The Five Metrics You Can’t Afford Not To Track
Improve both your bottom line and quality of life
By Matt Slimming, PT, DPT
A couple of decades ago the business of physical therapy was very different. Profit margins were high, competition was less aggressive, and regulations weren’t as onerous. It seemed all that was required to be successful were decent clinical skills, an outgoing personality, being consistent, and not doing irresponsible things. Now we find ourselves in an industry in which margins are tight, competition is fierce, and we often spend hours of our precious time just to understand regulatory changes.
In order to be successful in today’s world, we have to run our practices like businesses. That is an entire discipline. Every component of a practice must be operating at acceptable levels or profit margin, and thus company mission, can quickly erode. For that reason, perhaps the most important component of successful business management is to measure your performance in key areas and then adjust to improve in those areas.
One of our challenges is that as owners, we have limited time in which to manage our practices. Most of us can’t afford layers of middle management. Yet we still have to measure and manage metrics for success. Therefore, it is important to start with the most important metrics and progress from there.
But what are the most important metrics for you to measure this month?
For your practice, the most important ones are those that, by improving, do one of two things:
- a) make the greatest improvement on your long-term bottom line
- b) improve your quality of life
Let me provide an example for each of these measures of success.
Improvement on your long-term bottom line: If your clinic is struggling to consistently get close to 20% profit margin, you may wish to start by analyzing your monthly expenses. It may be appropriate to look at your expense categories and ensure they are within acceptable ratios. By addressing the categories that are out of line and cutting where you need to, you may find that you quickly approach the desired 20% profit margin.
Improving your quality of life: Perhaps your clinic is thriving and regularly meeting 20% profit. You may be more concerned about your quality of life as an owner. The greatest threat to your quality of life may be the risk of losing one of your staff therapists. If that is the case, you may want to begin to measure your employee engagement. This is relatively easily done using an online survey platform, such as Survey Monkey. By digging in and doing the analysis, you may come across deficits in your company culture that are hurting morale and increasing the risk of staff turnover. The obvious action would be to address your company culture in a comprehensive fashion.
In both circumstances, it is essential to do three things:
- Measure the metric in question
- Take action to address the metric, so that it hopefully improves
- Repeat and then maintain when at desired levels
These examples show that the most important metrics to measure depend on the status of the organization.
There are dozens of metrics that can be important for a clinic to measure. These range from analysis of growth, to marketing ROI, to errors at the front desk, to therapist productivity, to expense ratios. The following outline the five most important metrics that a clinic should start measuring if they are just getting started with this discipline.
1. PROSPECTS READY TO SCHEDULE (LEADS)
New patients are obviously the lifeblood of your practice. You need to know if you are growing, if your marketing efforts are effective, or if you are losing market share. This metric tracks the number of people that you are trying to schedule for their first appointment. These could be referred by a doctor, walk-ins, respondents to your online marketing that have asked to get on your schedule, or any other type of direct access patient.
Your goal for this metric is to be growing relatively consistently, taking into account seasonal changes and aberrant events, such as weather issues, pandemics, etc. The target growth rate will be different for each clinic, depending on demographics, competition, area population growth, age of clinic, owner goals, and other factors.
2. PROSPECT CONVERSION RATE
Your front desk policies and the effectiveness of your front desk staff getting these folks scheduled (and rescheduled) is of such importance. One lazy front-desk person, or an ineffective policy, can easily drop this rate by 20%, which could cost the average clinic $14,000 a month.
You also want to be tracking all interactions related to each prospect so that you can learn how to improve your process to make gains in this metric.
We have seen this value range from 60% to 100% and it depends greatly on the above factors, in addition to population demographics, in-network status, time of the year, and aberrant events.
3. FRONT DESK ERRORS (THAT RESULT IN DELAYED OR REDUCED PAYMENT)
Data entry errors are ignored far too often, and they could be hurting your bottom line dramatically. Data entry errors and errors in dealing with precertification and authorization requirements can easily cost an average clinic thousands each month.
These days the job of the front desk staff has become a lot tougher, largely due to insurance requirements. Couple that with the current difficulties in hiring and not providing sufficient training and performance analysis and these errors can quickly have a significant impact.
This will require you getting great data from your billing company or in-house biller. Not all of these entities are set up to provide this.
Each month you will want to track errors that caused delayed or denied payment and total amounts for each. Obviously, you want to be shooting for close to zero errors in both categories. Don’t be surprised if it takes a lot of training and retraining to get there. You may also wish to outsource these tasks to a revenue cycle management company. However, you will still want to track these errors if you do outsource.
4. TIMED UNITS PER VISIT
This obviously depends on the type of payor and may also depend on whether the payor pays you a flat fee or per code. We have seen huge variations in this metric, ranging from extreme underbilling to worrisome overbilling. Bear in mind that underbilling can still be unethical as it may provide patients with incorrectly low financial responsibility, thus causing “overutilization” of services. It is important to code accurately, according to how you treat.
Lazy or overly cautious physical therapists can easily code 25% to 50% lower than is appropriate, hurting the bottom line by that much.
5. VISITS PER CASE
This metric can show huge variation between clinicians and types of practice. There is much debate about appropriate targets and each owner should determine what is right for them.
So much goes into achieving an optimal number of visits per case. With patient financial responsibilities increasing, it gets harder to have all of our patients stay until they have reached an appropriate level of recovery. And what is an appropriate level of recovery?
Many believe that if the average patient is discharged from physical therapy at 80%, they won’t keep doing their exercises (let alone progressing them). As a result, their health could decline. Their pain could return or increase and their functional level could drop. They will likely return to their doctor complaining that their physical therapist didn’t fix them. This reduces the value of physical therapy in the doctor’s eyes, which is bad for health care. In addition, they will usually be directed to more expensive testing and less effective, but more expensive, interventions.
This is the worst result for the patient and for health care costs overall. We do have a moral obligation to do the best for our patients and this will often mean treating them until they are 100%.
Those physical therapists who achieve a higher number of visits do a lot of things right and this may be the hardest metric to coach physical therapists on. However, the effort is worth it to the clinic’s financial health, as improvements of just two visits per case can easily mean an increase of $10,000 in revenue per month to the average clinic.
It may seem that analyzing these five metrics will be a lot of work. However, plan to choose one of these this week and start the process of keeping track month-to-month. The next step will be to have meaningful discussions with your team about how to optimize that metric.
Matt Slimming, PT, DPT, is a PPS member and owner of STAR Physical Therapy and STAR Management Company, a PT billing company. He enjoys helping PT owners maximize revenue, without the headaches.