I’m a big fan of Pearson’s Law: That which is measured improves, and that which is measured and reported improves exponentially.
Knowing the right metrics to track—and why those metrics matter—is key to gaining a clear understanding of where your business is, how efficiently it’s running and how it’s doing financially. Metrics are also the key to tracking your progress as you grow.
People use different terms to describe this important information—key performance indicators, statistics, metrics. What we’re talking about are numbers—specific, objective numbers based on the data of your practice.
There are two primary types of metrics that are important for practice owners: operational and financial. First, let’s talk operations. There are several operational metrics that are valuable to practice owners, including:
- Cancellation percentage
- New Patients
- FTE, or Full-Time Equivalent
Having these numbers at your fingertips makes an enormous difference in your ability to run you practice well. The single most important operational metric?
Utilization is the number of patients your practice is seeing compared to the number it could see if it were at 100 percent capacity.
In my work with physical therapy and chiropractic practice owners, I see far too many under-utilized practices. Why does this matter so much? If you’re not using your current staff efficiently, you’re not getting the return on your investment you’ve made in your team. Underutilized practices are businesses that could be making tens or even hundreds of thousands of dollars more per year, just by better deploying the staff they already have in place.
Improving utilization isn’t expensive, since you’re working with the staff you have. Yet plenty of practice owners who spend a lot of time thinking and worrying about efficiency still hover at a utilization of 50 or 60 percent. Of course, most of them don’t know that number—but they do know their practice isn’t running smoothly, and they’re working harder than they should be for the money they’re making.
Are you one of the many practice owners who knows things aren’t working the way you want them to, but can’t get a handle on why? Schedule a free Discovery Call with me and let’s talk about some of your specific challenges.
Remember Pearson’s Law: what’s measured, improves. To make your practice more efficient, productive, and profitable, you need to first know what your current utilization is, and be able to track that number going forward.
Determining your utilization
Step 1: Find your capacity.
What are the maximum number of visits your practice could schedule in a month? Capacity is an essential metric that’s relatively easy to determine. To find your capacity, you need to know three things:
- The number of full-time-equivalent (FTE) clinicians in your practice
- The number of visits each FTE could see per day.
- The total number of workdays in a month
Capacity equals Number of FTE multiplied by Number of visits multiplied by Days in a Month
Let’s say you run a practice with 3 FTE clinicians. You schedule 30-minute appointments over an 8-hour day—so each clinician could see 16 patients in a day. Your practice has 20 treatment days in a month. Your 100 percent capacity would be 960 visits per month.
Step 2: Calculate utilization
Your utilization is simply the percent of capacity you’re actually using. To calculate utilization, you need to know:
The number of visits your practice sees in a month.
Utilization equals Visits divided by Capacity
That practice with 3 FTE clinicians? Let’s say it saw 625 patients in December. It’s utilization? 65 percent.
At 65 percent utilization, that practice owner is making a living—but leaving a lot of money on the table every month, additional revenue that could be generated with a staff and infrastructure he or she is already paying for.
I recommend to practice owners they aim for a utilization of 85 percent. This is a marker of a highly efficient practice, where operations are running smoothly and you’re making the most of your clinicians’ time.
How tracking utilization helps you run your practice
Keeping track of utilization gives you a meaningful, data-based snapshot of how your practice is functioning, month-to-month and year-to-year. When utilization dips, you know it’s time to take a closer look at other issues within your business, from workflow to scheduling to personnel. Here are some of the ways having a utilization percentage at your fingertips can help you:
See your return on investment for clinician compensation. I like to see a 3-3.5 return in profit for every FTE clinician.
Gauge when it’s time to hire another clinician. If your utilization begins to hover at or above 95 percent, and you have strong referrals, that’s often a sign it’s time to look seriously at adding to your clinical staff.
Identify your most and least productive clinicians. Sharing individual utilization numbers with your clinicians helps everybody know where they stand. It also enables you to take prompt steps to address productivity issues, assess the need for additional training, and ensure you’re working with clinicians who are a right fit for your practice.
Create a simple, objective system for raises bonuses, incentives, and other perks. Individual utilization numbers make it simple to structure a salary increase and bonus system based on clinician performance.
Here’s a profound benefit that might surprise you. Using metrics helps you step away from being immersed in the never-ending, nitty-gritty, day-to-day running of your business. When you use metrics like utilization and others consistently and well, you get awareness and clarity about your business, from top to bottom—and that gives you control. With that control comes freedom.
Next, I’ll talk about the most important financial metric for your practice.