Building your KPI Bible
The saying goes, “what gets measured, gets managed.”
But sometimes the problem is: How do you know if you are measuring something the right way?
Imagine this…
You want to know what your what your most profitable service line is.
Great, head over to your trusty EMR and pull that report. You know the one. By date of service, that has all the claim IDs, clinician’s names, payers, all that.
Cool, but date of service or post date? Date the service was billed? What time period are you looking at? Accounting for payer mix? Are you including patient payments? What actually gets paid or what should be paid?
As for profitability, what measures do you use for expenses? What’s your process for allocating overhead? Do you allocate overhead? What about the short term temp that cost 20% more for that one month? Are you normalizing that cost?
See how things can get murky fast?
The answer then is the KPI Bible.
It’s a system that we focus on creating in our Practice Operating System, but we’ll just go ahead and tell you about it.
Just like you have all your workflows and processes documents (right????), you also want your metrics documented, down to smallest detail, so that, (1) you are comparing apples to apples, and (2) you can make changes or justify methodology. And bonus, it’s way more efficient every time you want to look at a report.
So here’s how you want to approach it:
General Definition
First, define the KPI and its purpose. A classic is Net Collection Percent. Awesome and I agree.
Document it’s purpose. To measure how well we are doing at collecting the money we are owed.
You may have a less classic, Percent of Vacation Used. To understand if we are staffing effectively and creating an environment where our team can take time off.
Inputs
Once you have your list, go through each one and determine what inputs you need.
What data are you pulling? For Net Collection Percent, you would be looking at payments, adjustments, and charges (generally). Be specific, not general like this example.
Where are you pulling the data from? Again, not “the EMR.” Specific. Report Builder → Claim data → List of parameters.
What period are you pulling? For Net Collection you will be looking at least six months back. Define it. Or get a little off the beaten path and look at Net Collection percent within 90 days of a claim submission. May not be industry standard, but as long as you have a purpose for it, it is defined, and consistent, go for it. But define the period you are looking at.
Who is pulling the data? If well documented, it doesn’t have to be one person, but it helps. Consistency is key here and more than that, accountability so that it actually happens.
Calculations
How are you calculating the KPI? There should be a formula. Document it. Again, never assume everyone knows exactly what the calculation is. Further, when you can reference it, people will understand it better and be able to make decisions. For example, are you measuring Days in A/R with any specific adjustments? If you are, document them.
Who is doing the calculation? A person, the system, a vendor? Accountability.
How often are you running this? This is a bit of a macro question related to your reporting cadence, but it fits nicely here. For more operational KPIs you will want to look at them more frequently, closer to real time. For business level financials, Monthly can suffice.
Outputs
Where do the KPIs live? In a weekly email? Monthly updates? Self-serve dashboard? Define when and where these KPIs will be published. Match delivery and timing to business decisions. You don’t need a daily EBITDA update, but you may want a daily RVU update or patient call drop or no show update daily.
Who owns the KPI? Not who does the calculation, but who is responsible for the output. Having a KPI for its own sake doesn’t help anyone. It should be based on inputs that a person can influence.
What happens? Create thresholds for the KPI (well defined ones) and know when corrective action needs to be taken. Looking at a KPI with no context isn’t great. Looking at one with context but no action is worse. Red, Yellow, Green is always a classic. And in this case, Red means go (and fix it).
One of the great things about having all of this documented, is you can make changes over time. If a KPI doesn’t serve you or needs to be tweaked based on the evolution of the business, you now have a clearly documented process and don’t need to recreate the wheel.
And if someone leaves, well, you have a system. Not a single point of failure.
Wrapping up
Having KPIs is great. But if they aren’t documented then you may be flying blind. Without a process, context, and clear guidance, KPIs will just sit and collect dust.
Creating a KPI Bible will help you gain insight and specificity in your practice.
Disclaimer: The content provided is intended for educational purposes only and does not constitute financial or legal advice. This content is not intended to create, and receipt of the launch guide does not constitute, an attorney-client relationship. While efforts have been made to ensure the accuracy of the information presented, it may not necessarily reflect the most current legal developments or regulations and does not provide a complete representation of all associated legal and compliance considerations for any given topic. Therefore, readers are encouraged to seek professional legal advice or consult with appropriate professionals regarding specific legal issues or concerns related to their individual circumstances.