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MedNews Blog

Practice Management Column: Benchmarking Your Practice’s Performance

Written by Anne Dunne
September 25, 2012

We are pleased to introduce our new MedNEWS contributor, Anne M. Dunne. Anne is the Director of Healthcare Consulting at Grassi & Co, a full-service tax, accounting, and business advisory firm headquartered in Jericho, NY with offices in Manhattan, NY. Anne will be contributing to MedNEWS bi-weekly and will discuss issues related to practice management.

Benchmarking Your Practice’s Performance

Benchmarking is the process of measuring and comparing data to identify opportunity for improvement and to achieve a higher level of performance. To effectively manage physician group practices, management and leadership must be prepared to monitor and evaluate the operational and financial performance of the group and identify newly emerging trends. Simply stated, this means taking a critical look or snapshot of a practice’s financial and operational health. Many practices have no formal benchmarking practices, and simply compare the practical expenses of their businesses to the national average. While useful, there are more detailed and sophisticated ways to evaluate a practice. These include performance measures or benchmarks. There are many benchmarks which a practice may choose to track and evaluate, but four are considered the Key Financial Performance Indicators. These are: Net fee for service collection rate, Days in accounts receivable, Accounts receivable > 180 days as a measure of total accounts receivable and the denial rate, which is defined as the percentage of charge line items denied for payment on the first past.

Net fee for service collection rate: This is the most significant as it represents revenue It is defined as the net FFS payments divided by gross charges less contractual write-offs, discounts, courtesies and bad debt. Well run medical practices have a net fee for service collection rate close to 100 %.

Days in account receivable: It is defined as the total accounts receivable divided by 1/365 of gross charges. Days in accounts receivable demonstrates the time for service delivery to claim payment. This number fluctuates based upon specialty and market and is higher in practices using paper versus electronic medical records. The HFMA target is 55 days and the MGMA benchmark is 74 days.

Accounts receivable > 90 days: The amount of monies due a practice is referred to as it total accounts receivable. Monies outstanding should be a “young” as possible, as a dollar today is more valuable than a dollar tomorrow. Better run practices have > 85 % of their accounts receivable in 0-90 days. Monies in accounts receivable > 180 days is generally considered bad debt or uncollectable.

Denial rate: This benchmark looks at the percentage of time a claim is not paid. It is calculated by dividing the number and dollar value of denied line items by the total claims filed to a payer, (number and total charge amount). Better performing practices have denial rates below 5 %. Payers expect that only a small percentage of medical practices will follow up on claim denials, and as such, leave money on the table.

To compete successfully in today’s economic environment, medical practices must aim higher than average – that means comparing your practice’s results against those groups performing better. Comparing specific benchmarks and understanding how they affect the bottom line can be instrumental in finding out what makes your practice unique and where it can improve. Benchmark the key financial performance indicators, clinical production levels, staffing levels, employee turnover rate, payer mix and any other indicator you believe will provide useful information.

About The Author

Anne M. Dunne, RN-BC, MBA, MSCN is Grassi & Co.'s Director of Healthcare Consulting. Anne is a Registered Nurse with an MBA and holds dual certification in nursing case management and multiple sclerosis nursing. In her role at Grassi & Co., Anne helps Grassi & Co.'s healthcare clients with various practice management issues. To contact Anne directly, via phone please call 516-336-2463 or via email at annedunne@grassicpas.com. Follow Anne on Twitter @annemdunne.





Category: Practice Management


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