Stay On Track, Part Deux

My last blog post talked about changing our views on how we evaluate our practice. I mentioned that instead of comparing how well or not one did last month or last year in terms of our critical numbers, we ought to measure our practice’s performance against financial expectations.

Along those lines, I wanted to share a practical example, which I think can put this notion into perspective. I’ve put together a few charts with some hypothetical numbers. Let’s take a look.

First, we need a goal. Let’s say we want to increase each doc’s net receivables by $20,000.  So let’s put together a few charts to show how we set a course towards that goal. Here is our first graph:

Dr. A  – Actual 2009 2010 Projected
Revenues
Gross Charges $637,570 $669,449
Adjustments (30%) $191,270 $200,835
Collections $446,300 $468,614

The projected gross charges are determined based on last year’s gross charges. For this example, there is a 5% increase. When one applies the 30% contractual adjustments, the projected collections for Dr. A is $468,614 a $22,314 increase in collections.

In other words, in order for Dr. A to increase her collections by $22,000 she’ll need to bill nearly $670,000 assuming a 30% contractual adjustment.

The $669,449 gross charges goal sounds like a lot, but if we break it down, the goal is much more attainable.

So how do we break it down?

We could divide the gross amount amount by 12-months or even by 52-weeks and come up with a monthly or weekly number to achieve. However, by doing so, one is assuming Dr. A is working all 52 weeks. Ideally, it is better to determine how many days Dr. A is scheduled to work in a year. Here’s is an example of how we can figure that out:

Days 365
Weekends -104
Vacations -25
PTO -5
Holidays -6
CME -6
Total Days 219

Then, we take our gross goal of $669,449 and divide it by the number of days Dr. A will be working to get our gross daily charges.

$669,449 / 219 = $3057

Dr. A’s daily gross charges goal is $3,057. Not only does that look better than $669,449, we now have set a course for the future instead of looking back and comparing this month to previous  months.

What’s next?

We then can create another chart that measures Dr. A’s progress. Here is an example of what this chart may look like.

Date Daily Target Month to Date Target Actual Charges

Diff

Year to Date Goal Diff
1-Jan $3,057 $3057
2-Jan $3,057 $6114
3-Jan $3,057 $9171
4-Jan $3,057 $12,228
5-Jan $3,057 $15,285
6-Jan $3,057 $18,342
7-Jan $3,057 $21,399

Among the many advantages, this approach allows to make adjustments on the fly. If one is not meeting the weekly or daily goals,  then one can adjust accordingly in a timely manner instead of finding out at the end of the quarter or the end of the year that we fell below last year’s numbers.

Another Example

With this model, one can create all kinds of forecast. For example, our practice has made a big commitment to bring back patients for their well child’s. So I decided to track our progress in a similar way.

I ran a report to determine how many well child’s we did last year during the June and July period. Using the results, I set my forecast. I then broke down our goals by doctor, by day. Every week, I check actual numbers against my forecast and report back to the staff and the doc’s of our progress.

Thoughts

As with many of my examples, I’m making a lot of assumptions and perhaps over simplifying the process. I know. But I’m afraid I’d bore you to death if I would actually describe the process with every single detail and consideration. Nonetheless, conceptually I think you’d agree this is a much more proactive approach to running a practice than looking back at one’s historical figures and determining whether or not the practice is up.

If you’d like to learn more about how I  do this for our practice, reach out to me and I’ll be happy to discuss.