From reactive to proactive: Essential medical practice financial metrics and key performance indicators

A 40-year career in the healthcare industry has taught me one key lesson: Always work to proactively manage financial, access, quality and patient experience metrics instead of being reactive.

When I started as chief operating officer of Einstein Physicians Philadelphia (EPP) three years ago, we began assessing outcomes and effectiveness of our financial reviews to become more proactive. EPP consists of about 700 academic and non-academic physicians and advanced practice providers (APPs), in addition to about 400 residents/fellows in primary care, hospital-based, medical and surgical specialties in the highly competitive Philadelphia market.

While we created monthly P&Ls (profit and loss statements), the primary metrics contained in them for context were charges, payments, expenses and visit volumes. EPP had other metrics such as work RVUs (wRVUs), patient experience scores and access to care data, but all in separate reports and without the consistent ability to “drill down” at enterprise, physician company, practice specialty, site of service and physician/provider levels. 

Becoming proactive required the development of more key metric data to augment the core financial outcomes. In partnership with our finance colleagues, we developed key performance indicators (KPIs) to expand the context of what is causing variances in our outcomes compared to budget (see Table 1). We used the core metrics of wRVUs and visits but expanded them by physician and APP and new versus established visits and then paired them with revenue, expense, and full-time-equivalent (FTE) metrics to create associated data outcomes. We then reported new context of data per FTE, per visit, per wRVU and per other ratios that help identify the reasons for certain variances.


* Excludes anesthesia, as anesthesia reports ASA units instead of RVU data
** Advanced systems and technology
*** Net patient revenue
 
Armed with context, we assessed our review process and developed a new model and cadence regarding key data points that impacted our success. Collaboratively with our finance, professional revenue cycle, physician recruitment, human resources, patient access, and patient experience colleagues, we established a Financial & Operational Review Meeting (FORM) PowerPoint format. This new format was accompanied by a joint monthly presentation from the chair and administrator of each medical specialty/department to a group of executive leaders for the physician companies that included the president, chief operating officer, operational vice presidents, vice president and controller of finance, vice president of professional revenue cycle and director of patient access. Each month, a department gives a live presentation; due to our size, it takes a full quarter for every department to present in this manner. In the months between their live presentations, they still complete the FORMs for review by operational leadership. 

Each presentation is focused on the cost center level (although roll-up presentations may be added as needed) at the month and year-to-date (YTD) views, including:

• FTE vacancies/variances at the physician/APP and staff levels
• Strengths, challenges and opportunities that allow the chairs/administrators to share their view of issues that may impact their performance and/or opportunities for growth/expansion
• P&Ls
• KPIs
• NPR (net patient revenue)/wRVU analysis
• Variance explanations to NPR/wRVU, revenue and expenses
• Access to care metrics (reported for the month and as compared to the rolling 12-month trends)
• Patient experience scores (reported for the rolling three-month trends compared to benchmarks).

We realized that while we had a good handle on explaining variances in revenues and expenses, one of the key metrics for success in practice management (NPR/wRVU) was not well defined and we struggled to determine if these variances were based on payer mix, service mix or revenue cycle efficiency. The longest part of this journey was in developing the key formula and data reports to explain the impact of NPR/wRVU. A collaboration with an external company helped create tools to specifically explain these variances. Over a two-year period, we successfully created consistent “drillable” dashboards for revenue cycle KPIs (Figure 1) and NPR/wRVU dashboards (Figure 2) for comparison on a month-to-month basis for the FORMs and in a period-over-period view. 


In the same time period, in collaboration with our revenue cycle colleagues, we created a three-level detailed denial report format (Figures 3 and 4) to augment the summary level denial data contained in the revenue cycle dashboard. This report identifies the main denial categories in volume and dollars over a rolling three-month period to allow us to focus on the largest impacting categories and expands at various more detailed levels ultimately to the claim level, which contains many columns of information including CPTs, insurers, physician/APP, department or specialty, so that we can then further assess trends and develop appropriate action plans. 



The NPR/wRVU analysis focuses on the following factors for the month view compared to budget:

• Budgeted versus actual net revenue variance
• wRVU volume impact
• Payer mix impact
• Service mix impact
• Revenue cycle impact

And when viewing the period-over-period impact, we added:

• A/R (accounts receivable) impact

In both report formats, each factor (except revenue cycle) specifically identifies the overall and per-wRVU dollar impact that creates the variance to budget or period. Once each of the defined metrics is calculated, the remaining variances are attributed to revenue cycle. Since they are not definable in an exact manner like the other metrics, the operations leader now uses the revenue cycle dashboard and the detailed denial reports to work collaboratively with their assigned revenue integrity specialist in identifying the factors impacting the revenue cycle and add those explanations and action items to the NPR/wRVU variance statements. 
 
We finally feel that we have all the tools and transparency at all leadership levels to allow us to be proactive in managing the factors that impact our financial and key metric performance. This fiscal year (FY) is the first time in my three-year tenure that EPP’s bottom line financial performance is better than budget. While there has been a month or two during which we outperformed budget, this is the first time that the physician companies achieved this performance outcome for an entire fiscal year. While there are other contributing factors, we feel strongly that all our processes, data reporting and analysis, along with our operational leader’s assessments, actions, and planning based on these data, have contributed to our success.