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How to Measure Medical Practice Financial Health?

June 15, 2016


You could ask 10 different medical practice owners, administrators and executives and get 10 different answers about which are the most important financial Key Performance Indicators (KPIs) to monitor your practice’s financial health. Top performing practices surveyed recently, however, were found to track the following metrics on a monthly and annual basis:

Financial Reports:

  • A/R Aging
  • Cost reports by department, provider, and location (if applicable)
  • Income statement and balance sheet
  • Cash Flow

Practice Management Reports:

  • Collections summary analysis
  • Encounter forms reconciliation
  • Un-billed revenue
  • Billing summaries
  • Procedures analysis
  • Managed care profitability/capitated contract analysis

In many cases, the most effective managers used an analytics dashboard with real-time access to key metrics including number of visits and number of procedures, for example.

David Gans, MSHA, FACMPE, takes it one step further in his article “Data Mine: What matters and what doesn’t.” With all the information available in today’s practice management systems, Gans suggests these are the essential financial KPIs for medical practices:

Revenue Cycle Indicators:

  • Total A/R per provider
  • Percent of A/R at 120+ days
  • Days in A/R
  • Adjusted Fee For Service (FFS) collection percentage

Financial Performance:

  • Total medical revenue per provider
  • Total operating cost per provider
  • Net revenue per provider (total revenue minus total operating cost)


  • Operating cost as a percentage of total revenue

But accessing and analyzing this data at the practice level is just the first step toward getting control over your financial health and performance. To understand how your practice stacks up and to find opportunities for improvement, you need to advance to the benchmarking stage. 

The Value of Benchmarking in Medical Practice Management

Your practice’s individual numbers are useful in setting performance goals and measuring your progress, but to identify areas of weakness in your financial health, comparing your KPIs with national averages by practice specialty is essential. 

 Specialty  % of A/R

120+ Days

  Months Gross FFS Charges in A/R  
  Better Performance All Respondents Better Performance All Respondents
Primary Care 10.34% 19.17% 0.93 1.34
Med Specialty 9.52% 16.12% 0.86 1.24
Surgical Specialty 9.02% 16.55% 0.97 1.39
Multi- Specialty 10.23% 17.76% 1.00 1.28


If your Accounts Receivable numbers don’t stand up compared to better performers in your specialty, you can and should investigate your payment and collections policies and procedures.

For example:

  • Which carriers are you having trouble with denials and adjustments?
  • Are your window collection policies lax?
  • Is your data collection, documentation, and coding accurate and up to speed?
  • Are you using automated features in your medical billing or practice management system to help manage your A/R?
  • Are you devoting enough resources to following up on adjustments, denials, and collections?
  • Do you offer arrangements and financial counseling to help patients struggling with their bills?

Related Article: Assess Medical Billing Performance in Your Medical Practice

Take a look at bad debt per provider benchmarks for more insight into your A/R management:

 Specialty Better Performance All Respondents
Primary Care $5,535 $12,408
Medical Specialty $14,305 $19,364
Surgical Specialty $15,888 $27,977


If your bad debt is out of control, it’s time to investigate:

  • Is the problem mostly due to payers or patients? If payers, is there one that stands out?
  • If payers are the problem, what steps are you taking to work denials? Have you consulted with the payer to identify potential problem areas?
  • If patients make up the bulk of your bad debt, are you promptly working late accounts? Do you offer payment by credit card? Is there face-to-face financial counseling available?
  • Are you working accounts in a timely manner? You have less than a 70% chance of collecting debts past 90 days, and that drops to about 50% at six months. 

If you’d like more information about benchmarking your practice’s financial performance, contact us today to speak with one of our Medical Billing and AR Specialists today and request a free medical billing analysis. 


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