KPIs, Tool #5 of 8: Average monthly charges and Average monthly payments
Performance is Reality
“Words are words, explanations are explanations, promises are promises: performance is reality.”
You gotta like it: “performance is reality”. When you’re on a boat, reality is key. One fine day we were sailing into harbor and I’d read the chart wrong, making a decision to sail below an outcrop when I should’ve been sailing above, sailing my way straight on to reefs…
I looked down at the depth gauge and realized I was about to run aground on the course I thought was so great. Run aground at 8 knots, family on board chatting, laughing, waiting, at the end of a long sun-shot, windy rough sea day to get into harbor, drop the hook, raise a glass, eat cheese, take a dip: I was going the wrong way, and going the wrong way FAST. But I realized it, and I realized it in time because of that depth gauge, and I swung the boat hard over and like a good ‘un she responded with nary a complaint, despite the fact that I hadn’t prepared her properly beforehand, heaving sails in before coming about: I just did it. She responded, and so did my carefree crew: they yelled “hey Cap’n! Give us some warning there, mate!” and did what they should with the sails while I prayed, clinging to the wheel with cold hands, that we were gonna be ok, that we were gonna be good. And we were. The boat and the crew performed, sailing well and easily into safe deep blue water.
We continued on into harbor: we dropped the hook; took a dip; ate cheese; told jokes; and I breathed in deep the whole time (still do!). My wife gave me a quizzical look and I told her later that she had to check me and my course more often. But hey: I checked my course, I checked my depth gauge, I didn’t like the look of the water and was getting worried; I was looking at various salty KPIs to confirm my course was good; the KPIs told me it wasn’t; I made a course correction; the boat and people did what they had to do; all good. What could have been disastrous wasn’t.
KPIs validate reality.
Pairing average Monthly Charges with average Monthly Payments allows you to confirm your course is good. Are monthly charges down? Maybe it’s a software issue: your billing department just loaded contracted amounts into the fee schedule and the software automatically adjusts charges accordingly. Are your payments down? Too much provider vacation recently: that was a bad decision, got to manage that better: no vacation for the next quarter!
Average monthly charges and payments:
- Provides you with a “measure” of Provider production. It’s important to note that the practice fee schedule directly affects the relationship between charges and productivity. When all fees use the same calculation (i.e the same % of Medicare allowed for each CPT code) this KPI is an accurate measure of productivity.
- Average monthly charges can be computed for several different “variables” such as providers, locations, payers, lines of business, etc., and help in formulating projections for adding additional providers, lines of business, medical devices & supplies, etc.
- Average monthly charges tracked over time provide insights into practice stability. The trend of charges will let you know if your practice is growing or contracting.
- Average monthly charges provide “context” for A/R related KPI’s.
- Average monthly payments give you the ability to create budgets.
- Average monthly payments when compared to average monthly charges, provide gross collection % (another KPI). Essential for cash projections.
- When average monthly charges and average monthly payments move in different directions, (charges going up while payments go down, or vice versa) it indicates there is a problem (likely related to payer contracts, credentialing or work effort) that needs to be addressed.
If performance is reality, how do you confirm reality? On a boat, it’s easy: either you’re afloat or not. How do you stay afloat? Common sense, consult your instruments (KPIs) to validate, make the decisions you need to keep it all going. Running a complex business, such as a medical practice, and staying afloat on a boat is the same: common sense, consult your KPIs to confirm, make the decisions you need to make to keep it all going.