Data Driven Audiology Practice Management

Data Driven Audiology Practice Management by Kathy Foltner, Au.D. More than ever before, audiologists in private practice find themselves in the midst of increasing competition and searching for tools that will increase practice success. And, more than ever before, the profession of audiology and the hearing care industry demand audiologists understand audiology practice, not only from a service, but also from a business perspective. The most successful audiologists understand both clinical audiology and the business side of an audiology practice. AUDIOLOGY PRACTICES n VOL. 5, NO. 4 23

Regardless of setting, an audiology practice must be profitable so that it may continue to keep its doors open to serve patients. That means audiology practices must be effectively managed to not only survive, but also to thrive. There are many keys to success, but embracing change, utilizing quality business tools, and proactively managing the practice based on data-driven facts are all critically important to sustainability. The days of allowing a practice to run itself sans active practice management are gone. There are countless ways in which audiology practices differ, including the amount of revenue they generate, whether or not they participate with various third-party payors, the vendors and manufacturers they choose, and whether or not they charge for services. Even with many large differences all audiology practices also have several commonalities. For example, all audiologists should know their costs and hourly breakeven rate. Additionally, audiologists must have a firm grasp of how they will cover their expenses and generate a marginal profit. Today, many audiologists find themselves working harder to generate the same, or even less profit, than they did in prior years. Further, some audiologists find growing their practice year after year extremely grueling. If you find yourself in one of these two situations, this article provides guidance on how to use data in the management of your practice. It has been said, If you don t know where you are going, how will you know when you arrive? This statement sums up the importance of strategic planning. A strategic plan should assess the full potential of a practice and link the practice s objectives to the resources and actions that are required to achieve the defined goals and success. A critical part of a good strategic plan is the use of business intelligence, which can be quickly and accurately gathered by computerized systems. In simple terms, business intelligence can be any activity, tool, or process that provides clarity and supports quality decision making in your practice. In order to better understand the power of business intelligence, let s spend some time reviewing the concept of a key performance indicator. Key Performance Indicators (KPIs) are, a set of quantifiable measures that a company or industry uses to gauge or compare performance in terms of meeting strategic and operational goals. 1 Typically, a company or audiology practice establishes its operational goals and then identifies the KPIs that will most impact the practice s ability to achieve those goals. To set appropriate goals for individual KPI success one can utilize industry benchmarks or best practice data that is provided by professional organizations, vendors and other groups. (Editor s note: See Kimberly Rawn s article in the previous issue of Audiology Practices for examples of benchmarking best practices.) KPIs should be specific, clear, measureable and monitored or tracked for specific time frames for improvement comparison. The total number of KPIs tracked is less important than choosing KPIs that will provide the right data for making the best decisions about your practice. Common KPIs in the hearing aid industry include return rate, close rate, exchange rate, binaural rate, average sales price, units sold, technology level dispensed, hearing aid sales of new versus existing patients, and ancillary product sales. It is often said that these hearing aid KPIs drive revenue. This essentially means the better an audiologist acts upon KPI data, the more revenue the practice is likely to generate. The practice KPIs you choose to measure and monitor also play a critically important role in the management of your practice; the amount of revenue generated and collected as well as the overall efficiency of scheduling represent a few of the KPIs you should measure and monitor over time. Fortunately, due in large part to computerized data management systems, practices can more easily monitor and benchmark KPIs. Here is an example of how KPIs can be more effectively managed with a computerized dashboard. Figure 1 is a summary of three KPIs with a breakdown of actual performance compared to goal for a specific time frame with a goal alert indicator. This Figure 1. Dashboard KPI Summary Figure 1. Quick Stats Practice KPI Summary 1 Investopedia web site. Retrieved September 20, 2013 from www.investopedia.com 24 AUDIOLOGY PRACTICES n VOL. 5, NO. 4 To increase efficiency, audiologists can become smarter about their practice business decisions and embrace tools that are available to assist with practice management and

