Key Financial Metrics for Physician Practice Success

Jenny Handwerk |

Key Financial Metrics for Physician Practice Success



Practice owners must control each professional's performance, the integration of internal systems, and the speed and quality of care delivered. This is accomplished by employing performance measurements.

Medical performance metrics are essential management tools for monitoring and evaluating the services delivered by organizations. They fund the development and scope of objectives, identifying the need for adjustments, cost reduction, performance reviews, and, ultimately, fulfilling the organization's mission.

Key performance indicators (KPIs) provide physician practices with a calibrated lens to measure progress, identify expansion prospects, and reveal areas that need to be optimized or adjusted. 

Although not all metrics are KPIs, all KPIs are metrics. KPIs are a set of essential measures used to assess progress toward goals, and they are frequently used to assist organizations to focus on areas with the most impact. 


Solvency Ratio 


The current or solvency ratio is one of the most crucial ratios to understand. It is a simple computation, but it requires a few definitions. In a financial report, "current" refers to an asset that can be turned into cash within one year or a liability that is due within one year. Current assets are those that can be converted into cash within one year.

Current assets include cash, cash equivalents, accounts receivable (A/R), inadequate debt allowance, and any inventory we have on hand. Current liabilities are bills that have to be paid within a year. Current liabilities include all notes and accounts payable due within a year and interest, wages, and income taxes.


Operational Metrics


To run and expand your clinic like a well-oiled machine, consider measuring operational efficiency in addition to patient growth.  By assessing the four operational indicators listed below and incorporating technology into your business, you may enhance workflow and efficiency by minimizing no-shows, saving staff time, and offering a user-friendly platform for patients to book or reschedule appointments.


Days in Accounts Receivable (AR)

Days in Accounts Receivable (AR) is an important KPI for hospitals to track. It calculates the average days to collect money from patients and insurance companies. Many days in AR suggest that the hospital struggles to collect payments and may suffer cash flow issues. Keeping this figure as low as possible, preferably under 45 days, is critical.



Patient Satisfaction and Retention Metrics


Healthcare facilities and practices are in the customer service industry, and patient happiness is a clear sign of the quality of treatment. Wait times, test turnaround time and overall treatment quality are all factors that influence how your patients evaluate their healthcare experiences. By sending out surveys and questionnaires, your practice can gain meaningful data on patient safety and care quality and broader issues like budget allocation, bonuses, and employee incentives. 


Net Patient Revenue (NPR)


Net Patient Revenue (NPR) is the total revenue generated by the hospital's patient services, including inpatient and outpatient care. This KPI is an essential measure of a hospital's financial performance. 

It is computed by deducting the hospital's contractual allowances, bad debt, and charitable treatment from its total patient revenue. A high NPR shows that the hospital is successfully generating revenue from patient services.


Labor Expense as a percent of Operating Revenue 


Labor Expense as a percent of Operating Revenue calculates the portion of operating revenue spent on labor costs, such as salaries, benefits, and wages. This KPI is especially essential for hospitals since labor is frequently the greatest expense category. A high labor expense percentage implies that the hospital is incurring large labor costs, which can influence profitability.

To establish a successful physician practice, it is critical to analyze and change several indicators continuously. This ensures financial stability and long-term prosperity. To expertly manage the ever-changing healthcare business, you must constantly assess and update your financial plan.

Monitoring these financial KPIs is critical for hospital CFOs to ensure financial stability and long-term performance. By tracking these KPIs regularly, CFOs may recognize patterns, foresee financial difficulties, and make informed decisions to improve financial performance.