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Benchmarking in Revenue Cycle Management - Part II

By Scott Everitt, Vice President of Analytic Solutions

There is a common misconception among healthcare organizations seeking to incorporate Benchmarks into their standard reporting practices. 

Typically, organizations turn to a 3rd party source for benchmarks. Trade associations like MGMA or HFMA, are familiar sources in healthcare. The addition of benchmarks to compare key metrics in operational reports is an obvious starting point.

While this is probably the best known way of Benchmarking, PDS has found there are several different types of Benchmarks which have value in assessing organizational performance. Each type of Benchmark has various benefits and shortfalls, but when used together, they can provide some very persuasive information to managers and stakeholders.

Trend Benchmarks:

As organizations often begin viewing new data points and metrics for the first time, the question typically arises, “We ARE performing at this level for a particular metric. Where SHOULD we be performing?” My answer is usually “Let’s start off by focusing on being better than we were at this time last year…or last quarter…or last month.” 

Trend Benchmarking is a process of evaluating the entity against itself over time.  It can be a particularly useful practice because Trend Benchmarking provides a comparative snapshot for ANY data point the organization wishes to measure. Trend benchmarking can also be useful for organizations who wish to view trending performance without the inherent biases contained in external benchmarks being compared to organizations with differing sizes, missions, resources, or geographies. Once the implementation of data collection and reporting standards is in place, management should be certain that past and present metrics are calculated the same way. 

While Trend Benchmarks can have distinct advantages for groups beginning the Benchmarking process, there can be pitfalls if the organization only utilizes Trend Benchmarking.  While it’s good to see a positive trend in performance across these measures, the rate of the improvement may not be matching that of the industry as a whole.  Management may be satisfied with the positive trends, but they may not be aware performance is lagging without utilizing a broader benchmarking campaign. 

Internal Benchmarks:

Not all benchmarks need to be derived from a 3rd Party. In many cases, utilizing Internal Benchmarks can be a more effective way to drive organizational performance. Internal Benchmarking is the process of comparing locations, divisions, departments, specialties, or even providers against their peer group within the enterprise. As with Trend Benchmarks, Internal Benchmarking can be done across almost any data point the organization measures.

Internal Benchmarking, if done effectively, can be an advantageous way of identifying particular outliers of poor performance. These outliers may be driving down the performance of the entire organization. A great example of an Internal Benchmark is to use averages. Choose a metric and calculate the average of the peer group. List all the peers and their score along with average, and then rank the peers. You can very easily understand who is performing below or above average.  Reports like this provide management with a quick view of where they can focus their efforts. Internal Benchmarking also removes many of the arguments management teams face. Low peer performers have a harder time challenging when others within the same peer group are exceeding the average.  Take provider charge lag for instance. If the average charge lag for the department is 3.2 days, it is hard for a provider to argue why their charge lag is 8.4 days, or 5.2 days higher than their peers.

Internal Benchmarking can also drive continuous improvement even when the organization as a whole is performing well. By definition, half of all peers being benchmarked will be performing below the average. Even if the lowest performing group is above a national or regional average, there is room for improvement within the group. This can help drive competition and ongoing performance improvement.

Care should be taken in using Internal Benchmarking to drive change, however. Internal Benchmarks can result in dissatisfaction and contention within the organization if not managed effectively. PDS typically recommends a philosophy of “Generate Light, Not Heat” in utilizing Benchmarks to impact organizational change. Groups or individuals performing at below average levels should be viewed as opportunities for quick returns on investment, rather than targets for punitive action, unless the poor performance fails to improve. This philosophy will assist management in getting buy in for new initiatives, training, and/or programs to bring about the highest level of improvement, instead of creating hostile or uncomfortable working environments.

External Benchmarks:

External Benchmarks are metrics which are usually submitted to a 3rd Party for comparison against groups of similar size, mission, or geographic region. This can often be accomplished through submission of a survey or direct data pulls from the billing, scheduling, or clinical systems. Typically, the 3rd party receiving the data then meticulously scrubs the data, calculates an average or best practice, and quantifies how an organization compares to its peers. External Benchmarks are very powerful tools in providing insight into performance on a regional or national level. This information is invaluable in developing strategic plans, highlighting areas where the organization is a superior performer and areas where there is a need for improvement.

The disadvantage to depending strictly upon External Benchmarks to evaluate performance is that there are usually only a handful of measures collected and reported by the Benchmarking Organizations. Some metrics are incredibly difficult to collect from enough participating organizations to provide a statistically significant sample size. Those metrics which are collected can be very resource intensive when it comes to collection, calculation, data scrubbing, and benchmark generation.  Additionally, not all organizations calculate certain measures the same way. Some good examples of metrics with many different formulas for calculation are Days in AR, Charge Lags, Net Collection Rates, Denial Rates, etc. All said, External Benchmarks are still the most common types of benchmarks utilized by provider organizations. Why? Because the comparison to other like entities is the most compelling data points utilized to formulate long and short term strategies and get the organization positioned to improve performance.

Tags: Benchmarking

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