Analyze Your Practice’s Operational and Financial Performance With KPIs
Tracking Key Performance Indicators (KPIs) helps both multi- and single-specialty practices, although the individual findings might vary greatly. Fuel Medical’s regional teams work with members every day to explain how KPIs can benefit their businesses. With years of experience working with practices nationwide, our teams can discuss industry standards along with the unique challenges each practice faces.
This Ask Fuel First section answers a question that our regional teams regularly hear: How can KPIs help my audiology practice?
The Numbers Don’t Lie
Single-specialty practices can benefit from using various KPIs. They can help you determine if you’re spending too much on marketing or not enough, analyze if it’s financially feasible to hire, identify seasonality trends, spot productivity challenges and be proactive instead of reactive. Reviewing financial numbers with members allows for transparency and the ability to make sound decisions based on facts—as they say, the numbers don’t lie.
Third-Party Administrator Plans
Jessy Culp, regional manager at Fuel Medical, said that for the past few years, one of the biggest challenges she’s seen practices struggle with has been determining how many third-party administrator (TPA) contracts they have and what percentage of their revenue it equates to. Many practices either don’t track this or don’t track it properly. She knows the importance of tracking varying revenue streams, as it is critical for every practice, regardless of size and specialty.
TPA is the fastest-growing sector in our industry and has no signs of slowing. Learning how to adapt is key. For new businesses or those that have a lighter schedule, it can make sense to accept some TPAs. It may not be necessary for established practices or those booked out for several weeks. When Jessy asks practices what percentage of their business is TPA, they generally give her a gut estimate, but most aren’t able to pull a report with the actual data. When she assists by doing a deep dive into the reporting, it is often surprising what revenue is generated by TPA and how much of their schedule is booked by TPA appointments. Then, they get to work on creating a strategy to successfully balance the proper amount of TPA volume for their specific clinic needs. The better the tracking of this or any KPI, the better equipped we are to make informed decisions.
A Story of KPIs
ABC Audiology*, one of Jessy’s members, whom she’s been fortunate enough to work with for many years, was considering selling their highly successful practice. Actually, they’d been toying with the notion for years. When they discussed their plan with Jessy, she reminded them that one of the key components for determining the practice’s value was defining how much of their revenue was generated by TPA. At the time of their initial discussion, TPA revenue was over 35%, so Jessy developed a strategy to reduce that amount by using Fuel’s Access Hearing program and scheduling modifications. Today, ABC Audiology has decreased its TPA volume by 15%, and gross hearing aid revenue continues to trend up. This has put the owners in a much stronger position for selling the practice. Since they’ve been consistently reviewing KPIs, it was straightforward when doing the analysis and preparing a valuation.
Why Do We Care About TPAs?
You might be wondering, “Why does the amount of TPA revenue matter?” The amount of TPA patients a practice sees can greatly impact the margin generated per clinical hour. Private pay hearing aid patients generate much more margin per clinical hour. This means that a clinic seeing a high percentage of TPA patients may be busy but also generate less profit. This will result in a lower valuation based on the cash flow valuation method.
One of the many benefits of KPI tracking for this member was being able to pull the numbers to put together a clinic valuation, enabling them to give an accurate estimate of the business’ worth to potential buyers.
Tracking KPIs for practice valuation is just one way to use this tool. If you have no desire to sell your practice, you may need a loan, a refinance of your existing loan or equipment co-op at some point, and the financial strength of your practice is the No. 1 factor in determining if you can accomplish these goals. Jessy tries to help all of the members she works with understand the numerous ways that tracking KPIs can help them. If you want to know more about KPIs, reach out to your regional team.
*We chose not to name the practice that Jessy Culp has been working with to protect their financial privacy. ABC Audiology is a fictional name.