Practice Success That Can Be Measured

People standing near an oversized cell phone

By Brian Gallagher, PT*

Recently, I was at a conference delivering a lecture to a room filled with physical therapy private practice owners and said, “It’s time we begin to question the KPIs we have long-been accustomed to because PT 2020 and beyond is looking much different than ever before.”

Due to the changes in our health care system and the increasing public appetite for quicker and more convenient services, what we once set as a standard of practice for running a successful physical therapy private practice no longer holds true in many cases. In light of the COVID-19 crisis, this may be even more relevant and timely to consider. For instance, we used to say that whatever number of weekly visits you are expecting to see in the week, 10% of them needed to be new patients to maintain that weekly volume of patient visits. That number has now grown to approximately 15%, due to the greater number of patients now being seen only one or two times per week as opposed to two or three times per week.

With that said, it is important to acknowledge that the standard brick and mortar physical therapy practice of seeing all “in-network” patients is no longer the only game in town. Many are becoming owners of a variety of new business models in order to better meet the needs of our public. We have mobile outpatient practices, cash-only practices, and hybrid model practices that each have their own set of metrics to follow in order to measure their performance. In the landscape of COVID-19 telehealth and virtual medicine this has become a model out of necessity, but will also impact the future.
However, what does that mean for their KPIs? Let’s start with some of the basics that everyone already knows. Here are a few working definitions:

  • Statistics: I like to assign stats to posts within an organization to track one’s performance. There are primary or “main stats,” and there are secondary or “sub-stats.”
  • Sub-Stats: Statistics within the post that drive the “main stat.” For instance, while your marketing team’s primary stat may be “new patients,” a sub-stat may be “number of referral offices visited.”
  • Metrics: The identified measurements assigned to a particular department, division, or whole company in order to accurately understand their performance when placed up against the standard targets, goals, or benchmarks.
  • Key Performance Indicators (KPIs): Show the progress (or lack thereof) toward realizing the company’s objectives or strategic plans. KPIs are used to monitor performance against targets or goals.<
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    After two decades of helping owners with their private practices, I still find it surprising how private practice owners can manage week to week without knowing KPIs. I’m not talking about the basic KPIs that everyone should know including patient visits, new patients, production, collections, and percentage of kept appointments. I hope the majority of owners are all well beyond this knowledge. I’m referring to more advanced KPIs that better illustrate the success of your practice. Because the climate has changed, the old KPIs alone are not great indicators of success.

    As owners dive into key metrics and KPIs that are a bit more advanced, they should know that there are five major divisions at work within their practice every day.

    THE FIVE PRACTICE DIVISIONS AND THEIR METRICS

    The PT private practice operating divisions and their key metrics are:

    • Executive: The amount of cash going into reserves each month
    • Administrative: The % of fully trained and tested personnel
    • Financial: Payroll as a % of Gross Income (GI) and GI divided by staff
    • Production: 3.75 units per visit or greater on a four-week running average
    • Marketing: Greater than 60% of all your new patients being return business

    Certain metrics and statistical trends can be an indicator as to where the owner should look to turn things around before they get any worse. Metrics and statistics can also be a training tool when communicated properly. Use them to motivate your staff to perform at a higher level.

    How? I recommend that you start by calling a staff meeting to educate your team on the statistics and metrics of their specific job posts. Then, issue each member of your team a new employee agreement that outlines the two-way street of performance that you both should be expecting from each other. They expect a paycheck, benefits, and the means for a greater earning potential over time. You, as the owner, expect high-quality care measured through patient outcomes and reviews, clinical efficiency above 85%, and an abundance of care being delivered during each session as measured in billable treatment units.

    Once you have each member of your team understanding the importance of statistics and metrics and fully on-board, you can then share the KPIs for each division and the current status of divisional metrics through weekly meetings.

    Reporting on data without tying it back to specific actions that they have control over will do nothing more than disenfranchise them from your company goals and mission. The whole point of tracking this data is to empower each team member to work hard each day, knowing the impact their products have on the success of the team.

    DIVISIONAL METRICS DEFINED

    Once you have a handle on the structure, it’s time to define primary metrics for each of these divisions.

    • CEO: The primary metric for the CEO should be “the amount of cash going into reserves each month.” There are several sub-stats that go into driving this primary metric.
    • Administrative Division: Their primary metric is based on “the percent of fully trained and tested personnel.” People will only perform as well as they are trained and held accountable. A practice today that doesn’t have an internal CDT (career development training) program for continued professional enhancement, consistency, and compliance will struggle, as will employee retention and staff morale.
    • Finance Division: Their primary metric is “payroll as a percentage of GI” and “GI divided by staff.” It is imperative that these two metrics be closely monitored and that the executives know what to do about it. Your payroll needs to remain below 60% of your monthly GI each month. Production should be calculated on a four-week running average and should be greater than or equal to 3.75 units per patient visit. This one all depends on how well trained your clinical staff is and what time intervals you have selected for treating patients throughout the day.
    • Marketing Division: For this division, the primary metric would be “percentage of all new patients being return business.” This is an indicator of how effective your internal marketing efforts are toward building your brand and reputation out in the community.

    As you process these key metrics, what is most important to know is what they are a reflection of within your practice, and what specific sub-stats influence the key metrics. It’s the sub-stats that matter most because they drive the metrics. It’s in the training and experience of your executive team to know where to look and what to do when these metrics begin to drop. All of the metrics I mentioned are good ones to follow if you are still seeing patients under the insurance base model.

    We can no longer measure our practices solely on the old traditional benchmarks. Our patient care delivery systems are rapidly evolving, and this requires a new scale of assessment. If you want to consider new and advanced metrics and KPIs and how to measure these as the industry evolves, reach out to your peers in PPS or outside the industry to brainstorm options. Otherwise, seek a consultant who can guide your decisions as appropriate for your individual business.


    Brian Gallagher

    Brian Gallagher, PT, is a PPS member and owner of MEG Business Management. He can be reached at Brian@megbusiness.com.

    *The author has a professional affiliation with this subject.