So your healthcare practice is up and running. You’ve hired great people, implemented a marketing strategy, put the right technology in place, and your patient retention strategy is in full swing. Things are going great, right? Well, there’s no way of knowing for sure unless you’re measuring your performance.
For many healthcare practices, the idea of measuring and tracking KPIs, or key performance indicators, is a new one. Typically, many just look at the bottom line—is the practice making money? But there’s a problem with doing this.
Why? Because this metric is a lagging indicator, meaning it tells you what’s already happened. If your bank statement is looking less than ideal, it’s likely a sign that your practice has been struggling for quite some time.
Once you start implementing the right KPIs, you’ll begin to see your practice in a different way. But which KPIs are important for a healthcare practice to measure? And where should you start?
We talked to Chris Ygay, owner of Private Practice Dollars, to explain the KPIs you can measure as a healthcare practice, what they’ll tell you, and how you can implement them.
Measuring business development
The idea of business development may be a new one to some healthcare practitioners, but it’s important to know how many prospective patients will be coming to your practice within a specified timeline, both so you can be staffed properly and so that you can project your earnings. There are two KPIs you can adopt to start thinking about business development:
Patient acquisition cost (PAC)
It’s important to understand how much, on average, your practice is spending to acquire each new patient. This cost influences your profitability and measures the effectiveness of your sales and marketing efforts.
The goal of a patient acquisition cost metric is to be as low as possible. The tricky thing here is that depending on your practice, a PAC of a hundred dollars or even hundreds of dollars might still be a good investment, depending on how much revenue it generates over the course of the patient’s relationship with your practice.
When you start to regularly measure and report on this KPI, it’s easy to see where you could be losing hard-earned money.
Over time, this metric should go down. When you’re getting your practice off the ground, your marketing dollars need to work harder to generate awareness. Eventually, you’ll be able to compare this metric against your average charge per patient (which we’ll cover later) to ensure you’re not overspending to acquire patients.
Sales and marketing spend/number of new patients
Ygay breaks down each step further:
- Track all the expenses for your marketing campaign.
- Set up a tracking system to determine the number of new patients directly generated from the campaign.
- Divide your marketing expenses for the campaign by the number of new patients generated.
Over time, you’ll be able to see how different marketing initiatives influence your patient acquisition cost and which tactics you should drop or continue with as a result.
Revenue per patient
Once patient acquisition cost is calculated, it’s a good idea to start calculating revenue per patient. As Ygay explains, putting these two numbers together will tell you if a marketing campaign was successful.
To determine revenue per patient, you need to calculate the revenue generated throughout your patient’s treatment history. This is normally done over a predetermined time period (like one year).
“In order to deem a marketing campaign successful,” says Ygay, “The revenue per patient needs to exceed the patient acquisition cost. If it doesn’t, the campaign needs to be altered or ended.”
The key to determining these numbers, says Ygay, is having good tracking systems that staff are well-trained on.
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Ideal Patient Experience™
Focusing on efficiency doesn’t mean trying to get patients in and out the door as fast as you can. Rather, it encourages you to focus on how you can optimize the number of appointments you accommodate, lower your patient wait time as much as possible, and maintain an ideal level of staff relative to the patients you treat.
In other words, it’s all about ensuring your patients feel comfortable and prioritized. You can use three KPIs to measure efficiency:
“Tracking patient appointments ensures a practice has a steady flow of patients,” says Ygay, which, in turn, means a steady flow of revenue.
He notes that practices should be observing the total number of appointments that can be booked, and comparing that to the number of unfilled appointments. “From there,” he says, “A practice can devise strategies on filling those open appointment slots.”
First call (or contact) resolution standard
When someone calls, how long does it take you to answer their question?
This is a relatively common metric that’s used by businesses in different industries to measure not only how quickly their customer service teams respond to calls and other messages, but also how efficiently they can actually resolve the issue, whether it’s something as simple as booking an appointment or a more complicated issue like clarifying post-surgical instructions.
If your practice or business is online-focused or receives a significant number of calls and messages each day, this is an especially crucial metric to keep track of.
Patient wait time
As a measurement, patient wait time is relatively self-explanatory: it tracks the amount of time elapsed from when a patient checks in to when they see a provider.
According to Ygay, there’s much to be learned from tracking this KPI.
“Keeping wait times down can help increase patient satisfaction and can help a practice manager determine how to staff and schedule employees.”
He also notes that a long wait time is one of the main reasons patients will leave negative online reviews. Seeking to improve this metric can also improve how your patients portray your practice online.
It goes without saying that your patient wait time should be as low as possible. Of course, things come up every day that can impact the amount of time spent in the waiting room.
Track your patient wait times by day. On days when it’s the highest, what else is happening? How can you address those factors? What can you do to preemptively address patient dissatisfaction on days when wait times are high, for example, giving advance notice so that they can adjust their schedule for the rest of the day accordingly?
As the name of the KPI suggests, patient-to-staff ratio compares the number of patients on-site to the number of staff members. Overall, says Ygay, having more staff members, especially clinicians, can have a positive effect on patient care quality.
“It can also affect the number of appointments that can be potentially booked,” Ygay notes, which ultimately affects profitability.
Ideal patient-to-staff ratios will vary from practice to practice. Keep an eye on which of your other metrics improve when this ratio goes up or down.
