Practice Management Alert

Implement financial benchmarking to see problems coming before they impact your bottom line.

When a patient comes into your practice with a health problem, what do you do? You get data. You take a medical history. You measure their vitals. You perform tests. You compare that data to previous measurements of the same patient, or to the expected levels in a healthy person.

You should treat your practice’s financial health exactly the same. Get data, and then compare it to previous measurements and to industry standards. This process, called financial benchmarking, is a simple and efficient way to track how the business side of your practice is doing, from identifying growth opportunities to catching problems before they spin out of control. Follow this expert advice to hone your benchmarking skills.

Keep The Data Simple

Every business is complex, with dozens of potential data categories to measure performance. The trick with benchmarking is to choose only those categories that offer you the most meaningful statistical feedback. Choosing too many categories can overwhelm you; choosing the wrong categories won’t give you the information you need.

Keith Borglum, Certified Healthcare Business Consultant at Professional Management & Marketing, tells Practice Management Alert about one set of benchmarks he uses. For every month, for every doctor in a practice, he recommends collecting a series of 7 or 8 data points. These might include days worked by physician, patient visits per day, charges, total collections, accounts receivable, and normal expenses.

Create a template: Once this monthly data is entered into a table, you should be able to see many months of clear data on a single sheet. You’ve generated a benchmarking sheet that “condenses all the data for the month into one horizontal line,” says Borglum. “After three or four months, you can start seeing trends.” With those trends visible, he notes, “you can easily identify aberrations in the data, and track back what system they may be occurring in. You can diagnose why something has changed.”

Beyond this “self-benchmarking,” you can then compare your statistics to available national data to see where you stand. “Maybe your charges are down,” Borglum offers, “but maybe everybody’s charges are down! Or maybe Medicare and insurers have reduced reimbursement for a whole panel of codes.”

As you’re benchmarking against industry-wide figures, it’s also important to adjust for your specialty and your geographic region; an OB/GYN practice might have higher operating costs than an orthopedist, for example and a Midwestern practice might have higher revenues than a Southern one, Borglum notes.

How to Choose and Compile Your Benchmarks

As long as you limit the total number of monthly benchmarks, you can choose any benchmark that will measure a critical aspect of your finances. You could choose the baseline benchmarks from Borglum’s sheet, or a rate like procedures per physician, or a productivity measure like wRVUs (Work Relative Value Units, which compile work by procedure type).

In a smaller practice, the physician or practice manager may be too busy to assemble this monthly benchmarking document. Luckily, this task requires little expertise; even the greenest staffer should be able to source and copy the correct figures from your systems. “If you don’t want a single staff person knowing everything,” Borglum advises “you can have one person give you the scheduling numbers, another give you the billing numbers, and another give you the accounting numbers.”

Where to Find External Benchmarks

Finding national benchmarks to compare your figures to can be a challenge, especially for specialists. The two most reliable sources are MGMA (Medical Group Management Association) and NSCHBC (National Society of Certified Healthcare Business Consultants). Both organizations survey thousands of practices annually to generate industry-wide statistics. But each one gathers data differently, and as a result each should be used differently for benchmarking:

• Because of its rigorous reporting standards, MGMA tends to receive data mainly from the large or multi-specialty practices that can afford such thorough collection. So it features “great top-line data – charges, collections, accounts receivable, WRVUs,” Borglum advises, with less reliable information about overhead and specialties.
• NSCHBC, by contrast, draws from more specialists and smaller practices, and as a result offers much better benchmarks for individual specialties, says Borglum. It offers better information on overhead and other expenses than MGMA does, but is biased to more successful single specialties on the income side because data can only be submitted by practices that hire a management consultant.

Editor’s Note: To access external benchmarks (for a fee or membership), visit http://www.mgma.com/industry-data/mgma-surveys-reports and http://www.nschbc.org/statistics/.

Creating a Benchmarking Schedule

At a bare minimum, says Borglum, you should be doing annual benchmarking, when your year-end numbers and national statistics are compiled. But that’s not enough to see granular trends. If for some reason you absolutely can’t spare the time to look at monthly data, a quarterly review system could be the next best thing. Every three months, you can review big-picture trends and set goals » » for the future. Ultimately, however, there’s no substitute for getting in the habit of a monthly review, which allows you and your team to assess where you stand as a practice and what could be improved.

Of course, it can be a pain to spend your valuable clinical time looking at numbers. “Most physicians only look at how well they’re treating patients, and whether the patients are getting better,” says Borglum. “They don’t like to look at the numbers on the business side, and that’s how the business can go awry. Forcing yourself to look at all these numbers through regular, organized benchmarking gives you a better, more well-rounded perspective.”