Benchmarking for Better Practice Performance

In today’s health care environment, managing a practice well is an increasingly complex task.

A medical practice must not only deliver quality patient care, it must also create a strategic plan to remain profitable even as the cost of providing medical care continues to rise. To succeed, a practice must measure performance to help physician owners and administrators make informed management decisions. One approach that has proven invaluable is benchmarking.

The process of benchmarking allows practices to measure performance, efficiency and quality. Many medical practices perform some level of internal benchmarking, measuring their own performance over time. A practice may compare the collections per physician from year to year as a measure of productivity or to compare providers in the same practice. While internal benchmarking may be useful, external benchmarking, which compares the performance of an organization against other practices in the same specialty, provides a much better indication of how well the practice is performing. Since many external factors affect a practice, such as changing payer mix, reduced reimbursement rates, and rising salary and benefit costs, external benchmarking is extremely useful in evaluating a practice’s performance relative to other practices in the same specialty.

Benchmarking a medical practice successfully includes evaluating processes as well as performance. Measuring processes evaluates the efficiency of the delivered patient services. Examples of process benchmarks may include everything from staffing and productivity to office flow and analyses of procedures performed and protocols. Process benchmarking would measure items such as how many patients per month a provider is seeing, patient retention rates and the number of procedures performed in a defined period. All of these factors are measures of efficiency.

Measuring performance evaluates a medical practice’s financial and operational standards. Performance benchmarks cover the areas of billing and collections, staffing and payroll related expenses, productivity and profitability. For example, to measure accounts receivable and collection efficiency, typical benchmarks include measuring the percentage of claims denied, total days charges in accounts receivable and gross charge to net collection percentage. Typical benchmarks to measure provider financial productivity are collections per provider, RVU’s per patient encounter and net collections per patient visit.

Together, process and performance benchmarking help practice leaders understand whether their organization’s performance is improving from year to year and how it compares to similar medical practices. For example, a benchmark of accounts receivable aging could indicate that the best performing groups in a specialty have less than 10% of their accounts receivable greater than 90 days old. This standard would provide a basis from which to evaluate the billing and collection performance, and, if necessary, establish goals based on best practices.

Finding and purchasing appropriate comparative data is essential to successful benchmarking. Data can be purchased from various sources. Many sources publish their data based on median scores only, which provides limited information. Other benchmarking data sources publish data in percentiles, allowing practices to measure themselves against the best performers in their specialty. It is important to be sure external data sources separate regional data too.  After all, the benchmarks from a 10-physician primary care practice in Southern California would not be a good comparison for a similar size primary care practice in Northeast Ohio.

Ronald Pavlovich is a CPA and a Certified Administrator in Physician Practice Management (CAPPM) by the American Academy of Medical Management. He is a Senior Manager in the Medical Practice Management Group at CBIZ MHM, LLC in Akron.

MD News April/May 2011, Northeastern Ohio/Western Pennsylvania