Figure 2. An example of a KPI report with optimization functionality Figure 2. An example of a KPI report with optimization functionality. dashboard As mentioned, provides a numbers good example tell of a KPIs story that and are measureable, provide clear, time data specific, that supports non-ambiguous and and enhances can have a proactive sub- still data-driven rely on manual practice systems for management. these crucial tasks. Either they dashboards communication and reports are are long the gone. vehicle Many audiologists, to however, stantial impact on an audiology practice s success. do not use all of the various modules that are available in their When the bank balance is declining one must determine if the problem is associated chosen PMS, or do not assure accurate data entry rendering KPIs with always provider tell a productivity, story and with a practice little training, fees, any adjustments audiologist third party can understand payors the or story patients of their not practice paying and quickly their balances, their practice. theft, and/or expenses among associated with participation with PMS essentially useless for reporting and management of identify other things. their strengths When as well you as track areas that gross need and more adjusted attention. Once identified, it is relatively easy to maintain what Understanding and using the various PMS modules (sched- revenue as well as collections the answers becomes very apparent. The practice story in My Profile Comparison Report you are doing well and focus on improving specific practice uling, invoicing, billing, marketing, patient communication, (Figure 2) is consistent with audiologists that are seeing more than targeted numbers of weaknesses. etc.) is at the core of proficiently identifying and solving many patients (appointments), have more than optimized performance revenue (gross gaps within production) a practice. Consider and the time spent According to Bojorquez, the KPI Cycle includes five steps: have generated an excellent and above target production and the associated per day costs ($4,900 (both actual vs. $3,125). costs and lost opportunity hard, costs) of however, manual tracking. the story Manual does tracking not made sense 1. One Define could the core conclude business that strategy the and audiologists objective; are working 2. end Determine there. KPIs to track, including benchmarks; when automated tools did not exist, but that is no longer the case in most industries, including hearing care. Let s examine 3. Measure performance over time; Although adjusted production (revenue) is optimized some because specific examples the practice from the achieved real world and how automated a large dashboards dollar can difference help a practice between more effectively man- 4. their Adjust targeted tactics based goal, on very results quickly in relation it is to benchmarks; easy to identify 5. gross Review production and revise, and learn adjusted from your mistakes production. and brainstorm Even to identify more options. alarming is total collection. (See the Practice middle of Figure Performance 2.) Total Issue #1 This is also age their known business. as a high adjustment rate. Bojorquez collection concludes, is not optimized business intelligence and also is moving consistent away with An nearly audiologist a 29% feels reduction they are working from longer hours and seeing more the patients, providers but the bank are account seeing balance is shrinking. from adjusted gut-feel production, strategic choices which and should moving toward be near an evidence-driven patients and rational generating approach substantial to business. by Lynn Sirow, Ph.D. 2 and Dashboards, above target Where dollars, are the this problems practice and what has are both the solutions? an 0%. Although such adjustment as the one depicted and a collection in Figures 1, problem 2 and 3, provide that examples of evidence-driven business intelligence. How Computerized Dashboards must be investigated & Pamela and solved Souza, in order Ph.D. to fix the shrinking bank balance problem. Practices that Help record net production as gross With production today s inexpensive would not and have easy-to-use the data computer easily technology, problem. including available practice management software (PMS) available to identify this core adjustment Figure 2 shows current daily results compared to the practice s targeted goal for multiple KPIs for one month and identifies systems specific to the hearing care industry, the days of whether or not each KPI is optimized for that given month. manual tracking, scheduling, billing, marketing and patient 2 Bojorquez, A. The Key Performance Indicator Cycle. 2013 Sikka Software Presentation AUDIOLOGY PRACTICES n VOL. 5, NO. 4 25

Figure 3. Third Party Payer Dashboard. Figure 2. Third Party Payer Dashboard Notice how the audiologist or business manager can simply glance at the right-hand column to quickly see if a particular KPI has been optimized that month. As mentioned, numbers tell a story and dashboards are the vehicle that supports and enhances proactive data-driven practice management. When the bank balance is declining one must determine if the problem is associated with provider productivity, practice fees, adjustments associated with participation with third party payors or patients not paying their balances, among other things. When you track gross and adjusted revenue as well as collections the answer becomes very apparent. The practice story shown in the dashboard in Figure 2 is consistent with audiologists that are seeing more than the targeted number of patients (listed as appointments on the dashboard), have more than optimized revenue (listed as gross production on the dashboard) and have optimized hindrance target production to per the day practice. ($4,900 vs. $3,125). One could conclude that the audiologists are working hard, however, the story does not end there. Although net production (listed as adjusted production on such the dashboard) contracts is optimized should because avoided. the practice achieved their targeted goal, very quickly it is easy to identify a large dollar difference between gross production and adjusted production. Even more alarming is total collection. (Shown in the middle of Figure 2.) Total collection is not optimized and also consistent with nearly a 29% reduction from adjusted production, which should be near 0%. Although the providers are seeing patients and generating substantial and above target dollars, this practice has both an adjustment and a collection problem that must be investigated and solved in order to fix the shrinking bank balance problem. At first blush one might conclude that Aetna is the best payor in this practice because this practice had the highest billings with Aetna ($38,669) for the time frame; however, this same practice only collected $16,046 from Aetna or 41% of billings. Both Anthem Blue Cross and United Healthcare had substantially lower gross billings at $16,978 and $11,080 respectively, but a much higher collections at $13,582 for Anthem Blue Cross and $10,589 for United Healthcare making those collection percents 80% and 96% respectively. Although more revenue was generated with Aetna there may be more value to participation with Anthem Blue Cross and United Healthcare for this practice. One must investigate not only the data, but also all variables including if a payer Practice Performance Issue #2 generates private pay hearing aid or other sales. The bottom line is that you must track gross production (total billed) and total collected by payer to have the data to be able to identify your best and worst payers, including those that offer value and those that are a The KPIs on the dashboard in Figure 2 clearly show that this practice does not have a productivity problem. Asking providers to see more patients, work longer hours, or produce more revenue will not solve their core problems. It is not the production of revenue, but the collection of revenue that is the major problem. Based on the dashboard numbers one must investigate and solve both the high adjustment rate and the low collection rate. Most audiologists participate with one or more third party payors, as many audiologists believe some limited revenue from these third party payors is better than no revenue at all. However, that is often not the case, especially when payments fall below costs or a practice s breakeven rate, or when collection percentages for a payor are low. In most cases participation with third party payors results in payment adjustments and many audiologists do not fully understand the impact of participation and the resulting required fee adjustments. Adjustments result when patients or carriers do not pay usual and customary charges, when patients are turned over to collection or when discounts are taken. A computerized dashboard allows a practice to track payments by payor. Thus, a practice can make data-driven decisions about the third party payors they wish to utilize in their practice. Providing services and products below the practice s hourly breakeven rate or below cost is rarely a good decision. In fact, unless there is a very compelling reason to do so, Regardless of the size of a practice an audiologist s time is one of the practice s most valuable assets. Managing the provider s time efficiently and effectively is also key to success and always plays a significant role in any practice s profitability. Any activity that takes an audiologist away from seeing patients and generating revenue should be evaluated both in terms of actual cost as well as lost opportunity dollars. 26 AUDIOLOGY PRACTICES n VOL. 5, NO. 4

