What Numbers Indicate a Financially Healthy Pediatric Practice?

As a practice owner, you may feel like you should know some key numbers and metrics for your practice, but you aren’t really sure where to start. Maybe you googled something and found a list of all the Key Performance Indicators (KPIs) you should be pulling every week or every month and you either aren’t sure how to pull them or, if you are able to pull them, or you aren’t sure what you should be doing to improve.

As the CEO of a pediatric billing company, I know numbers are important. After all, what gets measured gets managed, right?  Yes, you need to know how your practice is doing, and you need concrete numbers to be able to do that, but the traditional metrics other businesses use and the “billing” metrics a lot of billing companies use are likely not the best ones to start with for your practice.

Read on to find out why there are better options for your practice and the three numbers you should start with to really understand how your practice is doing.

Traditional Metrics don’t work because your practice isn’t like a normal business.

Businesses generally use some key accounting metrics to understand their performance and I see many practices adopt these as their KPIs. The problem is that your practice isn’t a traditional business. Let’s take a look at what I mean.

How much will Nordstrom get from you if you go and buy a $200 pair of shoes? $200. Whether you pay by cash, major credit card, check, or on credit with a Nordstrom card, they know they can reasonably expect to receive $200 when they sell you those shoes.

When you see a patient for a sick visit and send a bill for $200 for a 99214, how much will your practice get paid? The only thing we know for sure is that it will NOT be $200. You don’t know how much you will get paid and who will actually pay it with any degree of certainty until you actually receive the money.

This severely impacts traditional metrics like Accounts Receivable, making it hard to know your true cash flow and if you can reasonably expect to collect that money.

“Billing” Metrics don’t really tell you the most important part of the story.

There are some common metrics that many EMRs showcase, and I don’t think these are quite right either. They usually have to do with what is left to be collected, but this can inadvertently cover up some significant billing problems.

Here are some examples:

AR over 90 days: This is important because it tells you how many old receivables are left on your books, and the more that is written off, the better this number looks. However, this number alone is no way to measure the success of your practice.

% of charges collected: I’ve seen people boast that they collect 90% of the charges they send. This means you are leaving money on the table (link to fee schedule). If you aren’t charging enough, you will never maximize profitability. Note that this is different from the Net Collection Rate.

Denial rate: This can mean different things to different teams and requires deeper understanding before comparing your practice to another. If you are using % of CPT codes denied and your number is extremely low, you are definitely leaving money on the table because you aren’t coding for all of your work. Eye exams, capillary draws, and specimen handling are three examples of things that are usually denied but do get paid at times and are worth billing.

These Three Numbers Will Help You Identify a Crisis

Here are the three metrics that I believe are the best starting place to see how your practice is doing:

1) Number of office visits where you got paid nothing and there is no balance due. This number should be ZERO.

2) Number of vaccines you gave where you were paid nothing and there is no balance due. This number should be ZERO.

3) Pick any vaccine and make sure you billed it as many times as you administered it. Your number ordered minus the number billed SHOULD EQUAL the amount you have on hand.

Why are these codes so important? Your two biggest assets are your time and your vaccines. If you aren’t getting paid for those two things, who cares about duplicate denials on vaccine administrations and denied hearing tests?

Why is there no balance due? If you didn’t get paid anything and your system doesn’t show you are owed anything, this means it has been written off, and no one is going to take any steps toward making sure you get paid.

Why are you reviewing vaccine inventory? You are looking for holes in the system where providers might be calling out for vaccines or lab tests that never get “ordered” in the system and never drop to billing.

Pull Those Numbers Now

If you are like many practice administrators or physician owners who want to know how they are doing but get stuck understanding what to actually do about the metrics they calculated, start here with these three things. These are the first three things Altus looks at when evaluating a practice and if you start here, it will go a long way towards letting you know if you are in a crisis.

Need help calculating your numbers? Schedule a 15-min discovery call and let me know what EMR you have so I can help you get started.