Know Your Numbers: Benchmarking the Health of Your Practice

You likely tell your patients that they should “know their numbers.” Key health markers like blood pressure, blood sugar, cholesterol. But do you know the key health markers of your practice? And more importantly, do you know if they show your practice is healthy or in need of some changes? The process of benchmarking can help you with both. Tracking key metrics and comparing against other practices helps physicians decide whether they should make any adjustments to help their practice serve patients more effectively or become more efficient and profitable. 

I get that benchmarking isn’t the most exciting topic in healthcare these days. But it’s an important one. Just as you can’t help a patient develop a plan of care unless you know their vitals and if they are in a health range, you can’t chart a course for continued business success of your practice without knowing your numbers. 

At Alo we take time to explain to physicians and practice managers how understanding their overall performance can help them build a thriving, sustainable practice. A good starting point we often suggest to practices are the surveys from MGMA (Medical Group Managers Association) and AAFP (American Academy of Family Physicians). We encourage practices to obtain these reports and benchmarks and compare them to their own data. We provide access to these metrics for our affiliated practices. We also share internal data from our 36 practices which provide robust and “apples to apples” comparisons of highly similar groups, making for highly credible benchmarks. 

The physicians we work with often ask questions such as: I’m seeing eighteen patients a day, is that a lot or a little? Is my revenue per patient typical? What do my patient satisfaction surveys show? Am I paying my staff enough to attract and retain the best talent? The answers can uncover a range of possibilities for improvement. In this case it really is true that better data yields better decisions.  

Here are some things you should track:  

Patient volume: This is a true balancing act for clinicians. Trying to squeeze as many patients as possible into a finite number of short time slots leads to patient and provider frustration. Yet too few patients can mean too little revenue. 

Revenue: Benchmarking revenue against similar practices is a bit tricky due to varying patient and payer mixes. Be sure to look beyond total practice revenue and evaluate where you stand on revenue per physician or revenue per employee. 

Operating costs: Running a practice requires considerable expenses, both fixed and variable. Overhead for some practices includes rent, but others might own their building outright. Costs will also differ, sometimes considerably, between practices that staff and provide office space for functions such as care management and revenue cycle management, and those that outsource these operations. Still, it is good to know if your operating costs exceed your peers or the median, are you getting extra value of some sort?  

Compensation: Like other professionals, doctors want to know how their own compensation compares to their peers. Those who own their practices also must look at compensation benchmarks when deciding what to pay all other staff, both clinical and non-clinical. Physicians should be sure they’re clear on whether they’re evaluating total compensation (including benefits, bonuses, malpractice insurance coverage, etc.) vs. just salary. 

Profit/loss: The ultimate metric - are you profitable or losing money? Knowing where you stand on the basic math of revenue minus expenses is only the beginning. Your accountant can give you a more complete picture based on your financial statements. At Alo, we like to review the ratio of collections to fully loaded compensation. A good ratio means you're collecting enough to cover all the costs of running the office, even after paying everyone. If it's low, you might need to adjust fees or cut costs to stay afloat. 

Operational metrics: It’s critical to know how you’re doing on patient satisfaction surveys, how quickly you answer the phone and respond to patient inquiries, how well you’re scheduling visits, and other bread-and-butter measures. There are tools, like Birdeye, that can not only help you track this, but also track your competitors.   

I could probably make this list longer! The point is, there are multiple ways to evaluate how your practice is doing against industry standards, and you should consider a range of metrics to get a complete picture. The more you “know your numbers,” the better position you’re in to make sure your practice thrives instead of merely survives.