The Metric With The Most

Unsurprisingly, most clinicians I work with are highly analytical. We tend to be analytical in our decision making, analytical in our natural communication style, analytical in our practice management, and analytical in our diagnosis and treatment planning. Data driven decisions not only lead us down the road of justified actions and best practices, they also enable confidence in the choices we make.

Running a practice requires you to know your numbers. But there are many numbers that can cause a lot of noise and distraction. Not every metric carries equal importance. Getting lost in analysis can lead to confusion, ineffective management, and analysis paralysis. If you’re lost in numbers, don’t know where to start, or you’d rather spend time treating patients than being your own actuary, one metric you can start with is your annual revenue per patient (ARP).

Annual revenue per patient is loaded with insight. This metric shows you how your practice operates, and how your patients interact with your practice. Annual revenue per patient reflects your philosophy of care and comprehensiveness of care your practice provides to your patients. In-house specialty services or referred work is reflected in the number. Patient acceptance and their relationship with the office through acceptance and declining of treatment is revealed in ARP, as is the treatment being offered to the patient. ARP can even reflect the dominant types of insurance in the practice (government subsidized plans vs. other private insurance plans) if assignment of benefits is accepted by the practice as well as the socioeconomics of the patient base.

Trends in ARP can demonstrate sustainability. This is of particular importance if you are acquiring a practice. As part of due diligence, it is advisable to monitor how ARP has changed over the recent years in the practice you are considering purchasing. If the number of new patients hasn’t risen remarkably but the ARP has, what is the reason? Is there over treatment? Can you maintain the ARP based on your clinical ability and the anticipated needs of the patients in the practice? Conversely if you notice ARP is relatively low, are there skills you can bring to the practice to ethically elevate the treatment patients receive?

For practice owners, higher ARP often correlates with fewer, longer appointments with patients. From an operational perspective, longer patient appointments where more treatment is provided in a single visit creates greater practice efficiency through less room-turnover and downtime (staff members also tend to find the days much smoother when there are fewer patients and longer appointments).

When it comes to patients, annual revenue differs between new patients and existing patients. New patients tend to spend more in their first year because they are often overdue for treatment. Knowing the difference between ARP and ARNP in your practice provides an even greater depth of intel.

To calculate your ARP, take your active patient count of those patients seen in the past year, and divide by top line billings. To go deeper, separate active patients from your new patients and analyze the two numbers to reveal your ARP and ARNP.

Higher ARP doesn’t necessarily mean better; It’s not about billing more. It’s about understanding if the treatment you are providing is in alignment with what you believe is the best approach to care AND whether or not your communication between practice and patient is effective at delivering the best care possible. The secondary benefit is understanding the financial health of your practice (or your future practice).