This is a guest post from Shane Morgan, Partner within the Medical Division at Cutcher & Neale Accounting & Financial Services. Shane recently spoke at the 2017 AAPM Conference and has extensive experience assisting practitioners in planning and structuring their businesses plus improving financial performance.
In our last blog, we talked through buying into or starting a practice. In this post we will cover what you need to be monitoring on an ongoing basis, and how you can measure up your practice against others.
Key Performance Indicators (“KPIs”)
What is a KPI? They are quantifiable financial and non-financial measures that reflect the critical success factors of a practice.
When we talk about success, we are looking at the attainment of an organisation’s objectives or strategies.
If we look at examples you might use in your day-to-day when measuring patient health, you could be looking at measurements like:
- Blood pressure
- Heart rate
These are all measurements that are combinations of many other variables, and tell you a good deal about what is actually happening ‘under the hood’.
They reduce potentially complex information, into an understandable and meaningful format.
So when looking at a practice, we need to work out what we are going to measure – what are the critical success factors for a medical practice?
One of the attributes we often see in our successful practices is a focus on leveraging doctor time. What this means is that your doctors focus on providing the services that only they can provide, and the practice nursing and support staff take care of the rest.
These practices all have highly effective management and support staff. The result – usually a profitable practice with happy patients!
Success with using KPIs in your practice comes when:
- The KPIs are actually “Key” – they provide an accurate assessment of performance against the stated objective
- They are relevant – specific to the practice
- There are not too many (but enough!)
- They are viewed over a long period, and against your peers to provide you with context
And providing you with that context of where your practice places against the industry is the backbone of benchmarking.
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Why benchmark? Simple – context.
Your internal reporting might show you that your average consultation time is 28 minutes.
What does that mean?
How does that shape up against other practices?
If the industry average is actually 21 minutes, it means you are spending longer with each patient. Whilst patient care is paramount, the longer consultation time may indicate a lack of leveraging of nursing and administrative staff.
We view KPIs for medical practices and benchmark in the following areas:
We expand on the use of KPIs in several of these areas below.
This is where you can determine your leveraging of doctor time.
- How many Full Time Equivalent (“FTE”) doctors are working at your Practice?
- How many FTE nurse and admin staff are there?
- How does the number of nurse and admin staff compare to the number of doctors?
These are KPIs that tell you about how you service your patients.
- Do you know your average fee per consultation?
- How long is your average consultation?
- Do you measure the number of return visits that your practice receives?
Profitability / Expenditure
Here we measure areas such as your staff or equipment costs against medical fees. Comparison to other practices in this regard can give you particular insights as to your need to update equipment, how your staff are remunerated, and your leverage.
How to use benchmarking?
Benchmarking should be used to provide you with context for the performance of your practice. Just because you are below the benchmark in one statistic, it does not mean that you are a low performer.
You need to consider how the insights that you gain from benchmarking will improve the overall performance of your practice.
Benchmarking needs to be used hand in hand with KPIs in order to identify how you are tracking against strategic goals.
By benchmarking against what are essentially your competition, you can analyse what are the key areas you need to improve to be more effective and more profitable.
How to choose the right benchmarking software?
It has to be easy! Choose a software that doesn’t add significant time to your practice staff workload.
We recommend Australian Medical Benchmarks.
Australian Medical Benchmarks initially began as a joint initiative between Cutcher & Neale, The Royal Australian College of General Practitioners (RACGP), new technology enterprise RACGP Oxygen and Australian Association of Practice Managers (AAPM). The program has been collecting information from medical practices since May 2010.
You can find out more here: www.medicalbenchmarks.com.au