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Mastering the Revenue Cycle: A Comprehensive Guide for Physician Practices (Part 3)

This is the third article in a three-part series on mastering the healthcare revenue cycle for physician practices. Part one provides a revenue cycle overview and explains common pitfalls. Part two explains key stress points and solutions to protect against failure.

In revenue cycle management, it’s important to understand the common pitfalls, but the greatest impact can come from measuring revenue cycle performance and using the information to optimize the cycle as a whole. Doing so takes a blend of key performance indicators (KPIs), benchmarks, dashboards, and a commitment to analyzing the data – and acting on it.


As part of a physician practice’s strategic planning and annual budget planning process, revenue cycle leaders should work with practice leadership to establish the goals for revenue cycle performance. KPIs are the critical internal data points that are set and monitored by managers to achieve the planned performance, and they can help practice leaders focus on what matters most in achieving their goals. Periodic analysis and reporting on KPIs can also help facilitate communication on how the practice is progressing toward its goals.

There are various types of KPIs to choose from, including leading, lagging, process, qualitative, quantitative, outcome, output, and input.

Benchmarks Versus KPIs

A benchmark is a national or regional statistic that is used to compare a practice’s performance to its peer groups. They are typically produced annually by organizations like the Medical Group Management Association (MGMA), practice management vendors, or physician/administrator specialty groups. A KPI, on the other hand, is internal information that shows the company’s actual performance in that particular category and the practice’s overall trend against the benchmark or targeted goal.


A practice can’t measure something if it doesn’t have a measuring system, a methodology, or a tool. Dashboards are tools that are used for communicating performance on KPIs and revenue cycle goals. They provide a standard format for presenting and reviewing results and provide valuable information on current performance against those goals. Dashboards are also helpful in providing information about areas for management to course-correct from month to month.

For example, a dashboard covering the days in accounts receivable should show the following:

  • Where the practice is now (KPI)
  • Where the practice was in previous reports and the trend (lagging KPI)
  • The practice’s current target for days in accounts receivable (goal)
  • The days in receivable number for a representative group of peers (benchmark)
  • The days in receivable number for top-performing competitors (best-performing benchmark)

Data systems can produce various reports on an automated basis, but each practice needs to understand which reports are crucial and what those reports are showing. Everybody needs to pull the same report the same way. Parameters that define the report must be consistent from period to period to provide comparable data on where the practice is improving or falling behind.

For some practices, the benchmark reported by MGMA or another relevant organization will serve as an appropriate goal. In many cases, though, a practice can be well served by setting an interim goal to stairstep toward reaching the benchmark. If a practice has significant operational issues, is new, or has recently gone through an acquisition or merger, it makes sense to analyze current performance and to consider setting a more attainable goal that puts the group on a course to achieve the benchmark standard in a future period.

For example, if the benchmark for physician practices is 45 days in accounts receivable and if a practice has a current-days-in-accounts-receivable figure of 70, it is easier to set a manageable target at 55 days to gradually improve the metric during the current period. The improvements that get the practice to the first goal and the knowledge gained in that process can be used to continue reducing days in receivable to eventually meet or beat the national benchmark in a future period. The KPI tells the practice where it currently stands regarding days in receivable and whether the number is trending toward the goal or away from it.

Evaluating Every Aspect of the Revenue Cycle

Managers who want to study the revenue cycle performance of a physician practice can choose from a wealth of KPIs and benchmarks. For revenue and accounts receivable, the manager can choose to look at specific days in accounts receivable (as in the example above) or measure the trend in patient accounts that go past a certain point, such as 90 days. They can evaluate total accounts receivable per full-time equivalent physician as well as bad debts written off per physician.

KPIs can also be used to measure insurer performance. Practices can improve their accounts receivable performance by understanding trends in denials from specific insurers, days from billing to payment, and mean payments as a percentage of payer fee schedule amount.

At the practice leadership level, we recommend setting three to five goals and using the most important KPIs for tracking. Other supporting goals and KPIs can be set for each area of the practice that contributes to achieving the high-level goals.

Help From an Outside Perspective

When it comes to determining which benchmarks and KPIs are relevant and what reports provide the best feedback on trends and progress, a physician practice can often benefit from an outside consultant with experience improving revenue cycle performance. To learn more about how KSM can help your practice better understand and evaluate its revenue cycle, please contact KSM’s healthcare consulting team or complete this form.

Jimmy Burnett Managing Director, Healthcare Operations Performance Alignment
Mark Benninghoff Director, Healthcare Consulting

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