remember to focus on your practice priorities. Look for metrics that are readily available from your EHR, practice management or accounting system to measure their performance. And be sure to track your practice’s performance over time.

The third and last installment in this series will review metrics to measure provider performance.