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How a Medical Billing Company Measures Office Financials – Part 2

May 12, 2016

In a previous post, we looked at three reports every practice should run to stay on top of financial M-Scribe_Measuring_Specialty.jpgperformance: The accounts receivable aging report, the payer mix ratio, and the gross and net collections ratio reports. Now we’ll look at three more metrics that give deeper insight into your group’s financial health. These reports can be tweaked for your particular practice and specialty, but the broader picture is useful for measuring your overall performance. 

1. Accounts Receivable Per Full-Time Provider

Running a report comparing each provider’s outstanding accounts receivable with both the overall practice average and with other individual providers gives an interesting and meaningful look at how each doctor is performing. Aside from the obvious conclusions about patient load and complexity of services provided, this number can be tweaked to show aging, as well, giving you granular information about potential reimbursement issues. A provider with an aging imbalance compared to others in the group may have a problem with “dirty” claims, perhaps due to inadequate documentation or inexperienced coders

To dig deeper into these numbers, you can further break out A/R and aging by payer to identify possible trouble spots with a particular carrier or an imbalance in worker’s comp or auto accident claims. 

2. Average Revenue to Cost Ratio Per Patient

The key to profit and a growing bottom line is increasing the number of patients in your practice who generate a lot of revenue at a relatively low cost. The best way to measure how your business is doing at attracting and retaining these highly desirable patients is to calculate your average revenue per patient (total revenue for the month divided by the total number of patient visits) and your average cost per patient (total practice overhead divided by total patient visits) and determining your average profit margin per patient. Once you’ve calculated your “average” patient ratios, you’ve got a baseline number to evaluate individual patient groups:

  • Patients enrolled in each insurance plan (multiply number of patient visits for each carrier by the average cost per patient and divide by the total monthly revenue for each insurance plan)
  • Patients seen by each provider (multiple patient visits by average cost per patient and divide by provider’s monthly revenue)
  • Patients seen in each location
  • Patients meeting certain diagnostic criteria 
  • Patients by specific encounter types

The possibilities are virtually endless and give you deep data about your most profitable patient groups, insurance plans, and procedures, as well as those that are loss leaders. This data is helpful in contract negotiations, marketing efforts, and even identifying areas to exert broader cost control throughout the practice.

Related Article: How a Medical Billing Company Measures Office Financials – Part 1

3. Laboratory Expense Ratio

This is an often overlooked expense category that is very valuable in your overall operating expense and profitability. To determine your lab expense ratio (or any other “add on” service your practice provides), divide your total overall lab expenses for the month by the total number of lab-related CPT codes for the month. You can further break out this number by payer to compare each against the practice numbers as a whole to see whether ancillary services are a worthwhile addition to your core practice functions. 

It’s also helpful to break out your collections and adjustments for lab expenses and calculate true ratios by payer. In addition to providing insight about which services are profitable and which are loss leaders, it can also help you identify payers who consistently reject or mistakenly adjust reimbursement for particular lab CPT codes to see if there are coding or documentation issues involved. 

The experienced billing specialists at M-Scribe can help you identify the most meaningful metrics for your particular practice and show you how you compare to others in your specialty. Call today for a consultation.


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