The Balanced Scorecard

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What is a balanced scorecard? Most medical professionals focus only on the financial perspective of running a practice. Short-term financial decisions put many practices at risk in the future. A balanced scorecard evaluates three other perspectives besides financial. They include learning and growth, patient and internal processes.

The internal process perspective includes operations management, innovation, patient relationship management, and compliance management. Process management is often overlooked, and leadership does not always allocate the proper resources and is often unaware of helpful, new advances in technology and new ways of processing information.

Learning and growth involves training your staff and physicians to utilize the technology and processes to their full advantage. It's great to have the tools, but if they are not being used or used incorrectly, the return on investment is minimal.

Healthcare is a service-oriented business. Patients will evaluate the quality of the medical practice based on the quality of customer service they receive. Most patients know little about clinical medicine, but they know a lot about how they like to be treated. If they are treated poorly during a visit, will they respond quickly and cooperate with payment?

Below is the basic information that all physicians and administrators should be held accountable for in managing a medical practice. Visibility of this information to leadership is a key component of accountability. Without "public" disclosure of the results, those being managed will believe that the data is not being acted upon. This information should be benchmarked against budget, prior year, and peers (industry comparison). If possible, it should be summarized on not more than two pages with graphs. Not all of the data is financial and may reflect the practice's investment in tomorrow rather than today.

1. Days in Accounts Receivable: Formula = Total Accounts Receivable / Gross Fee for Service Charges (1/365). The higher number of days indicates a collection problem and potential with billing and collection follow-up. This should also be calculated by payer, as the cash problems may be caused by one payer.
2. RBRVS by Physician: Measures the complexity and value provided by the physician. Eliminates distortions caused by different types of contacting and managed care.
3. Patient Satisfaction: Many physician groups do not measure patient satisfaction. Payers today are forcing "pay-for-performance" reimbursement formulas that will require physicians to survey their patients. Even without insurance pressure, it makes good business sense to know what your patience feels about your service. The patient "experience" usually is a key influencer in the perception of quality of medical services.
4. New and Established Patient Total: This is a patient "growth" indicator. The practice should track where new patients are coming from (patient referrals, yellow pages, physician referrals) so a "marketing" focus can be developed to expand the practice.
5. Employee Satisfaction: This is another indicator that most practices ignore. Employee turnover is a significant cost that is usually lost in the numbers. Find out your employees' opinion on compensation, work-life balance, technology, and their managers. Good surveys can help eliminate "antidotal" information in dealing with human resource issues. There are very inexpensive tools (SurveyMonkey) that can easily gather quality information.
6. Total Support Staff per FTE (Full-time Equivalent) Physician: This is an indicator to evaluate whether your practice is over or understaffed in relation to the number of physicians. There are excellent benchmarks to measure your practice against the Medical Group Management Association (MGMA).
7. Income Available to Physicians: This calculation is the amount of income generated by a practice to fund physician compensation, benefits, and other discretionary physician expenses. Most practices commingle this information with practice expenses.
8. Aged Accounts Payable: Total accounts payable/operating expenses (1/365). Indicator of how current operating expenses are being paid. The higher the number may indicate cash flow problems.
9. Physician Compensation to Collections Ratio: Measures the income available to physician owners based on collections generated from the individual physician services.
10. Information Technology Cost: Cost of practice-wide data processing, computer, telephone, and telecommunications services as a percentage of revenue and per full-time equivalent staff.