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Using Benchmarks Correctly: Billing Staff to Provider Ratio

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Over the past few months, I’ve posted some tips that I hope make it easier for you to correctly calculate a few key practice benchmarks (days in accounts receivable, net collections percentage , and accounts receivable greater than 90 days old ). There is one more benchmark, though, that I suspect is under-examined by many practices: the ratio of billing staff to providers.

It’s a difficult benchmark to discuss, because a practice’s size has a lot to do with it. A good ratio in a large practice is very different than one in a smaller practice — and understandably so. Larger practices not only achieve some economies of scale, but also tend to carve out employee responsibilities. While a large practice might have specified “coders,” “billers,” and maybe even a designated “Medicare specialist,” a smaller practice might rely on a single person to do it all in conjunction with other duties. Yet this ratio is still quite important.

In many practices, it’s viewed strictly as an “expense” indicator. However, I feel strongly that it’s also a significant overall gauge of your practice’s financial health. That’s because the lower your billing staff-to-provider ratio, the more consistent your revenue cycle tends to be.

A high billing staff-to-provider ratio potentially points to underlying revenue cycle problems, including too many rejections, denials, and appeals. These are all time- and labor-intensive activities that could increase the need for billing staff—and thus raise the ratio. Automated tools can be used to address some of these problems and reduce the ratio, even if it already happens to be fairly solid.

Real-time patient eligibility tools, for instance, are one way to help decrease denials. Online claims editing capability (including CCI and LCD compliance edits) can speed rejection turnaround. With fewer rejections and denials, of course, comes a lessened need for appeals. And maximizing electronic claims submission, ERA and EFTs allows you to post payments quickly, with minimal manual labor.

Before you calculate your practice’s staff-to-provider ratio, however, it’s essential to know how to do it correctly. It seems simple enough: Count up the doctors in your practice and divide by the number of billing staff, right? Well, not quite.

Rather than count each physician individually—a common mistake—practices must make sure to count physician full-time equivalents (FTEs). To properly calculate the number of physician FTEs within your practice, divide the total number of patient encounters performed during the past year for your entire practice by the average number of yearly physician encounters, (This number will be between 3,600 and 4,800 depending on your specialty. Primary care tends to be on the high end at 4,800 and single surgical specialists, like orthopedics tend to be on the low side at 3,600.). The reason that you want to perform your FTE calculation in this manner is to accurately account for physicians who work part-time, job share, or work any other less-than-full-time schedule.

To calculate the number of billing staff FTEs, you’ll want to define an FTE as an employee who has been compensated for 2,080 hours of work (40 hours/week X 52 weeks/year) during the last year. Like the physician FTE calculation, this will take into account any employees that work any schedules more or less than 40 hours per week. Hours to include in this calculation should be related to any personnel that participate in the physician revenue cycle including data entry, coding, payment posting, accounts receivable follow-up, patient statement processing, etc.

So, an example calculation might go like this:

For the twelve months ending June 30, 2010:

Billing Staff Employee 1 was compensated for 2,080 hours of work = 1.0 FTE billing staff (2,080/2,080)
Billing Staff Employee 2 was compensated for 1,720 hours of work = .83 FTE billing staff (1,720/2,080)
Billing Staff Employee 3 was compensated for 1,500 hours of work = .72 FTE billing staff (1,500/2,080)

Dr. Koch performed 1,800 encounters = .5 FTE physician (1,800/3,600)
Dr. Sjogren performed 3,600 encounters = 1.0 FTE physician (3,600/3,600)

Billing Staff FTE count = 2.55 FTE (1.0+.83+.72)
Physician FTE count = 1.5 FTE (1.0+.5)

Physician to billing staff ratio of 1.70 (2.55/1.5)

The Medical Group Management Association (MGMA), in its 2008 book, Benchmarking Success – The Essential Guide for Group Practices, provides a benchmark standard ratio of 2.7 billing staff per physician in an average billing office. The 2.7 figure was derived by averaging the reported staff ratios across the many different physician specialties broken down within the publication. That number does not take into account the particulars of practice size, or any other factors that might alter it, but it’s perhaps a good starting point for your own investigation. No matter what your ratio, though, I urge you to view it as a barometer of your revenue cycle. Consider whether you have an opportunity to arrive at a better ratio by automating some of your processes.

For more information, download Navicure’s resource guide, Key Metrics in Revenue Cycle Management, which identifies four other critical KPIs and gives detailed instructions for calculating them.

Are you tracking your billing staff to provider ratio?  Share your experiences in the comment section below.