How a Computerized Dashboard Helps Collection by third party payor can also tell a very interesting story. It is easy to see on the dashboard in Figure 3 that for one specific time period total billed by payor substantially exceeds total collected by payor. Additionally, the dashboard quickly identifies the best and worst payors. One must consider both the work completed (total billed) and the result (total collected) to determine whether or not there is value in participating with a specific payor. At first blush, one might conclude that Aetna is the best payor in this practice because this practice had the highest billings with Aetna ($38,669) for the time frame; however, this same practice only collected $16,046 from Aetna or 41% of billings. Both Anthem Blue Cross and United Healthcare had substantially lower gross billings at $16,978 and $11,080 respectively, but a much higher collections at $13,582 for Anthem Blue Cross and $10,589 for United Healthcare making those collection percents 80% and 96% respectively. Although more revenue was generated with Aetna, there may be more value to participation with Anthem Blue Cross and United Healthcare for this practice. The bottom line is that a computerized dashboard allows you to track the total billed and total collected by payor, to have the data to be able to identify your best and worst payors. Providing services and products below the practice s hourly breakeven rate (or below cost) is rarely a good decision. In fact, unless there is a very compelling reason to do so, such contracts should be avoided. In addition to the two scenarios discussed previously, the real time collection of KPI data that is aggregated onto a computerized dashboard enables managers to optimize their return-on-investment relative to marketing, operational, and practice management funds. Additionally, computerized dashboards improve the efficiency of identifying and filling schedule gaps, thus, practices have fewer open slots in their schedule and generate more revenue. Regardless of the age of an audiology practice, it is common to see practice performance gaps that are costly to the practice and that negatively impact productivity. Not utilizing all of the modules in one s PMS, inaccurate data entry or an inability to act upon real-time KPIs are common practice performance gaps. Numbers always tell a story and dashboards allow managers and practice owners to identify trends and make data-driven decisions that often result in practice growth. n HEADQUARTERS REPORT Continued from page 7 practice forms, HR documents and business templates. Development of the ADA Young Professional Leadership Training Program Collaboration with ACAE to promote ACAE accreditation to university programs Expansion of ADA Practice Match and Extern Exchange to facilitate activities related to preceptorship/externship, practice buying and selling and employment in a private practice setting Expansion of the ADA Student Business Plan Competition Expansion of ADA s Virtual Student Chapter and associated student resources Introduction of the ADA Guide to Practice Management Study and development of recommended models of practice that will be useful for audiologists Drivers Wanted Don t just come along for the ride get in the driver s seat. If you are interested in helping to develop or implement any of these planned projects, please contact ADA headquarters at info@audiologist.org or at 866-493-5544. We will be glad to connect you with the working groups, task forces and committees that are transporting audiology to its autonomous future. n Kathy Foltner, Au.D. is Vice President Hearing Care for Sikka Software Corporation. She holds adjunct faculty status at Rush University Medical Center, is a prior private practice owner of a multi-location practice and a hearing care industry consultant. She can be reached at 312-593-1787 or at Kathy.Foltner@sikkasoftware.com. AUDIOLOGY PRACTICES n VOL. 5, NO. 4 27