.png)
In the world of healthcare, understanding key performance indicators (KPIs) is essential for improving patient care, optimising operational efficiency, and increasing profitability. One such KPI that is particularly important for healthcare providers is the average treatment charge.
This metric measures the average amount charged for each treatment or service provided and can provide valuable insights into your organisation's financial health and overall performance.
In this blog post, we'll take a closer look at the average treatment charge KPI, its importance, and how you can leverage it to improve your business's bottom line. Whether you're a small practice or a large healthcare organisation, understanding and optimising this critical metric can help you achieve your goals and succeed in a highly competitive industry.
"The key performance indicator that I use most often is the average treatment charge. It tells me how much value we are providing to our patients and how well we are managing our costs."
- Dr. Toby Cosgrove, former CEO of Cleveland Clinic.
Average treatment charge is a key performance indicator that measures the average amount charged for each treatment or service provided by a healthcare provider or organisation. This metric is calculated by dividing the total revenue generated by the number of treatments or services provided during a given period. The average treatment charge KPI is essential for healthcare providers as it helps them understand the financial performance of their business and identify areas where they can improve profitability. By monitoring and optimising this metric, providers can ensure they are charging appropriately for their services and make informed decisions to increase revenue and drive growth.
Healthcare is the primary industry of use for average treatment charge. In the healthcare industry, measuring the average treatment charge is critical as it helps in determining the cost of providing medical services to patients. This KPI is used to evaluate the financial performance of healthcare facilities, such as hospitals, clinics, and medical practices. It also helps in identifying areas where costs can be reduced without compromising the quality of care.
Other industries that use this KPI include:
There are five key benefits to measuring this KPI in your business:
1. Improved financial performance: healthcare providers can identify areas where they can data-driven decisions that optimises price and manages cost which will help increase revenue and profitability of the practice. They can also identify areas where they may be losing money and take corrective action.
2. Better resource allocation: healthcare providers can determine which treatments are most profitable and allocate resources accordingly. This can help them optimise their operations and improve efficiency.
3. Improved patient satisfaction: healthcare providers can ensure that they are providing high-quality care at a reasonable cost. This can help improve patient satisfaction and loyalty.
4. Better decision-making: healthcare providers can make informed decisions about pricing, resource allocation, and other key business decisions. This can help them stay competitive and adapt to changing market conditions.
5. Compliance with regulations: healthcare providers can ensure that they are complying with regulations related to pricing and billing. This can help them avoid penalties and legal issues.
When measuring an average treatment charge KPI, it is important to consider:
To calculate average treatment charge, you need to follow these steps:
Here's the formula:
It's important to note that the average treatment charge should be calculated for each treatment or service provided by the healthcare provider, and it should be calculated regularly to monitor changes in pricing, patient demographics, and overall financial performance.
The benchmarks for average treatment charge can vary depending on the industry and the specific business.
However, some general rules are:
If you find that your average treatment charge is below industry standards or decreasing over time, this could be indicating that the business may be undercharging for its services, may be losing customers to competition, or not providing high-quality services.
There are several common errors that can occur when measuring average treatment charge:
1. Inaccurate data collection: If the data used to calculate the average treatment charge is not accurate or complete, this will impact the accuracy of the KPI.
2. Inconsistent data sources: If the data used to calculate the average treatment charge comes from different sources or is not standardised, the resulting KPI may not be comparable or meaningful.
3. Failure to account for outliers: If there are extreme values in the data set that are not accounted for, the resulting KPI may not accurately reflect the average treatment charge.
4. Failure to adjust for inflation: If the results are not adjusted for inflation, it may not accurately reflect changes in the cost of treatment over time.
5. Failure to consider other factors: If the KPI is used in isolation without considering other factors such as patient volume or payer mix, it may not provide a complete picture of the financial performance of the organisation.
Increase the number of patients receiving treatment
One way to improve the average treatment charge is to increase the number of patients receiving treatment. This can be achieved by implementing marketing strategies to attract more patients, improving the quality of services offered, and expanding the range of treatments available.
Increase the number of high-value treatments
Another way to improve the average treatment charge is to increase the number of high-value treatments offered. This can be achieved by investing in new technology and equipment, hiring specialised staff, and offering advanced treatments that are not available elsewhere.
Improve billing and coding practices
Accurate billing and coding practices can help ensure that all services provided are properly documented and billed. This can help increase revenue and improve the accuracy of the average treatment charge.
Streamline operations
Streamlining operations can help reduce costs and improve efficiency, which can lead to higher profits and a higher average treatment charge. This can be achieved by implementing technology solutions, improving staff training, and optimising workflows.
Improve patient satisfaction
Improving patient satisfaction can lead to increased loyalty and repeat business, which can help increase the average treatment charge. This can be achieved by improving the quality of care, providing excellent customer service, and implementing patient feedback programs.
There are several variations of the KPI related to average treatment charge, including:
Average treatment charge per patient: This KPI measures the average amount charged for a specific treatment per patient. It helps to understand the revenue generated by each patient and the effectiveness of the treatment.
Average treatment charge per visit: This KPI measures the average amount charged for a specific treatment per visit. It helps to understand the revenue generated by each visit and the effectiveness of the treatment.
Average treatment charge by provider: This KPI measures the average amount charged for a specific treatment by each provider. It helps to understand the revenue generated by each provider and the effectiveness of their treatment.
Average treatment charge by location: This KPI measures the average amount charged for a specific treatment by each location. It helps to understand the revenue generated by each location and the effectiveness of their treatment.
The main difference between these variations is the unit of measurement used to calculate the average treatment charge. Each variation provides a different perspective on the revenue generated by a specific treatment, patient, provider, or location.
What is the average treatment charge KPI?
The average treatment charge KPI is a metric that measures the average amount charged for a specific medical treatment or procedure.
How is the average treatment charge calculated?
The average treatment charge is calculated by dividing the total revenue generated from a specific medical treatment or procedure by the number of patients who received that treatment or procedure.
Why is the average treatment charge KPI important?
The average treatment charge KPI is important because it helps healthcare providers understand the revenue generated from specific treatments or procedures. It can also help providers identify areas where they may be able to increase revenue or reduce costs.
What factors can affect the average treatment charge?
Several factors can affect the average treatment charge, including the complexity of the treatment or procedure, the location of the healthcare provider, and the type of insurance coverage the patient has.
How can healthcare providers use the average treatment charge KPI to improve their operations?
Healthcare providers can use the average treatment charge KPI to identify areas where they may be able to increase revenue or reduce costs. For example, if the average treatment charge for a specific procedure is lower than expected, providers may need to evaluate their pricing strategy or look for ways to streamline their operations to reduce costs.
