To understand financial statement benchmarking for medical practices you have to understand some of the value drivers in the practice. To understand these drivers, you have to understand the fundamental categories of group practice metrics including:
Accounts receivable should be broken down per physician and as a percentage of total medical revenue. You should also review a standard A/R aging.
Gross Charges by Payer Type
A practice’s revenue can be significantly impacted by its payer mix (i.e. insurance companies).
Charges and Revenue
Physician charges and revenue should be broken down per physician and as a percentage of total medical revenue.
General operating costs should be broken down per physician and as a percentage of total medical revenue.
Provider costs (i.e., costs for anyone providing billable services including physicians, PAs, RNs, etc.) should be broken down provider per physician, per provider, and as a percentage of total medical revenue.
Staff FTE Levels and Cost
Staff costs should be broken down by FTE (i.e., how many FTE per position) and their associated costs. The data should be broken down on a per FTE basis and as a percentage of total medical revenue.
Procedures are broken down on a per FTE basis.
Financial concepts for a medical practice are distinctly different than most traditional businesses. It is important to continually ensure optimal efficiency and profitability within the practice. To maintain appropriate oversight of practice financial operations, practice metrics can be applied to the following operational drivers:
- Financial reporting
- Accounts Receivable Assessment
- Tax reporting and compliance
- Insurance processing
- Disbursements and collections
- Safekeeping of practice assets
- Billing supervisory responsibilities
What Makes A Healthy Practice?
The health of practice revenue is largely defined by the terms found within the practice’s agreements with payers. Practices that carefully and regularly review these terms tend to be more profitable and successful.
- Understand cash flow cycle: Where does the revenue funnel in from?
- What is the average payment cycle?
- What bogs down payments?