Know Yourself<

by: Tyler Smith

Using Benchmarks to Measure and Change Your Business Performance

Anybody can step on a scale. The hard part is knowing whether your weight is the best you can hope for and what to do about it.

The same thing happens in business. In the grind of day-to-day business, you might know if you are making or losing money but have difficulty carving out time for the self-examination necessary for informed practice management.

Savvy practices use performance data, often called benchmarks, to identify where they are and where they’ve been on key measures like number of patient visits, gross charges by group and by physician, relative value units (RVUs), collection ratios and even clinical outcomes. It’s all part of understanding themselves and figuring out strengths and opportunities for improvement. But a number alone isn’t enough.

“Benchmarking identifies changes in an organization,” says David N. Gans, director of practice management resources with the Medical Group Management Association (MGMA), Englewood, Colo.

Gans stresses that for benchmarking to be useful, the practice has to clearly identify what it wants to measure. For example, an analysis of collections might target age of accounts receivables, percentage of accounts collected, by payer, and total percentage uncollected.

Elizabeth Woodcock, industry speaker and author, agrees, and counsels practices to think carefully about their benchmarking expectations. “Decide on a dozen performance indicators,” she advises. “These will depend on the particulars of your practice. For example, a practice with multiple services, such as lab ancillaries, nursing homes or home visits needs to have a service line analysis as part of their indicators, measuring both volume and profit.”

Compare inside and out

A number, no matter how carefully derived, however, is not a benchmark until the practice has something to compare it to. At Southern Indiana Pediatrics (SIP), a 12-physician, three-location practice in Bloomington and Bedford, Ind., chief operating officer Sandra DeWeese each month tracks total charges, receipts, overhead, hours worked, overtime and patient volume on a per-physician and per-practice basis.

“We watch trends,” DeWeese remarks. “A one-time measurement misses subtle changes” that have occurred. A not-so-subtle change that has recently occurred, she added, is Indiana’s shift of its entire Medicaid recipient population into managed care. As 43 percent of SIP’s patients receive Medicaid, the practice will be doing multipoint reviews of charting to ensure proper reimbursement.

A practice that wants to grow can use internal benchmarking measures to identify opportunities. “Good business measures to identify growth, or the lack thereof,” Woodcock notes, “include traditional indicators such as overhead, collections and receivables, in addition to other key indicators such as appointment access, new patient appointments as a percentage of total appointments and surgery collections as a percentage of total collections.”

A practice that understands its internal workings may also wonder how it measures up against the rest of the world. Although MGMA’s Cost Survey and Compensation and Production Survey are considered industry standards and provide a useful set of national benchmarks, they cannot, by definition, account for all individual practice variations and differences within markets.

“To get comparable practice benchmarks on a geographic basis, you’re going to have to pay a consulting firm,” adds physician practice management specialist Joan M. Roediger, JD, LLM, a partner with Philadelphia-based Obermayer Rebmann Maxwell and Hippel. “It’s difficult from the management side to get physician buy-in on that, particularl<

For Healthcare Professionals