Key performance indicators (KPIs) provide visibility into a skilled nursing organization’s financial stability, operational efficiency and quality of resident care. CFOs of skilled nursing facilities (SNF) should understand and monitor back-office KPIs closely, as the data offers valuable insights that can help guide budgeting, staffing and investment decisions.
There is no shortage of KPIs for today’s CFO, so it is important to consider your financial, clinical and operational goals before prioritizing which metrics you will regularly track. It is also helpful to establish a specific target that is unique to your financial goals, or you can use industry averages to gauge your performance. By tracking real-time data, CFOs can spot trends to identify problems and quickly intervene before risks escalate.
To find out how well your skilled nursing organization is meeting its goals, make sure you regularly monitor the following essential KPIs:
1. Payroll-to-revenue ratio in skilled nursing organizations
What it measures: The percentage of revenue spent on employee compensation, including salaries, wages, benefits and payroll
Indicator: How efficiently an organization manages its labor costs relative to the income it generates
How to calculate: Total payroll expenses/total revenue
Goal: Well-managed facilities fall within the range of 50-55%
What CFOs should look for:
Anything outside of the industry typical range of 45-60%
Ratios higher than 60%, which could indicate staffing inefficiencies, overtime issues, high use of agency staff or lower reimbursement rates
Ratios lower than 45%, indicating a red flag for compliance and quality metrics such as CMS staffing ratings
2. Days cash on hand
What it measures: How many days the business could operate using cash reserves if all revenue streams stopped
Indicator: Evaluates liquidity and ability to weather financial fluctuations
How to calculate: (Total annual operating expenses – non-cash expenses)/365
Goal: 60-90 days
What CFOs should look for:
Less than 30 days cash on hand = significant liquidity risk and issues meeting payroll and vendor payments
Ways to achieve a healthier range of 60-90 days to become more financially stable
If pursuing capital projects, ensure at least 30-60 days cash on hand is maintained
3. Days in accounts receivable (AR)
What it measures: The number of days it takes to collect payment after services are provided (including insurance reimbursements and out-of-pocket services)
Indicator: How efficiently the billing and collection process is managed
How to calculate: Total accounts receivable/average daily revenue
Goal: The industry average is 45 days, but a benchmark should be based on billing frequency and payer mix.
What CFOs should look for:
The percentage of claims spending 90 days or more in AR
Outstanding balances by payer category
Trends in payment patterns
4. Claim denial rate
What it measures: The percentage of claims denied by payors during a specified period (typically monthly or quarterly)
Indicator: Reflects billing accuracy and revenue cycle efficiency
How to calculate: Total dollar amount of claims denied by payors/total dollar amount of claims submitted
Goal: The industry average rate of denials is 6% to 13%; however, the ideal benchmark for skilled nursing organizations should be 3-5%
What CFOs should look for:
High denial rates, which increases administrative costs and reduces revenue
Denial trends, to help identify your most common denial reasons and the internal errors that caused them
Issues with eligibility verification, preauthorization, coding, billing and/or documentation
5. Cost per patient day
What it measures: The daily rate of services including room and board, nursing care, therapies, medication management and meals (before any insurance coverage is applied)
Indicator: Evaluates expenses/costs of running the business, and overall profitability
How to calculate: Total expenses incurred for a given period/number of days in the period
Goal: Daily rates vary by location but the 2025 median national cost for a private nursing home room is $361 per day and $314 per day for a semiprivate room[1]
What CFOs should look for:
Unreasonably high costs in certain areas (dietary costs, medication, etc.)
Variable costs that can be reviewed and possibly reduced
Maintenance costs, to determine when it’s more cost-effective to replace vs. repair aging equipment
Using KPIs to Drive Financial Success in Your Skilled Nursing Organization
Regular monitoring of KPIs is an essential task for skilled nursing CFOs, but the data means nothing if it cannot be interpreted into actions that improve financial, clinical and operational performance.
Whether your organization’s goals are to pursue capital investments, increase cash flow, gain a competitive advantage, control costs or increase profitability, Richter can provide the support you need to master strategic decision-making and achieve long-term financial success. We have the experience and industry insight to help break down your metrics, compare your performance against industry peers and establish a strategy to improve any areas of concern.
To learn more about our accounting or other comprehensive solutions we provide to hundreds of SNFs nationwide, contact us hereor call us at 866.806.0799.
Richter partners exclusively with long-term post-acute care providers to deliver tailored, high impact solutions across clinical, financial, and operational domains. Our team of more than 90 healthcare consultants brings real world industry expertise to help leadership teams improve compliance, strengthen financial performance, optimize revenue cycle management, streamline EHR and PointClickCare systems, and manage Medicaid eligibility with confidence. Acting as a trusted extension of your organization, we provide personalized guidance, expert led enablement, and end to end support that reduces complexity while driving measurable growth. With a focus on sustainable outcomes that strengthen clinical quality, financial stability, and operational efficiency, while also reducing risk and advancing resident care excellence, Richter empowers skilled nursing communities, senior living providers, home health, and hospice organizations to achieve long term success in today’s complex healthcare landscape.
