Health care is not only one of the largest industries, but it is also one of the most complex. The combination of the size and complexity of the industry has resulted in endless frustration for practice managers when interpreting intense quantities of data. How are industry leaders supposed to make sense of this convoluted information and turn it into stronger results? The answer, in short, is benchmarking. Benchmarking, in this instance, is comparing the processes and metrics of a single business to those in the industry. In order to effectively benchmark, practice managers must first make sure they are utilizing useful, reliable, and up-to-date information. This starts with being able to rely confidently on your internal data, typically a practice’s electronic health care record (EHR) and accounting systems. For external data, practice managers should conduct due diligence and identify an external source they can extract quality benchmarking data from. There is an extensive list of consulting firms and technology companies covering the health care space, such as the Medical Group Management Association (MGMA), that provide relevant information, as well as insight on benchmarking data. Once comfortable with the sources of data, the next step is to understand the business objectives of the practice and to select benchmarks that can best identify what is necessary to improve performance. It should also be noted that it is critical to consider the unique aspects of each practice (i.e. specialty, size, and market forces) during the selection of benchmarks. This will allow for the identification of benchmarks that add real value to a practice. As it pertains to health care some of the most frequently used metrics include: operating costs per procedure or per visit, operating costs as a percentage of revenue, collections per provider, visits per day, and days in accounts receivable. Another consideration is what form of benchmarking to use. Benchmarking at its base has two different approaches: internal and external
1) Internal benchmarking involves the analysis of two departments within the same practice. When one department outperforms another, this information can be dissected to enable better processes to be implemented throughout the organization. It should be noted that all benchmarking should begin with internal benchmarking as it requires the organization to examine its own performance and creates a baseline for other benchmarking strategies.
2) External benchmarking is the comparison of performance to industry leaders in order to obtain new ideas and methods to improve. This should be done continuously to analyze how industry leaders achieve success. External benchmarking involves three alternatives: competitive benchmarking, functional benchmarking, and generic benchmarking.
a) Competitive benchmarking is the comparison of performance to direct competitors only. This type of benchmarking is difficult as it can be challenging to obtain the necessary data. Despite the difficulty of obtaining the required information this method should be attempted as it allows a practice to stay in tune with its external environment and helps ensure a continuous focus on improvement.
b) Functional benchmarking is the comparison to successful businesses performing the same or similar functions, but operating outside of the immediate industry. For example a doctor’s private practice could be benchmarked against another professional service provider such as a lawyer or accountant.
c) Generic benchmarking takes a broader look at results comparing performance based on business functions regardless of industry. An example of this strategy would be comparing the performance of a hospital’s accounting department to the accounting department of a construction company. This method of benchmarking can be executed without as much difficulty as competitive benchmarking, as organizations operating in different industries may be more willing to share their data. Note that this data will need modifications to be comparable in a beneficial manner to the company’s own metrics.
Proper implementation of benchmarking will allow practice managers to not only understand what is influencing their practice’s current level of performance, but also develop a sound strategy to improve it. As the health care industry continues to expand, it will become more important for industry members to analyze their own data, which will be useless unless they can develop an understanding of what they are looking at.