Key Financial Metrics to Analyze for Your Healthcare Business
Evaluating the cold, hard numbers of a business is a highly beneficial process. In fact, research shows that data analysis can help businesses become more successful, because having an in-depth knowledge and understanding of key metrics can allow a company to function more optimally in its industry.
Today, we’re providing a rundown of ten key financial metrics for the healthcare industry. By measuring these and other KPIs, healthcare leaders can greatly improve the financial operation of their clinics, centers, or hospitals.
Revenue by Practitioner
Analyzing this metric can provide healthcare businesses with a greater understanding of the performance of individual practitioners, as well as assist with allocating resources more effectively and identifying certain trends (e.g. if practitioners consistently generate higher revenue during specific periods).
Revenue by Practice
Examining the financial performance of your healthcare business’s various departments is advantageous for pinpointing which services or areas are most profitable, and contribute the most to overall revenue. It is also a helpful metric for evaluating the cost effectiveness of certain practices or departments.
Revenue Per Treatment
By analyzing revenue per treatment, you can better assess the profitability of different procedures or services, leading to more effective pricing strategies and increasing the accuracy of budgets and financial forecasts.
Expense Per Practice
Identifying practices with high expenses allows businesses to implement cost-control measures, which may involve streamlining operations, renegotiating vendor contracts, or identifying other areas where operations can be improved.
Number of Patients Served
When a healthcare business examines the number of patients they have served, they gain more insight into patient demand, resource allocation, revenue generation, and overall operational efficiency. These insights can then improve appointment scheduling, staffing, and revenue projection.
Number of Encounters
Analyzing the number of encounters between healthcare providers and patients is crucial for proper resource allocation (consequently increasing efficiency), accurate revenue projection, and financial forecasting. Healthcare companies can project revenue and expenses based on anticipated encounters, leading to stronger budgeting and financial planning.
Number of Practitioners
Healthcare businesses can optimize staffing levels and operations by assessing their number of practitioners, which is helpful for aligning practitioners with patient demand and preventing overstaffing or understaffing.
Aggregate Revenue & Expenses (R&E) Per Practice Area
By examining the financial performance of different practice areas or departments, healthcare organizations can identify which areas are most profitable, and which may be less successful. This metric guides decisions on resource allocation, investment, and service offerings.
Profit & Loss (P&L) By Location
Evaluating the profit and loss of each branch of a healthcare company allows leaders to identify both high-performing and low-performing locations, making adjustments as necessary to increase the revenue for less-successful units.
P&L vs. Actual Budget
Exploring the differences between P&L and the actual budget of a healthcare company highlights discrepancies between expected and actual financial outcomes. Positive variances (better than budgeted) can be leveraged, while negative variances (worse than budgeted) can be addressed.
In summary, a thriving business tracks key metrics—including clinical, operational AND financial. There is no metric that is too small or insignificant to measure when it comes to the good of your company. Fortunately, best-in-class cloud-based solutions like Sage Intacct make the process easy for your financial KPIs. Contact us today to learn more.