Using EMR and Key Performance Indicators to manage your practice.
By Bridgit Finley, PT, DPT, OCS
Most of us business owners became owners because we were skilled practitioners, not because we knew how to run a business. A business owner requires a skill set different from that of a physical therapist; we must shift roles from hands-on practitioner to manager. Instead of working “in” the business, we now need to work “on” the business and be able to understand financial metrics.
Running a business means that you need to know your numbers: How many new evaluations? How many visits per new patient? What is your days sales outstanding (DSO)? Your numbers are key pieces of information known as metrics or key performance indicators (KPI) that drive your business. If you do not know your numbers, then you are not running your business, your business is just running without any direction. Practice owners need to know the KPI that will help them in their business and guide their decision-making. With an electronic medical record (EMR), all the data at our fingertips can be pulled at month’s end to see how the business is doing in relation to company goals or industry benchmarks. Metrics can be grouped into financial, marketing, and collections. Collections is one metric that was difficult for me to be able to understand and control. I recommend working with your EMR provider to select three or four KPI and receive month-end reports about them. Avoid looking at a dozen or more reports; it will paralyze you.
My good friend, David Browder, a big Peter Drucker fan, says to me all the time, “What gets measured, gets done.” The first step is simple: Decide what you want to measure, then look at the industry benchmarks and set your goals accordingly. Each month, look at the KPI and set action steps to improve the indicator. Monitor the action steps weekly and monthly steps to ensure that they “get done.” Let’s say I am worried that my accounts receivable (AR) over 90 days is getting so high that it is affecting the business’s cash flow. The easiest money to collect is standing right at your front desk. If the money is not collected up front, it will move to your AR. Each day that it sits on your AR, it becomes more and more difficult to collect. Your EMR should have a report at your fingertips that shows you your AR broken down into current (less than 30 days), 30-60, 60-90, and over 90 days. I look at my AR broken down into timeframes, with and without motor vehicle accidents. We are one of the few clinics to take motor vehicle accident (MVA) cases, but we want to monitor those cases and not let them skew our AR over 90 days. We know that we will not likely collect on a MVA case before 90 days, so we evaluate our AR with and without the MVA cases.
First we need to understand the benchmarks for AR and DSO. AR is the money that is owed to the business by the customers and insurance companies and is outstanding. DSO is [day’s] sales outstanding and is the average number of days that a company takes to collect revenue after a sale has been made. A low DSO means that it takes a company fewer days to collect its accounts receivables. DSO is an effective efficiency ratio to determine overall collection effectiveness. To improve the decision-making value of the DSO metric, it should be broken down into major payer classifications. I worked with my EMR company to determine what percentage of my collections would be acceptable for over 90 days. I wanted to know the benchmark and leading industry standard for their customer base. I learned that EMR vendors receive a tremendous amount of information from their customers and that information can help me run my business. We determined that we did not want our MVA AR to be more than 5 percent, and if it reached that number, we would limit or stop seeing those cases. We also wanted our AR over 90 days to be no more than 15 percent of the total AR. The DSO benchmark is 30 days, so if our 90 days AR is increasing, something is not working. With my AR broken down by payer classification, I could see that one category I wanted to go after (the low hanging fruit) was cash; the amount that the patient owes is from copayments and coinsurance. We met with the front desk personnel and set a goal to increase our front desk collections from 9 percent overall to 11 percent. If we were able to do this, it would have an immediate effect on our cash flow, decrease our AR, and improve our DSO.
Each month, I now pull the reports and review them compared to the benchmarks or standards. If we are not meeting standards, I drill down further to see what is breaking down. Another way to improve DSO is to make sure that the front office person is entering all data correctly so that claims are not rejected, or 97 percent clean claim submission rate is reached. The therapist has to complete his/her notes for a claim to go out within 24 hours. When payment is received, it should be posted quickly and accurately within three days, another company standard. As a company, we set goal to decrease our DSO from 40 to 30 days. If you want your team to buy into the goal, they must be involved in the process and implementation and be rewarded for a good outcome.
Bridgit Finley, PT, DPT, OCS, a PPS member and chief executive officer of Physical Therapy Central, with multiple practices in Oklahoma. She can be reached at firstname.lastname@example.org.