physician profitabilityThe healthcare landscape is evolving and changing rapidly, making it more important to measure what is providing value and what is not. In the desire to find out what’s really working, it can become too easy to collect massive amounts of data – much of which doesn’t ultimately matter. With that in mind, the real goal should be to collect only the most important areas of data, and use those metrics to find what makes a practice profitable and what should be changed.
Everything that happens before, during, and after a patient sees a provider can affect whether that provider is paid for his or her services. Locating the metrics that drive financial success is among the most important areas for a practice to consider. Here are five metrics that should be on a physician’s list:

1. First-Pass Rate of Resolution

Claims can and should get paid the first time they are submitted. The more of them are resolved on the first pass, the more money the practice makes more easily. This can be calculated by taking the total number of claims paid and dividing them by the total number of claims submitted. If that number is 90% or higher, the physician has a good first-pass rate of resolution. It’s a reflection of revenue-cycle process management and how effective that is over time.

2. Days Spent in Accounts Receivable

The lower the number of days spent in accounts receivable, the faster a practice is being paid. The 30-40 day range is optimal, and numbers (on average) should stay below 50. Problems with a particular payer can also generally be identified, so they can be resolved to the satisfaction of everyone involved.

3. Accounts Receivable Percentage Greater Than 120 Days

No more than 25% of the accounts receivable should be greater than 120 days when it comes to how long a practice must wait for payment. Practices that are not able to secure payment in a timely manner can end up struggling. Payment difficulties can also show that there are issues with management of the revenue cycle which need to be corrected.

4. Net Rate of Collection

The goal to aim for with a net collection rate is greater than 95%. This is the actual amount collected, as opposed to the amount that is billed. Some of the amount billed may never be collected, and that is a risk a physician has to accept with his or her practice. Keeping the net rate of collection as high as possible shows strong revenue management.

5. Reimbursement per Encounter, on Average

The amount a physician (or his or her practice) collects for each patient encounter is another important metric. While there is no set benchmark for this amount because it varies greatly between specialties, a practice can benchmark this amount within a specialty and gain a realistic idea of whether more or less money should be charged per patient.
These metrics are critical indicators of the performance of a physician’s practice and, by extension, that practice’s profitability. They should be carefully analyzed against benchmarks and in context, in order to make the best use of them and the data they provide. It is not necessary to collect massive amounts of data, when a small amount of important data, used in the correct way, can provide all the information a physician needs for profitability.
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Last Updated on April 18, 2014