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The five most important metrics for serious practice owners

It is not sufficient for practice owners to simply operate a medical practice in order to pay staff, pay for utilities and keep some cash in the bank for the future. A business needs to have purpose, and at least some of that purpose needs to be defined in measurable financial terms and in explicit and measurable non-financial terms too.

We always recommend that Practice Owners set quantifiable financial and non-financial measurements. Performance metrics by which the success of their practice can be measured. These “Key Performance Indicators (KPIs)” should serve to make something complex (like running a practice) simple.

KPIs should be carefully chosen and limited to highly relevant, measurable and actionable activities within the business. KPIs give specific insights into parts of the business, and allow management to have a better understanding of how the business is tracking.

Each business should have a number of KPIs so that decision makers can have a more complete understanding of the business.

Establishing and setting KPIs requires thought about:

  • What is important for the business to be successful
  • What is the business trying to achieve
  • What is the timeframe of the activity
  • What can be done with the information

There are so many ways to slice this up, and truly it requires an appreciation of the specific business, its strengths and weaknesses, its structure and its staff. So we set the challenge to trim down the almost infinite list of possible Medical Practice KPIs to the five most important and powerful metrics for every situation.

The five most important metrics for serious practice owners:

  1. Occupancy

At its simplest a Medical Practice is a location where doctors and patients can interact. The location is a real estate proposition, with size, shape and amenity all contributing to a valuation of cost for that space. Occupancy measures the success of the practice’s real estate proposition.

The denominator here is available rooms. Calculate this as the number of available consulting sessions (e.g. two per day) x the number of days per week (e.g. six) x the number of consulting rooms.

The numerator here is the number of rooms used.

A medical practice with less than 40% occupancy is probably not going to be viable. If occupancy is below 65% then work needs to be done to increase room utilisation. If occupancy is over 90% then the practice is close to losing doctors, patients or staff due to capacity constraints.

Another way to measure occupancy is by patient attendance, and this may be more suitable in some situations. The denominator would be the number of appointments available for patients and the numerator would be the number of patients who attended. Be mindful to set the denominator for the maximum number of doctors, not simply available doctors.

  1. Revenue per hour

The ability of the practice to generate revenue can be measured by the amount of money in the bank at the end of the month. This is a particularly blunt tool, and only marginally helpful in making management or business decisions.

Tracking hourly revenue provides a much more powerful analysis around which important business decisions can be made. For example, identifying the highest revenue sessions allows management to focus attention on expanding them and prioritising the work to support them.

Revenue per hour is granular enough to be able to identify practitioners whose billings are lower than average. It also helps identify services within the practice that do not produce high enough fees. Ultimately it allows the practice to set fees with data to ensure the best outcome for the business. For example doctors generating lower revenue per hour may have their fees increased. Or, patients who want access to the practice at the busiest times may have to pay a premium.

  1. Staff:Doctor ratio

The single greatest cost in a medical practice is the cost of staff. But how many staff is enough? All staff in healthcare are ‘busy’, as there is always something to do or something to follow-up on. But how can a practice owner understand how busy or how efficient the staff are?

The most universal way of easily measuring this is the staff to doctor ratio. At Hoxton we like to describe it the “Louise Ratio”, that is how many consulting sessions per week can a 1.0 FTE secretary completely and entirely take care of. Setting this standard and following it over time will give a clear interpretation of how busy staff are compared to what they should be. On one hand it will allow managers to predict when they are understaffed, but also when staff have excess capacity.

Working to a metric is much easier than telling staff that they are not busy enough! Software utilisation, workflow improvement and a general systems review from an experienced Practice Management Consultant is the most powerful way to improve this ratio in favour of a great business outcome. Hoxton Practice Management Advisory Service provide Gap Analyses, or a short engagement to identify opportunities for improving staff efficiency and reducing operational risks.

  1. Happiness of doctors and staff

A practice is entirely made up of the people who work within it – even if a nice waiting room, modern magazines and great car parking all add to the experience! Without engaged and happy administration staff, nurses and doctors there isn’t much for a practice to offer. Given the critical reliance on good staff the metric of staff and doctor engagement rates very highly in the important measures used by the best practice owners.

Staff engagement and happiness can be measured through surveys, structured feedback sessions and smiles. Putting some effort into capturing this will pay dividends by allowing practice owners to respond to changes in mood and sentiment rather than being caught unaware. Importantly if there is a fall-off of staff happiness management can make proactive changes to improve the situation. Even the fact that mood and engagement is a topic of conversation will already make any intervention easier.

In a similar way doctors need to understand their value and their role in creating and maintaining a happy work space. Formal feedback sessions should be used to discuss these matters with doctors Cultural rules and codes of conduct can be part of the medium around which responsibilities for care of staff and doctors can be discussed.  Accessible Policies and Procedures documents can bring this to life, such as in PracticeHub, where access and utilisation of documents can be tracked as a de facto measure.  There are a number of staff engagement platforms that track these happiness, satisfaction and mood metrics for staff and doctors.

  1. 30+ days Debtors

The last, most important metric focuses on the importance of knowing what the practice has NOT been paid. Keeping abreast of debtors and keeping a tab on exactly where revenue has been (potentially) lost can provide deep insights into where the whole team may be underperforming. Debtors that are out past 30 days can be easily reported on in most practcie software systems. Importantly it is a metric that comes straight from the bottom line and should be amenable to proactive management.

Simply tracking 30+ day debtors  over time, will graphically and numerically reflect actual loss from the bank account. If this doesn’t motivate good management then nothing will!

So what to do?

If you are not using these five metrics, and you want to be a serious practice owner, then the time is to make some changes is now. Set up a reporting system, discuss with your practice manager and make these activities central to your day to day business oversight.

Of course the most serious practice owner know that measurement is just the first step. Taking the next step by responding with nuance and confidence is where the best outcomes are achieved. Hoxton Practice Management Advisory Services provide consulting for practices taking business management seriously. We are able to provide expertise and business management where those capabilities are not available within the practice. Our experienced consulting service has a track record of delivering substantial business improvement in medical practices throughout Australia.

Call us today to find out how Hoxton Practice Management Advisory Services can improve your medical practice and let you rest easier!


Hoxton MPM
Suite 6, 342-344 South Rd,
Hampton East, VIC 3188.
Phone: 03 8060 4277



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