Your practice’s key performance indicator (KPI) reports are likely filled every month with a range of figures that quantify industry buzz phrases like average transaction charge (ATC), client retention rate, recommendation compliance, and appointment fill rate. I find many managers are quick to take these auto-generated values at face value, compare them to published industry benchmarks, assign them to the “good bucket” or “bad bucket”, and sometimes make knee-jerk changes based on this set of information alone. This blog is intended to inspire managers to dig deeper into their KPI reports to find meaningful, reliable data from which they can make smart, calculated decisions.
When having a surface-level financial conversation with a fellow veterinary manager, my least favorite question is, “What’s your ATC?” While I agree that this is a useful figure that should absolutely be internally monitored and can help give an outsider a baseline on practice invoicing, in my opinion this is not necessarily a KPI that should be used to compare independently operating hospitals. Let’s say last year, Hospital A had an ATC of $118 and Hospital B was $172. Which hospital is “better”? While it’s tempting to be more impressed with Hospital B’s performance, a closer look at the information is the only real way to know what that dollar figure means and if that is a KPI that can even be used to compare the two hospitals.
Questions that come top of mind for this particular scenario are as follows:
● What was the total revenue and total number of invoices to calculate this ATC?
● How many patients and clients does this represent?
● Does this include all invoices or only those associated with a doctor?
● How are invoice counts tabulated within the practice management software (PMS)?
● How are multi-day hospitalizations invoiced - one per day or one per treatment course?
● Does one hospital invoice a significant amount more/less in ancillary sales/services?
● Does one hospital see significantly more/fewer multi-pet appointments?
● Is there a wellness plan that needs to be accounted for?
● Are online sales factored into this equation? How about charity or employee services?
The logistics of how a hospital operates and how the PMS system is used is essential information. Knowing these factors (and more) would help us to determine if Hospital A and Hospital B are comparable apples to apples or if one is more orange-like. A lower ATC doesn’t necessarily mean a practice is less efficient or less profitable. It might just mean it invoices an abnormally large amount low dollar products/services (i.e. food, prescription refills, grooms) or has a high volume practice model which allows for more visits at a lower dollar rate.
A habit I have formed and recommend to others is to make notes on your KPI reports of any change in recording method and/or major hospital event. For example, in our PMS we recently changed the way we recorded an employee’s payment on account through a withholding on their paycheck. The result will cause our “Total Charges” amount that I have regularly used on my KPI report to falsely increase as compared to months and years past. The notation on my report will help me remember this change, along with dozens of others, during future reviews so I can more accurately analyze our data.
I am not suggesting that the differences between us and the hospital down the street or across the county should fuel our arsenal of excuses to explain away our practice’s underperformance. My message is more specific to how you use industry KPIs. When you analyze your KPIs internally month over month and externally against industry benchmarks you first need to know exactly what you are measuring and comparing, then determine if/why there is a trend or disparity in value, and finally decide if action is needed. These sets of data not only can tell us how we are doing, but can also help us make measured decisions with regard to adding doctors or team members, extending hours, expanding the facility, purchasing equipment, etc. With thoughtfulness and understanding, our KPI reports can be one of our most valued tools in practice management but you need to fully understand what they represent first.
Abby Suiter, MBA, CVPM
Daniel Island Animal Hospital (Charleston, SC)
2014 Emerging Leader