If wait times are increasing and patient NPS is decreasing (more on that later), increasing your patient-to-staff ratio may be a good place to begin making changes.
Of course, it’s very important to have a deep understanding of your practice’s bottom line. Regularly tracking and reporting on profitability metrics will tell you whether your other efforts—to improve efficiency, patient development, and patient satisfaction—are effective. There are a number of metrics that will clue you in to how profitable your business is:
Average charge and reimbursement per treatment
Profitability can be measured for a healthcare practice via average charge and average reimbursement per treatment.
Average charge per treatment can be used to gauge whether a practice’s treatments are generating enough revenue. Ygay is quick to note that this metric shouldn’t be used purely to generate more revenue, but rather as an assessment tool to determine whether treatments that are beneficial to patients are also benefiting the bottom line of the business.
Average reimbursement per treatment, on the other hand, calculates the amount that’s collected per treatment provided. Ygay says that this amount gives insight into the collection efficiency of a practice’s billing department, which can be tied back to claim follow-up, preauthorization efficiency, and patient collections.
When all is said and done, these two metrics will tell you at a high level whether your business is healthy, and whether you need to tighten the screws on your practice’s collection efficiency in order to remain liquid.
Daily charges and collections
“To get an idea of future cash flow,” says Ygay, “A practice needs to watch their daily charges. These are the charges that a practice sends out in a day.”
Simply put, if bills aren’t going out, then money will not be coming in.
On how to calculate this KPI, Ygay recommends using whatever makes most sense for your practice. “This can be broken down by a total amount of charges sent out in a day, or further broken down by patient or service.”
Much like charges, collections should be tracked daily, says Ygay. “A practice needs to know the amount of money they receive per day.” Again, this KPI is an important part of measuring profitability.
Insurance processing time
It’s important to have a solid understanding of your practice’s cash flow, and in order to know that, you have to have a good handle on how much time it takes for an insurance plan to pay a bill.
“This can be an average across all insurance plans,” Ygay explained to us, “and to get a better understanding, these figures can be broken down by each individual plan.”
If a practice is able to break it down by insurance provider, they can improve their cash flow by focusing on providers that pay their bills faster, Ygay tells us.
This number may also give insight into your practice’s billing department. If the billing department is not following an insurance provider’s billing protocol, it will affect your practice’s cash flow.
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Measuring patient satisfaction
Moving away from financial metrics, another important category to focus on is your patients’ satisfaction. Believe it or not, patient satisfaction can be quantified. But there’s also anecdotal evidence you should be paying equal attention to:
Net Promoter Score
Patient satisfaction starts with gauging your patients’ perception of and willingness to recommend your practice. This is measured with a KPI known as Net Promoter Score, or NPS.
NPS measures how likely a patient of yours would be to recommend your practice to friends or family (on a scale of 1 to 10).
NPS can be calculated as a percentage, like this:
% of patients who are promoters (scoring 9 or 10) – % of clients who are detractors (scoring less than 7)
Knowing your NPS score is important, but only scratches the surface of actual patient satisfaction. It’s important to include the opportunity for patients to provide their own feedback as to why they would give you that score.
The consequences of not taking this feedback seriously is that you miss out on offering, changing, or improving on services your patients want. Ultimately, measuring and asking for patient feedback is an invaluable KPI that should never be overlooked.
“More and more,” says Ygay, “People are using the internet to decide which healthcare practices they will trust with their care. One of the main metrics people will use are online reviews.” Potential patients are now going to sites like Google and Yelp as a first step in their search for a healthcare provider. Websites like Healthgrades take things even further with ratings for individual practitioners.
Online reviews may impact your practice’s search engine optimization and website rankings, which can directly affect the number of new patients you receive. And while you obviously can’t directly influence what patients are saying about your practice, you can be consistently mindful of the fact that the experience and care you provide extends well beyond their visit.
Providing exceptional patient care will serve you well (while getting you more positive online reviews).
Measuring employee engagement
It’s important to not forget that what’s going on inside your practice can tell you a great deal about how your business is faring. There are a number of metrics you can use to get a feel for your employees’ job satisfaction:
Tracking your staff’s attendance over time will allow you to see whether engagement is dipping overall. It will also show you who your most reliable employees are, allowing you to staff your practice properly.
While it’s certainly a lagging indicator, tracking staff turnover will tell you whether your hiring, training, and retaining strategies are working or if they should be revisited.
If turnover is high, there could be a number of reasons for it, from sourcing your candidates from the wrong places, to not investing thoughtfully enough in training, to failing to check in on your employees and gauge satisfaction before it’s too late.
Practice culture can be measured by conducting an internal NPS survey. Asking questions such as, “On a scale of 1 to 10, how likely would you be to recommend working at this practice to a friend or family member?”
This feedback should always be recorded anonymously, as your employees might not be as likely to offer honest feedback if their name is attached to it.
You can also look at more anecdotal evidence of practice culture, like participation in team events.
Measurement is an ongoing process
It may be overwhelming to see the number of KPIs available to you. The truth is, you don’t have to start measuring everything at once.
Start with what makes the most sense for your practice. NPS and patient development are a great place to start, and you can build out your analysis over time. Ultimately, performance measurement is an iterative, ongoing process that will show you that your practice is always growing and changing in different ways.