It is important for physicians or practice managers to understand the finances of the office to ensure efficiency and productivity while thwarting mismanagement.
Ratios to know
Dr. Eric Brinton noted that there are several ratios that are important to know, including the operating expense percentage as it relates to collections. “This ratio tells you how efficient your practice is,” he said. “The lower the number is, the more efficient you are.”
However, Dr. Eric Brinton noted that if the percentage, generally in the 35% to 70% range, is too low, you may be hurting patient volume because you either aren’t paying for enough help or don’t have enough office space, or both. Another key metric is operating expenses per relative value unit (RVU), a measure of value used in U.S. Medicare reimbursement formula for physician services.
“If the number is high, your overhead is high relative to the number of services you are providing,” Dr. Eric Brinton said, noting the figure usually is $11 to $20.
Knowing the non-physician payroll percentage can help you gauge your staff’s efficiency. If you have an optometrist on staff, you may want to determine this percentage twice, with and without the optometrist wages included in the non-physician payroll.
You also can put your finger on the pulse of collections with the gross collection percentage, relative to gross charges. This will offer an efficiency measure of your collections. The average in today’s practices is 65.7%, with a range of 43% to 96%, depending on what your recorded charges are compared to Medicare or other insurance allowables.
“If you write off a lot of money because your charges are higher than Medicare allows or more than insurance pays, this number may be artificially low,” Dr. Eric Brinton said.
Another metric to consider is collections per RVU per work. This figure will be low if you contract with low-paying insurance companies or if your AR people don’t collect well.
“This is a valuable number that allows you to compare different procedures,” Dr. Gregory Brinton said. Another figure that will help you gauge staff efficiency is collections per full-time equivalent (FTE) employee, which Dr. Eric Brinton said is usually $100,000 to $150,000 for ophthalmologists.
“For a retina specialist, that number may be a little higher,” he said. “You aren’t doing refractions, which requires more skill from your employees.”
The number of FTEs per physician also can vary, depending on how much work physicians like to do themselves. The average, according to the presentation, is 6, with a range of three to 13.
“In some practices, this number may be 1:1, and they look very efficient,” Dr. Gregory Brinton said. “But they may be losing work because they can’t take on more patients.”
You also can get numbers, such as accounts receivable rations, that tell you how efficient your collections staff is. It also can help tell if staff is just writing collections off because it is easier. Ultimately, all of the figures should be reviewed monthly, or at least quarterly.
You can track the figures over time to measure the performance of various aspects of your business. You also can set goals at the start of the year and track your progress toward meeting those goals.
Gregory S. Brinton, MD
E: [email protected]
Eric P. Brinton, MD
This article was adapted from Dr. Gregory S. Brinton and Dr. Eric P. Brinton’s presentation at the 2018 meeting of the American Academy of Ophthalmic Executives. They have no financial interest in the subject matter.