Key Performance Indicators for Physician Practices Sam Eddy Director, Physician Practice Consulting, QHR
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Sam Eddy Director, QHR Physician Practice Management Director of Physician Practice Management Sam Eddy is a results-oriented leader with more than 25 years of progressive healthcare business experience. Prior to joining QHR, his professional background included serving as the Director of Operations/Projects for FemPartners, Inc. in Houston, Texas. In this position, Sam grew the business through physician retention and recruitment, group practice operations, facility development and mergers, ultimately achieving annual increases in revenue over an 8 year period. His experience also includes serving as the Manager in the Healthcare Consulting Practice for Cap Gemini Ernst and Young, also in Houston. While in this role, Sam created and implemented a complete operational redesign for 22 urban clinics, including staffing and training. In his current position, Sam is responsible for leadership and oversight of QHR s Physician Services Consulting practice, which includes advising clients in the area of physician practice management, practice operations and physician-hospital integration strategies. His clients also benefit from his proven methodologies in strategic planning, contract negotiation and analyzing operational issues within the practices to improve financial results of employed physician practices. He is a member of the Healthcare Financial Management Association (HFMA) and the Medical Group Management Association (MGMA). 4
Greetings and Introductions 5
Agenda Why are we looking at Key Performance Indicators - Physician Employment Trends What are the Key Indicators Examples 6
PHYSICIAN EMPLOYMENT TRENDS 7
Hospitals Continue to Employ More Physicians. Physician Practice Ownership 2002 2011 MGMA Survey 100% Physicians Hospitals 75% 50% 25% 0% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source: Physician Compensation and Production Survey, Medical Group Management Association, 2002-2010 data; 2011 survey. 8
Physician Practices Losses Also Continue. Direct Operating Loss per Employed Physician 2011 MGMA (Based on 2010 Data) Scale by $100,000 2008 2009 2010 75th Percentile Median 25th Percentile -$45 -$104 -$81 -$104 -$158 -$215 -$190 -$282 Source: Medical Group Management Association, 2011: Merritt, Hawkins & Associates, 2010 Physician Inpatient/Outpatient Revenue Survey. -$333 9
Sources of Practice Losses 9% 3% 10% 19% 59% Productivity vs. Compensation Revenue Cycle Coding Payor Mix Chargemaster Source: Medical Group Management Association, 2011: Merritt, Hawkins & Associates, 2010 Physician Inpatient/Outpatient Revenue Survey. 10
The Knife Edge Physician Costs Average Cost of Recruiting $ 60K - $100K Practice Start-up Costs $156K - $250K Downstream Hospital Margin - $ 43K - $130K Net First Year Cost $173K $220K Turnover Rate, 2010 6.1% Turnover Rate, 2009 5.9% Greatest in Years 1-3 12.9% 11
No Room for Error Average Hospital Inpatient Claim $20,000+ Average Hospital Outpatient Claim $5,000+ Average Physician Claim $180 - $200 12
Health Reform Is Here The Goal: Expand Access to 32 Million More People! 13
KEY PERFORMANCE INDICATORS 14
Why do we look at KPI s In business, words are words, explanations are explanations, promises are promises, but only performance is reality. Harold S. Geneen Former President and CEO of ITT If you can t measure it, you can t manage it. Michael Bloomberg Mayor of New York City and CEO of Bloomberg, Inc. 15
What are KPI s Numerical Factor Used to Quantitatively Measure Performance Activities, Volumes Business Processes Financial Assets Functional Groups Entire Revenue Cycle Source: BearingPoint, Key Performance Indicators 16
What is the Purpose of KPI s View a snapshot of performance at an individual, group, department, hospital, or regional level Assess the current situation and determine root causes of identified problem areas Set goals, expectations, and financial incentives for any individual or group Trend the performance of the selected individual or group over time Source: BearingPoint, Key Performance Indicators 17
Where do we start with KPI s It all boils down to two basic categories: 18
Revenue 19
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KEY PERFORMANCE INDICATORS 21
The Majority of KPI s fall into Revenue Cycle Gross Charges Net Charges Adjustments Gross Collection Percentage Net Collection Percentage wrvu's/provider Charges per wrvu Collections per wrvu Accounts Receivable Aging Overall Accounts Receivable Aging Over 120 days Days in AR Days in AR per payor Denial Rate by payor Denial Type Denial Type by Payor Charge Entry Lag Days to Drop Claim Days to Pay Self Pay Balances Active Accounts per Follow-up Staff Bad Debt write off Encounters per Hour/Day No Show Rates TOS Collections New and Established Visit Curves New patients as a percentage of total Visits 22
Detail Counts It is important to get data by provider. It must be understandable. Physicians are the key component in healthcare. 23
Charges, Adjustments, Collections Breakdown by meaningful category. Such as: Office, Surgery, OB, Lab, Imaging Others as necessary While adjustments may not be broken out on financials if you are in an accrual system, it is still important to track them. 24
Gross Collection Percentage Measure: Purpose: Value: Gross Collection Percentage Measures revenue cycle cash flow, assists in predicting cash flow Shows opportunity for improvement in cash flow Calculation: Collections divided by Charges $100,000 $ 62,000 = 62% 25
Net Collection Percentage Measure: Purpose: Value: Net Collection Percentage Measures revenue cycle efficiency Shows opportunity for improvement in operations Calculation: Collections divided by (Charges Adjustments) Collections $62,000 Charges-Adjustments $100,000 - $33,000 = 92.5% 26
