4/23/2015. Financial Disclosure. Objectives. The Big 10: The Most Important Metrics Your Practice Should Be Tracking

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1 Financial Disclosure The Big 10: The Most Important Metrics Your Practice Should Be Tracking Andrew Maller, MBA, COE Elizabeth Holloway, COE, CPSS, PHR BSM Consulting 2015 ASCRS ASOA Symposium & Congress The Big 10: The Most Important Metrics Your Practice Should Be Tracking Presented by: Andrew Maller & Elizabeth Holloway Andrew and Elizabeth are Consultants at BSM Consulting. BSM Consulting provides practice management solutions to specialty care providers. Objectives What is a Key Performance Indicator (KPI)? Determine the metrics most important in measuring the financial health of the practice. Integrate the metrics and tools provided in the course in the practice. Interpret the results of each metric to identify tangible areas of opportunity for improvement. Type of performance measurement that is essential to the practice reaching it s goals. An objective to be targeted that will add the most value to the business. Should be understandable, meaningful, and measurable. The truth is, if you are not tracking KPIs You won t know where you are or where you are going. You will have no sense of how performance compares to prior year or budget. What are the most important KPIs to track in your practice You will find it challenging to lead or manage the practice. You will tend to make poor business decisions. 1

BSM Consulting provides practice management solutions to specialty care providers. Objectives What is a Key Performance Indicator (KPI)?

2 Is my practice healthy financially? Balance Sheet Balance Sheet Introduction The Eye Group Sample Balance Sheet Current Tangible Non-Current Liabilities Current Liabilities Non-Current Liabilities Shareholders Equity Paid In Capital Retained Earnings Net Income Liabilities and Shareholder's Equity Current Current Liabilities Checking Account $ 34,934 Accounts Payable $ 34,394 Savings Account 23,403 Total Current 58,337 Non Current Liabilities Equipment Loan $ 43,043 Tangible EMR Loan 26,047 Medical Equipment $ 793,043 Total Non Current Liabilities 69,090 Office Equipment 89,329 Leasehold Improvements 23,203 Total Liabilities $103,484 Accumulated Depreciation (784,054) Total Tangible 121,521 Shareholders' Equity Capital Stock $ 5,000 Other $ 4,392 Retained Earnings 560,504 Distributions (500,231) Net Income 15,493 Total Equity 80,766 Total 184,250 Total Liabilities & Equity 184,250 Balance Sheet Ratios Balance Sheet Ratios Current Ratio Current divided by Current Liabilities Calculation Current ($58,337) Current Liabilities ($34,394) Debt-to-Equity Ratio Total Liabilities divided by Total Equity Calculation Total Liabilities ($103,484) Total Equity ($80,766) Measure of a practice s ability to use current assets to cover current liabilities Current Ratio = 1.70 Measure of a practice s borrowing power or leverage Debt-to-Equity Ratio = 1.28 Goal: Goal should be greater than 1.0, but 2.0 or higher is preferred Goal: Goal should be less than 3 to 1 2

Retained Earnings Net Income Liabilities and Shareholder's Equity Current Current Liabilities Checking Account $ 34,934 Accounts Payable $ 34,394 Savings Account 23,403 Total Current 58,337 Non

3 Are Our Physicians Productive? Physician Productivity Net Collections per FTE MD Net Collections Per Encounter Net collections (gross collections minus refunds) Number of FTE MD s Net collections (gross collections minus refunds) Total patient encounters Net collections divided by the number of FTE MDs. Net collections divided total patient encounters. Assessment of provider productivity; track year over year trends, as well as inter-doctor variances Practice efficiency assessment tool; Useful tool to build revenue model in budgeting plan Look at the ratio over an extended period of time (monthly variances are quite common); low collections may indicate collection difficulties or provider inefficiencies. Understand your practice and the types of patients you see Helps you project provider revenue Benchmark Range: $800,000 $1,300,000 Benchmark Range: $175 $250 Are we getting paid in a timely manner? Billing & Collections 3

Total patient encounters Net collections divided by the number of FTE MDs. Net collections divided total patient encounters.

4 Net Collection Ratio Billing Metrics: Accounts Receivable Aging Monthly Collection Totals (net of patient refunds) Monthly Adjusted Charges (gross charges less contractual agreements) Monthly Accounts Receivable Summary Aging Reports Identifying collection trends in the practice. Net collections divided by adjusted charges. Identification of a practice s ability to collect that which it can legally collect (net charges). High ratios could be caused by billing problems, difficulties, or payer delays; track trends over time; if problems are apparent, complete a detailed payer analysis and re-assess department policies and procedures. Look at the ratio over an extended period of time (monthly variances are quite common); low percentages may indicate billing problems, collection difficulties, payer delays. Benchmark Range: 95% 99% Benchmark Range: A/R Aging Category 0 30 days days days days Percent of A/R Total 55% - 75% 8% - 18% 3% - 9% 2% - 6% Over 120 days 4% - 17% Billing Metrics: Days Sales Outstanding Days Sales Outstanding Adjusted accounts receivable divided by the average daily collections. Measure of how quickly receivables turn over in the practice. Operating Efficiency Adjusted Accounts Receivable Balance (Current A/R balance gross collection ratio (net collections/gross charges) Average Daily Collections (Net collections/number of days in the time period) Are my expenses too high? Operating Expense Ratio Operating Expense Less MD/OD Compensation and Benefits Net Collections (monthly gross collections less refunds) Total operating expenses divided by net collections. Illustration of practice efficiency converting revenue into professional compensation. Statistic not absolute: correlate with other indices; evaluate over time to observe trends. Benchmark Range: 50% 70% 4

Identification of a practice s ability to collect that which it can legally collect (net charges).

5 Do I have the right number of staff? Staffing Net Collections per FTE Staff Payroll Ratio Net collections (gross collections minus refunds) Number of FTE Staff Gross non-physician payroll. Net collections (gross collections less refunds) Net collections divided by the number of FTE s. Gross non-physician payroll divided by net collections. Assessment of staff efficiency and productivity Efficient use of non-professional personnel Compare trends over several years; be sure to compare with other like kind practices; performance less than healthy range may indicate overstaffing problem. Extremely low percentages may indicate physician inefficiency; High percentages generally indicate overall practice inefficiencies. Benchmark Range: $140,000 - $200,000 Benchmark Range: 20% 26% Staffing Metrics: Payroll Ratio Case Study: Do I have the right number of staff? Payroll Gross non-physician payroll divided by net collections. Efficient use of non-professional personnel Low Payroll 18% Over Stressed Staff High Payroll 36% Inefficient Office Gross non-physician payroll Net Collections 5

Assessment of staff efficiency and productivity Efficient use of non-professional personnel Compare trends over several years; be sure to compare with other like kind practices; performance less than

6 Monthly Benchmarking Year-to-Date Trends Dashboard Reports Presenting Numbers to Physicians Set monthly deadlines Be accurate Be on time! Condense data Prepare back-up documentation Summary Thank you for attending! KPI s: The Big 10 Understand performance Andrew Maller BSM Consulting Understand trends Make informed business decisions Elizabeth Holloway BSM Consulting 6

Condense data Prepare back-up documentation Summary Thank you for attending!

Financial Disclosure. Objectives. Succession Planning for Administrators. Succession Planning for Administrators

Financial Disclosure. Objectives. Succession Planning for Administrators. Succession Planning for Administrators Succession Planning for Administrators Maureen Waddle, Elizabeth Holloway, & Andrew Maller BSM Consulting 2015 ASCRS ASOA Symposium & Congress Financial Disclosure Succession Planning for Administrators