Best Practices

Is Your Practice Dashboard Fully Functional?

By Bruce Maller

Imagine heading out on a cross-country journey in a newly minted automobile. Pulling out of the driveway, you notice one little problem: the dashboard is darkened and the speedometer, GPS system, turn signals, and oil and gas gauges are not working. Although the headlights and stereo system work well, this seems of little consolation with no ability to track navigation or monitor the car’s vital signs to evaluate its performance.

During my travels, I often notice practices on journeys without fully functional dashboards. As such, many lack a sense of direction or an effective means of setting goals and gauging performance.

What’s on Your Dashboard?

First, practices should measure things that have the most significant impact on overall practice performance. These are commonly referred to as key performance indicators (KPIs). Although the specific measures can vary by practice, there are some “must haves” I recommend later in the article.

KPIs need to be well-illuminated or visible at all times, day or night, and should be assessed over time to identify practice trends. I also recommend there be a goal or performance target indicated for each measure.

A practice must have an automatic warning system so aberrations can be easily identified and practice owners and management can quickly and effectively intervene. This requires an understanding of the variables that impact performance. It is one thing to be able to identify a problem; however, a much different skill set is required to attack and fix what ails.

Many practices track too many things and lose focus on the “main” thing. Not unlike the dashboard in your car, practices need to be able to assess the key drivers that impact performance. If the dashboard is too cluttered, a manager or practice owner can be easily distracted and lose focus.

What You Should Measure

This will certainly vary by practice; however, here is my “Fab Five” dashboard of physician efficiency measures. Please note that although one might seek industry benchmarks or “best in class” performance, I recommended practices start out by tracking historical performance and establishing performance improvement goals.

1. Patient per Hour Rate (PpHr). Every provider has a “natural rate” of seeing patients. Rates will vary based on many factors including practice type and physician “style.” The simplest way to measure PpHr is by looking at the ratio of patients to clinic hours worked. For example, a physician who saw 7,000 patient visits in the prior year and worked 1,000 clinic hours would have a PpHr of 7.

2. Revenue Rate per Visit (RRpV) is calculated by dividing total professional collections by the number of patient visits completed in the computation period. For example, a physician who generated $1,000,000 in collections and saw 7,000 patient visits in calendar year 2011 would have an RRpV of $142.86.

3. Revenue Rate per Hour (RRpHr) is calculated by dividing total billings by the number of hours worked in the year. For example, a physician who generated collections of $1,000,000 and worked 2,000 hours would have an RRpHr of $500.

4. Net Income per Hour (NIpHr) is calculated by dividing net profit by number of hours worked during the year. Sources of net income include physician salary, retirement plan contributions, other MD direct expenses and the physician’s share of net in come. For example, a physician who worked 2,000 hours with $500,000 net profit would have an NIpHr of $250.

5. Operating Expense Ratio (OER) measures efficiency in conversion of receipts into compensation. OER is calculated by dividing operating expenses (exclusive of physician compensation) by gross collections. Effective application of the OER can assist practices with proper associate compensation structure while keeping the owner focused on receiving an appropriate return on time worked and risk assumed as a business owner.

Focus on What Matters Most

It is not difficult to get lost on your journey. The key is to be able to focus on the things that matter the most in driving practice performance. Well-constructed dashboards can enable practice owners to steer themselves in the right direction. Once comfortable with the practical application from a planning perspective, practices will identify many other areas into which this type of tool can be integrated. OM

Bruce Maller is president and CEO of BSM Consulting, an inter nation ally recognized health care consulting firm. For more information about BSM and its resources, visit www.bsmcafe.com.