Tuesday, October 18, 2016
Do You Know The Vitals Of Your Healthcare Practice?
By: Lisa Kianoff, CPA.CITP, CGMA
Vice President of Warren Averett Technology Group
You know them as vitals. You keep up with vitals on all your patients.
So, by the time you see your first patient of the day, you usually have a history of what might also be called their Key Performance Indicators. These KPIs, along with the latest information, enables you to uncover health patterns, determine the questions to ask and start to advise.
Now put your healthcare practice on the exam table. Can you answer these 10 Questions about the vitals of your healthcare practice?
1. What are the earnings of individual profit centers?
2. How are physician extenders (nurse practitioners/PA’s) contributing to profitability each month?
3. What is the contribution to profit by each physician?
4. How do profit centers compare, month to month? Year to year?
5. What are overhead allocations at each profit center, each month?
6. What profit centers do best for the practice?
7. How do you reduce costs, manage risks and streamline financial processes?
8. How do you know when it is the right time to add a new specialist?
9. What are labor costs per patient visit?
10. Where are you bleeding the most?
Fortunately, if you’re like most healthcare organizations, the 2 primary systems you already have in place may contain most all you need to answer those questions:
Practice Management (PM) is your go-to system for the practice: medical records, patient information, scheduling and medical billing. These systems provide revenue numbers and metrics vital to your ability to analyze your data. Look to these systems for metrics such as employee count, patient visits, square footage, number of providers and other types of non-financial data.
Accounting / ERP System is your core foundational system for all financial related activities. It includes accounts payable, labor and other cost components that details your financial picture. And detail from Payroll – in-house or outsourced – should be pulled into your ERP along with revenue and other non-financial metric information.
The revenue centric view healthcare organizations get from their Practice Management system is not enough. You need the ability to analyze revenue in combination with related costs to understand profitability by relevant business segments such as location, specialty, doctor, procedure or department.
Your accounting / ERP system is the most logical place to connect all this information. You bring in non-financial data such as employee counts, patient visits, square footage, number of providers and revenue data from your PM system and combine it with the revenue and expense information in your ERP and now you have data to analyze in new ways in dashboards and on financials. Calculations like expenses per square foot, revenue per professional, expenses per employee, and revenue per patient visit can now be incorporated into financials, dashboards and general reporting. Insist on reports that empower you to analyze your financials. And for the metrics you always want front and center, build it into your executive or user dashboards or knowledgebase.
What unlocks all this is your foundation, a chart of accounts designed to produce/view financial information for each multi-faceted component of your practice. Drill into General Ledger Detail for reports on GL Segments or Dimensions that can track:
• Physician Extenders (Nurse/PA)
• Specialties / Ancillaries
• Clinic or location
• Patient Type
• Entities / Companies
• Your choice
To understand profitability by relevant business segments you must be able to analyze revenue with related costs. What diagnosis would you stand behind without metrics at these multiple levels?
Practice Managers, Controllers and Physicians need financial reports that are accurate and comprehensive so they have visibility to see what impacts financial performance – positively and negatively.
Upper management need big picture views, with the ability to slice data as needed. For managers, make it personally relevant with specific reports that focus on revenue and expense only for each one’s selected areas of responsibility.
Focus On Your Health
So how do you feel about the vitals on your healthcare organization? You will have more confidence when your team members have access to the KPIs to help them continually improve your practice focused where they have some control and/or responsibility.
You will improve your service and your bottom line through seeing and understanding the metrics and financials of your entire healthcare organization.
Like the patient who regularly gets their vitals checked, a healthcare organization has to regularly monitor its vitals. Take these 10 questions along with you the next time you visit with the professionals you use to help and guide you with questions on business or finance. Having confidence in the answers means you have what you need to know to be healthy.
Lisa Kianoff, CPA.CITP, CGMA, is Vice President of Warren Averett Technology Group. She was founder and President of L. Kianoff & Associates, Inc. which merged with Warren Averett in 2015. Contact: Lisa.Kianoff@warrenaverett.com