Create 5 KPIs for Your Practice
By Tannus Quatre, PT, MBA
There are hundreds of metrics you can use to gauge the performance of your practice. From employee production to customer satisfaction, profitability, and more—there’s really no limit to the ways in which you can generate a metric that quantifies your performance.
And therein lies the problem.
Generally speaking, metrics are an important tool used to understand your business and to make decisions about its future. However, without some constraints as to their use, two things will happen.
The first is becoming overwhelmed. Imagine trying to stay focused on 100 metrics, all of equal importance, and all at the same time—maybe you’ve been in this situation before. Beads of sweat start to form just thinking about it. How can you possibly maintain clear, calm focus when attempting to move dozens of dials all at the same time? The simple answer is, you can’t.
The second is paralysis by analysis. When you can’t maintain focus, you can’t make (good) decisions. By trying to focus on everything, you end up not focusing on anything. Paralysis by analysis applies here.
So, while on the one hand we have the brilliance of nearly infinite metric selection at our fingertips, this very characteristic of managing a business can also lead to our downfall. In order to be effective as a manager or owner, we need to focus on what is truly important, and those to whom we delegate decision-making authority must follow our lead.
To do this, I advise that you start with five (or fewer) key performance indicators (KPIs) that you know to be key to your success. Once these are well under control, you are free to add more, but we need to first remove the noise before we can get started.
A KPI is a metric critical to the success of your business. They are not the same for every business, even in like professions such as physical therapy.
As an example, we all know that patient visits are a critical driver of revenue, and as such this is a common area of focus with regard to KPIs. But the measure of visits alone may not be as useful as measuring the drivers of visits (what actually leads to them happening in the first place). This is where KPI focus can vary dramatically from practice to practice.
Here are a few tips to help you determine your five optimal key metrics:
Start at 10,000 feet, then work your way down to 10
At the highest level, ask yourself what one or two metrics are required for your success. This might be something related to revenue or profitability—accurate, but much too general for a useful KPI. Then ask yourself, “What is the driver of this metric?” Repeat the process several times until you narrow down to a useful and manageable metric that can be used as a KPI in your business.
Example: At the 10,000-ft level, my practice needs to have strong revenues. So I ask myself, “What are the drivers of my revenues?” Answer: patient visits. Next I ask, “What are the drivers of patient visits?” Answer: evals. Next, “What are the drivers of evals?” Answer: marketing contact with referral sources.
You can repeat this process as many times as necessary, and stop when you’ve come to a good KPI for your practice.
Now, or later
Narrow down to metrics appropriate for the stage of your business by asking yourself if your KPIs should be focused on the near term (read: survival), or longer term (growth and sustainability). Usually a mix of the two are appropriate; however, there’s little use in focusing on long-term growth KPIs if the business is at risk of failure over the near term.
Do I have the data?
It may seem obvious, but it’s worth stating that the ability to calculate a metric is a prerequisite to using it as a KPI. This can come into play with metrics that require data not made easily available through standard electronic medical record (EMR) and financial systems. Examples may include customer and employee satisfaction data. If you don’t have the data, you’ve got two options: (1) find a way to get it, or (2) focus on a different KPI.
KPIs are critical to the success of your physical therapy practice, but don’t let them overwhelm you.
Tannus Quatre, PT, MBA, lives at the intersection of physical therapy and entrepreneurship, spending his time helping physical therapists build and operate successful practices through his company, Vantage Clinical Solutions. He specializes in marketing, finance, and business planning, and authors and speaks regularly for the APTA and PPS. He can be reached at firstname.lastname@example.org.