Improving the financial performance of a medical group requires a strategic, data-driven approach. At the core of this approach are key performance indicators (KPIs) – measurable metrics that offer critical insights into operational efficiency, revenue health, and overall practice performance. By focusing on the right KPIs, hospital and medical practice leadership can make smarter, faster decisions that drive profitability, enhance efficiency, and support long-term success. In this article, we’ll highlight twenty (20) important KPIs sorted into five (5) categories that medical groups should be tracking to achieve financial success.
1. Revenue Cycle Management (RCM) KPIs
Revenue Cycle Management is a critical area for any medical group, as it directly impacts cash flow and financial stability. KPIs in this area include:
- Days in Accounts Receivable (AR): The average number of days it takes to collect payments once the medical service has been provided. A lower number indicates efficient billing and collections processes.
- Net Collection Rate: The percentage of payments collected out of the total amount billed. A high net collection rate signifies effective revenue cycle management.
- Denial Rate: The percentage of claims denied by payers. Monitoring and reducing the denial rate can significantly improve cash flow and reduce administrative burdens.
- Cost to Collect: The cost incurred to collect each dollar of revenue. Lowering this cost can enhance profitability significantly and provide a significant return on the medical group’s investment.
2. Patient Access and Scheduling KPIs
Efficient patient access and scheduling are vital for maximizing revenue and patient satisfaction. KPIs in this area include:
- Appointment Scheduling Lead Time: The average time between a patient's request for an appointment and the actual appointment date. Shorter lead times can improve patient satisfaction and increase the number of visits.
- No-Show and Cancellation Rate: The percentage of patients who do not show up for their scheduled appointments or cancel their appointments within the same day of the appointment. Reducing the no-show and cancellation rates can enhance revenue and optimize resource utilization.
- Third-Next Available Appointment: The time until the third-next available appointment, providing insights into appointment availability and scheduling efficiency. The benchmark for the third-available provider appointment is fourteen (14) days for primary care single specialty and six point three (6.3) days for surgical single specialties.
- Referral Capture and Turnaround Rates: The percentage of unique patient volume that remains within the medical group after an initial provider interaction. This metric reflects how well your organization captures and retains referrals internally. In addition to monitoring time to first appointment for new patients, it’s essential for multispecialty medical groups and integrated health systems to evaluate the full patient journey – from referral to treatment – to identify potential patient drop-off points within the patient/practice cycle.
3. Operational Efficiency KPIs
Operational efficiency directly impacts the financial performance of a medical group. KPIs to monitor include:
- Provider Productivity: Measured by the number of patient encounters per provider. Higher productivity normally indicates efficient use of the provider’s time and resources. (Note that Provider Productivity is also a KPI in assessing Financial Performance, as listed in section 4 below).
- Staffing Ratios: The ratio of clinical and administrative staff to providers. Optimal staffing ratios can improve efficiency and reduce costs.
- Average Patient Call Handle Time: How long a patient waits on the phone before connecting to a representative within the medical group. Shorter call handle times typically lead to better patient experience. By tracking this KPI, medical groups can identify bottlenecks and improve responsiveness. Implementing digital tools like online scheduling or automated messaging can offload routine inquiries, reduce call volumes, and shorten call wait times.
- Patient Wait Times: The average time patients wait before seeing a provider once they are checked in for their appointment – a critical factor in overall patient satisfaction. Long wait times can negatively impact both patient experience and patient retention. Many high-performing healthcare organizations target a wait time of less than 10 minutes from check-in to provider interaction, in line with benchmarks from the Healthcare Financial Management Association (HFMA).
4. Financial Performance KPIs
Monitoring financial performance KPIs is essential for understanding the overall financial health of the medical group. KPIs include:
- Operating Margin: The percentage of revenue remaining after all operating expenses are subtracted from medical groups revenues. A higher operating margin indicates better financial health.
- Provider Productivity: A measure of a provider’s work or output. It is used to assess a physician’s efficiency and their results in treating patients. It can be measured in multiple ways, including but not limited to total annual collections, annual work relative value units (WRVUs), patient panel size, or the number of encounters seen per day.
- Total Revenue per Patient Visit: The average revenue generated per patient visit. Increasing this metric can improve overall profitability.
- Expense per Patient Visit: The average cost incurred per patient visit. Reducing this expense can enhance profitability.
5. Quality of Care KPIs
While financial performance is essential, delivering high-quality care is equally critical – serving as a key indicator of a medical group’s efficiency, effectiveness, and commitment to patient outcomes and patient safety. KPIs in this area include:
- Patient Satisfaction Scores: These scores reflect patients' overall satisfaction with their care. High satisfaction scores can lead to increased patient retention and referrals.
- Clinical Outcomes: Metrics such as readmission rates and treatment success rates provide insights into the quality of care provided.
- Preventative Care Measures: Assess the effectiveness of preventative care initiates, such as vaccination rates and cancer screenings to promote population health.
- Compliance with Clinical Guidelines: Monitoring adherence to clinical guidelines ensures that patients receive evidence-based care, which can improve outcomes and reduce costs.
Identifying and tracking the right KPIs is essential for improving the financial and operational performance of a medical group. By focusing on revenue cycle management, patient access and scheduling, operational efficiency, financial performance, and quality of care, hospitals and medical groups can make data-driven decisions that enhance profitability and ensure long-term success. Regularly reviewing these KPIs and implementing strategies to improve them will help medical groups thrive in an increasingly competitive healthcare landscape.
This article is intended for educational purposes only and should not be considered financial or clinical advice. For personalized guidance on which KPIs are most relevant to your medical group, please contact Ronnen Isakov at risakov@medicmgmt.com.
Ronnen Isakov is Managing Director Advisory Service of Management Group, LLC. His background includes extensive work in areas including business advisory, valuation, network optimization, transaction support, and project management.