The vital role of benchmarking in medical practices
Why numbers matter – the crucial metrics seen in KPIs that medical groups need to track to achieve success and avoid common pitfalls.
According to a November 2022 MGMA Stat poll, more than one in three (36 percent) medical groups are on track to miss their annual productivity goals. This is a troubling statistic that suggests many practices could face challenges in the year ahead.
But the first step in addressing these challenges is to accurately track practice performance. As the saying goes, you can’t improve what you don’t measure.
For medical practices to know they are missing the mark on important standards like productivity, patient satisfaction, provider compensation and more, they must implement tracking and benchmarking methods. Ultimately, benchmarking performance plays a crucial role in the success of a practice or organization.
The importance of tracking benchmarks
Healthcare benchmarking is the process of comparing one hospital, department, service line, provider group or other dimension with another for the purpose of identifying practice weaknesses and improving quality. By comparing a practice's performance metrics against industry benchmarks and best practices, medical professionals can assess their operational efficiency, financial health and overall performance.
For medical practices to gain productive insights from benchmarking data and key performance indicators (KPIs), comparisons must be done correctly. Medical group leaders also must clearly define which operational measures or goals are the most critical to the overall success of the practice or organization. It is difficult to derive meaning from a measurement that has not been defined.
Measurements should include any metrics that will determine the ongoing success of the practice as well as those aligned with the overall mission, vision and values. These are important elements for any medical practice to consider to successfully leverage benchmarking insights.
Crucial metrics and performance indicators
Understanding KPIs in healthcare enables professionals to take purposeful and calculated actions toward success. In a saturated market that currently faces financial and staffing challenges, it is important that practices are strategic and maximize efficiency whenever possible.
Here are some KPIs to track:
- • Performance as compared with budget or earnings before interest, taxes, depreciation and amortization (EBITDA), which are both tied to the overall revenue minus expenses.
- • Provider productivity and efficiency as measured by relative value units (RVUs) or in some cases patient encounters per day.
- • Revenue cycle metrics, such as days in accounts receivable (AR), collection and denial rates, as well as data on patient collections.
Equally important is patient satisfaction data, including wait times, appointment availability, and no-shows and cancellations. Staffing ratios including provider-to-staff ratios, patient satisfaction scores and feedback should also be measured and taken into account.
Common missteps in using this data
To obtain valuable and accurate benchmarking results, practice leaders must be aware of common errors that can occur while comparing their practice with others.
To start, comparing data with that of another practice without considering practice size, specialty, geographic type or patient demographics will lead to skewed benchmark results. For the most accurate information, results must be compared with an organization that has similar characteristics.
In light of the continual evolution of the healthcare industry, practices must stay ahead by incorporating new metrics into their measurements and methods. Failing to regularly update benchmarks and adapt strategies based on changing industry trends and practice needs can also lead to inaccurate benchmark results.
Lastly, failing to include all relevant stakeholders in the benchmarking process will hinder the progress of a medical practice. Without the necessary stakeholders involved in the process, it is difficult to effectively implement improvements and make changes.
More than just comparing numbers
To gain a comprehensive understanding of benchmarking numbers and KPIs, medical practices must go beyond simple comparisons of different figures and benchmarks.
They need to use benchmarking results to drive positive change within the practices themselves. Leaders can leverage data-driven insights and benchmarks to make informed decision-making that optimizes patient care, fosters operational efficiencies and ensures long-term financial viability of the practice. A culture of utilizing benchmarks as a tool to achieve continuous improvement will contribute to the success of medical practices and organizations.
Andrew Hajde, CMPE, is a healthcare professional with more than 20 years of industry experience. As the director of content and consulting at MGMA.