How to choose the right KPIs – Gathering the right information, making decisions, and solving problems all depend on asking the right questions
When I ask someone how their practice is performing and which metrics they look at regularly to assess their performance, I typically hear the same set of KPIs. Revenue, new clients, ACT, active clients, percentage of revenue toward cost of goods, and percentage of revenue toward labor, to name just a few.
I consistently receive the same answers even though practices are in different situations and have different goals. We recommend that practices measure a small number of metrics that provide the most relevant information for what they are trying to accomplish. Your team needs to understand why they are looking at a particular KPI, and more importantly, they need to know what to do with the information.Measure the metrics that provide the most information about how your practice is progressing toward its goals. Make sure the team knows why they are looking at specific KPIs, and how to act on the story the data tells them. Click To Tweet
How to choose the right KPIs and what to do with them
What question does a specific KPI answer about your practice’s performance? How does it relate to your goals? How will you use that information?
I recently spoke with a practice whose goal was to provide more services (better care) to more patients. When I asked which metrics they were tracking against that goal, they mentioned ACT and number of invoices.
ACT is the average dollar amount of all invoices generated at the practice, or the amount clients spend each time they visit. Total practice revenue ÷ Total number of transactions = ACT. It is typically used as an indicator of the level of care being provided to patients and as a benchmark for individual doctor performance.
Now, I’m not suggesting that the practice should not track ACT, but does that metric, along with the number of invoices generated, tell them how they are performing against their goal?
Let’s look at an example practice:
|Practice A||FEB 2018||FEB 2019||Difference|
|# of Invoices||1,157||1,156||-1|
Looking at the metrics above, this practice’s ACT is $32 more than it was for the same month last year. That’s a 20% increase in their ACT. However, the number of invoices generated was flat to last year. Is this practice providing more services to the same number of patients? Given the data, that seems like a reasonable assessment.
But how many of these invoices were for a unique patient? Pharmacy refills, retail purchases, and multiple visits from the same patient will skew that number. If a patient was seen multiple times for the same condition or had $0 transactions—like a suture removal—our ACT will be affected.
The value of measuring unique patients and average revenue per unique patient
What if we were able to measure the number of unique patients that visited a practice each month and the average revenue generated from each unique patient?
To calculate revenue per unique patient, add the revenue from all transactions for one patient during the month for the total revenue contributed to the practice. Then divide that by the number of unique patients that visited the practice. Regardless of how many times a patient visited the practice in one month, they should be counted only once.
For example, client A brings Fluffy in every day of the month for subcutaneous fluids. Each visit is $40. We wouldn’t count 30 invoices or transactions. We would count Fluffy only once as one unique patient. We would also take the $40 for the visit and multiply it by 30 visits, or $1200 of revenue. As one unique patient, Fluffy has contributed $1200 toward revenue.
Considering that scenario, results for the same practice are:
|Practice A||FEB 2018||FEB 2019||Difference|
|Unique Patient Visits||930||900||-30|
|Rev. per Unique Patient Visit||$199||$246||$47|
In these results, we see that this practice actually saw 30 fewer unique patients compared to the same month last year (a 3% decline in patients). Yet on average, they earned $47 more per unique patient that month. These metrics tell a different story around patient visits, and whether the practice is caring for more pets.
Let’s look at an example from another practice using just unique patient metrics:
In this example, we see that the practice is steadily increasing the number of unique patients that visit the practice each month, year over year. However, on the right you will see that the average revenue from each unique patient is consistently lower compared to last year. In Sept and Oct of this year, this practice earned roughly $70 less per patient than the prior year. This practice is working harder for less money.
With the increase in patients they are caring for, are they spending less time on client education? Are they missing charges? With these metrics they can more accurately identify where they are falling short of their goals.
How to choose the right KPIs to reach your goals
Think about your practice’s specific goals and what matters most to you, to determine which KPIs best answer how you are performing against your goals. Choose fewer, more finely-tuned metrics. Most importantly, know what kind of action you can take against the results.
If the practice that I spoke with wanted to care for more patients, tracking their net change in active patients or unique patient visits would be a better gauge of their performance than the number of invoices they are generating.
To assess the level of care this particular practice is providing to patients, revenue per unique patient—or more specifically, revenue per patient in various service categories (lab revenue per patient, vaccine revenue per patient, etc.)— will provide more accurate and actionable information. Compliance and other non-financial metrics are also important to consider.
Know what your goals are, ask the right questions relating to your performance, and use the data to build a strategy to achieve success.
Sheri Gilmartin, CVT is VP of Sales and Marketing for VetSuccess. She can be reached at firstname.lastname@example.org.