Charges, Adjustments, Collections 27
wrvus by Provider Measure: Purpose: Value: Calculation: wrvus by Provider Measures productivity of Providers Shows true work output wrvu per code multiplied by volume of code performed totaled 28
Charges and Collections per wrvu Measure: Purpose: Value: Calculation: Charges/Collections per wrvu per CPT code Measures consistency in charge master Show when a procedure is under priced Total Charges for code divided by total wrvus 29
wrvus by Insurance Company 30
Aged Accounts Receivable Measure: Purpose: Value: Calculation: Aged Accounts Receivable by provider, by payor group. Trending indicator of receivable aging and collectability Indicates payment delays or revenue cycle s ability to liquidate A/R Aging category divided by total AR 31
Days Charges in AR Measure: Purpose: Value: Calculation: Days Charges in AR Measures revenue cycle effectiveness and efficiency Demonstrate potential additional cash Total AR divided by the average charges per day for a given period 32
Denial Rates Measure: Purpose: Value: Calculation: Denial Rate by CPT Payor Tracks payer denials and impact on cash flow and trends payment opportunity and process improvement. Drives root cause accountability in the revenue cycle processes. Total number of Billed Dollars/Units divided by Total number of Denied Dollars/units 33
Charge Entry Lag Measure: Purpose: Value: Calculation: Charge Entry Lag Measure operational Efficiency Demonstrates opportunity to accelerate cashflow Total days of entry delay (DOS to DOE) divided by the number of entries (claims) 34
Days to Pay Measure: Purpose: Value: Calculation: Days to Pay Measure delay in payment/cashflow Perform calculation to predict cashflow, demonstrate payer effectiveness and compliance Total days from DOS to DOP divided by the number of claims 35
Self-Pay Percentages Measure: Purpose: Value: Calculation: Self Pay percentages Measure Amount of Cash owed from Patients Determine the effectiveness of revenue cycle Amount of Billed charges (to the patient) divided by total charges Total Amount of Self Pay AR divided by the total AR 36
Quarterly View 37
Calculations on Quarterly View 38
Bad Debt Percentages Measure: Purpose: Value: Bad Debt Percentage Measure the Quality of AR Determine cashflow and efficiency Calculation: Total amount of charges written of over a period (annually) divided by total charges Bad Debt WO $1,800 Total Annual Charges $100,000 = 1.80% 39
Active Accounts/Follow Up Staff Measure: Purpose: Value: Active Accounts per Follow-up Staff Measure staffing needs in Business Office Assure staffing is effective to maintain cashflow Calculation: Total open account (Non Zero Balance) divided by the staff assigned to follow up Open Debit Accounts 2,308 + Open Credit Accounts 289 2,597 Number of Follow Up Staff (FTE) 2.30 Accounts Per Staff 1,129 40
Time of Service Collections Measure: Purpose: Value: Time of Service Collections Measure the Effectiveness of Front Office Staff Maximize cashflow and minimize expense Calculation: Amount collected at TOS divided by total amount collected Total Monthly Collections $55,000 Collected at Time of Service $ 7,500 Percentage 14% Is that good? Initial goal should be to collect $25 per visit. Therefore, if you see 24 patients per day for 20 days per month that would be 480 patient encounters. 480 times $25 is $12,000. 41
Visit Code Ratios Measure: Purpose: Value: E&M Visit Code Ratios Measure Actual work to Expected Curves Shows opportunity to increase revenue and compliance risk Calculation: Number of billed codes by procedure divided by total procedure count 42
Visit Code Ratios 43
Visit Code Ratios 44
New Patients to the Practice Measure: Purpose: Value: New patient Percentages Measure the new patients coming to the practice Determine practice growth and patient retention Calculation: Total number of new patient E&M codes divided by total E&M Codes 45
No Show Rates for Visits Measure: Purpose: Value: Calculation: No Show rates Measure the number of times Appointments are not kept Determine scheduling templates and front office effectiveness Total number of no shows divided by the total number of patients scheduled 46
Patients Seen per Hour Measure: Purpose: Value: Patients Seen Per Hour Measure the productivity of providers Determine the staffing and facilities needed and their effectiveness Calculation: Total Number of patients seen divided by the total number of office hours available 47
Operating Cost per Provider Measure: Purpose: Value: Calculation: Operating Cost Measure the costs and profitability Determine where operating efficiencies can be gained Total Operating costs (less salaries and benefits of physicians) divided by net revenue 48
FTEs per Provider Measure: Purpose: Value: Calculation: FTE s per provider Measure the staffing costs Determine the optimal staffing needs and create efficiency Total number of FTEs divided by the total number of providers 49
Proprietary and Confidential Examples
Physician Dashboards 51
Physician Dashboards 52
Physician Dashboards 53
Physician Compensation 54
Physician Compensation 55
Physician Dashboards 56
Physician Dashboards 57
Operational Dashboards 58
Operational Dashboards 59
Financial Statements 60
Financial Statements 61
Financial Statements 62
Financial Statements 63
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Upcoming Programs Physician Contract Reconciliation (Trustee Webinar) February 12, 2013 12 noon 1:00 p.m. CT Physician Recruitment, Part II (Trustee Webinar) March 12, 2013 12 noon 1:00 p.m. CT Physician Practice Strategy Consortium June 19-21, 2013 Classroom Program Loews Vanderbilt Plaza, Nashville, TN 65
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Thanks for Attending! Intended for internal guidance only, and not as recommendations for specific situations. Readers should consult a qualified attorney for specific legal guidance. 68