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Is Your Pediatric Practice Making a Profit? 7 KPIs to Maximize Practice Revenue
By Ken Dominy
We believe that independent pediatric groups usually provide the most cost-effective and highest quality care to their patients. Obtaining fair and consistent payment has become more difficult over the years due to a number of factors. This includes payer edits that reduce reimbursement for services, insurance companies that have special rules for receiving full payment for well visits, and inconsistent approaches in reimbursements across payers. A pediatric practice needs to be able to receive fair payment for their services in a manner that the practice maintains an acceptable profit margin. Seven Key Performance Indicators (KPIs) to monitor pediatric practice revenue include:
1. Average Reimbursement Per Visit
This KPI can be measured by identifying the total revenue for a select period of time (recommend 12 month increment) divided by the total number of visits (well visits, sick visits, and other visits). Contract rate with the payers, practice collection rate for the insurance claims and patient statements, as well as optimal coding all influence the average reimbursement per visit. In addition to reimbursement rate, other factors that impact average reimbursement per visit include the ratio of sick to well visits during the time period and the payer mix of the practice.
2. Contract Rate Per Payer
The contract rate for the top payers should be reviewed on an annual basis. The fee schedules and contract rates vary based on payer. Note that this number is influenced by the area of the country the pediatric practice is located because the reimbursements for similar CPT codes varies by geographic region. The practice leaders should discuss the lowest paying payers and decide if they will try to renegotiate the contract or no longer accept the payer in the practice. While some payers are below the average, there might be other reasons to keep the payer that is important to the practice. We believe that this review and discussion should be completed on an annual basis and for this reason, we include this analysis and discussion as part of the annual business review for your practice.
3. Collection Rate of the Contract Amount
Each CPT code has a contract reimbursement rate per insurance company. Although an insurance company usually has one contract rate per CPT code for a pediatric practice, the amount paid by the insurance company and patient varies depending on the type of insurance plan the patient has with the insurance company. This means that if a bill for CPT code 99214 is sent to the insurance carrier for $150 and the contract rate is $100, one patient with ‘full reimbursement’ might have the entire $100 paid by the insurance company while another might need to pay $50 and the insurance company pays the other $50. The KPI for collection rate should be measured for all insurance and patient payments. We discuss collection rate for your practice during the annual business review including the account manager discussing specific actions taken for your practice (e.g. number of phone calls, patient statements), the results obtained and recommendations to enhanced the current approach.
4. Average AR Days
Average Accounts Receivable (AR) days is a measure that shows on average, how fast the practice is being paid for services. The lower the number, the faster the practice is being paid for services. Overall, average AR days are between 42-60 for medical practices. Ideally, a pediatric practice should average less than 30 AR days. Two factors to consider that influence the AR days for a practice include how fast the providers close their charts so the claims can be billed, in addition to the ability of the billing team to process and obtain payments for services. Ideally, charts should be closed within 24-48 hours and a common metric is 90% of charts closed within 72 hours. Practices should rarely have open charts after 1 week. If your practice is challenged with closing charts, recommend we discuss during the annual business review and provide some resources such as additional training with one of the trainers to help with your specific needs.
5. Monthly visits by provider
A practice KPI includes the number of visits per provider. If the well/sick ratio is constant over time, then a change in the number of patient visits links to the future revenue change per provider. While value based care is still in the early stages, most pediatric practices receive over 95% of their revenue based on treating patients in a fee for service model. For this reason, the practice should monitor visits by provider each month and overall visits for the practice. We recommend evaluating this over a period of time (6 months or 12 months) to identify an average per pediatric provider. Reviewing this on an annual basis provides some perspective related to how full the schedule is and if the practice should consider adding a provider.
6. Monthly Billed amount and Paid amount per month
The pediatric practice leaders should review the monthly trends related to the billed and paid per month to the pediatric practice. With this data the practice should also identify the linkage to number of visits per month. Factors that can increase the billed and paid amount include the ratio of well to sick visits, payer mix, coding and medical billing collection rate. If the payer mix is very constant and the well/sick visit ratio is consistent, changes in coding can increase or decrease the billed amount or revenue received per month. The pediatric providers select the level of coding or the service provided since they are seeing the patient. The pediatric providers should update their coding knowledge so they select the optimal code based on the service provided. Additionally, a strong billing team can enhance revenue by optimizing the collection rate from the insurance company and patients.
7. New Patient Visits
New patient visits to the pediatric practice show how fast the practice is growing. Ideally, most of the new patient additions to the practice should be under 5 years and the segment with the most new patients per month should be under 1 year of age. If the practice has a slow growth rate in new patient visits or a high amount of new patient additions over the age of 10 years old, the practice should identify options to enhance the new patient adds. This might mean providing background on the practice to OBGYN groups in the area as well as providing/hosting prenatal counsel. Other factors that can influence the growth of a practice includes non-participation with certain payers in the area, hours the practice is open Monday through Saturday, the number of other pediatric practices in the same geography, and the number of retail clinics and urgent care centers in the area. With busy parent schedules including their careers, providing optimal access to parent and patients impacts the choice of which pediatric practice to join. We have tools in PediatricXpress that provides the new patient growth by month by age group (e.g. # of new patients under 1 year, 1-4 years, 5-9 years, 10-14 years, 15+ years).
While there are other KPIs to evaluate for a pediatric practice, the seven described above are important for practice leaders to monitor to maximize practice revenue. We review your pediatric practice performance versus national benchmarks during an annual business and vaccine review of the practice.
