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Five simple benchmarking tips for optimal revenue performance

In today’s payer policy environment, physician practices need an extensive focus on core business and practice management strategies in an effort to drive revenue.

While these fundamentals, philosophically, may not have changed in relation to yesterday’s practices, the threat of declining revenue has certainly brought them back in the spotlight. Utilizing fundamental practice management and business strategies including a broad spectrum of key performance indicators are crucial to long-term success and sustained revenue for any medical group.

Benchmarking is the process of analyzing key performance indicators (KPI) through internal and external comparisons to like data. The inherent difficulty with benchmarking is in obtaining true “apples to apples” comparisons or standards. Most physician practices, while similar in execution, vary greatly in terms of culture, policy, and operating environment. This makes true comparison without asterisks impossible.

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Benchmark Inventory
Identify and list the practice’s benchmarks and key performance indicators with narrative about the use of the indicator and its relevance to the practice. Many common financial benchmarks may include:
Gross charges
Adjustments
Write-offs as a percentage of charges
Bad debt as a percentage of charges
Percentage of A/R over 120 days outstanding
Collection agency recovery percentage

Whatever a practice benchmarks, this exercise will cause it to reflect on the data it is gathering and the value the data provides. Practices may find they want to add KPI’s or drop KPI’s that for whatever reason have become irrelevant.

Accommodate practice and environmental change
The healthcare environment is changing and many practices are reflecting on their strategies. For example, over the past few years there has been significant interest in insurance carrier contract accountability. Technology and carrier competition has provided new tools and data allowing new KPI and benchmarks to be created. Some examples include:
Claim denial rate (number of claims)
Claim denial rate (based on dollars)
Days to pay claim
Accurate payment rates
Days from denial to adjudication (by carrier, by employee)

A practice should ask itself crucial questions about its processes and environment to determine areas that need the most focus, especially where revenue, productivity and efficiency are concerned.

Find Comparables
Once benchmarks have been established, internal and external comparisons should be identified.
Internal. Look within the practice’s existing data sets for comparable data. The practice’s billing data sets will contain inherent comparability between insurance carriers in a given marketplace thus avoiding the need to look externally. That being said the American Medical Association (AMA) has recently begun comparing these data elements in its annual production of the AMA Insurance Company Report Card, as one example.

External. Look at other practices that possess similar alignment in size, specialty focus and type. Organizations like the Medical Group Management Association (MGMA), Radiology Business Management Association (RBMA) and the Healthcare Billing and Management Association (HBMA) often provide analysis of industry surveys and data. Third-party billing and practice management companies like MMP are also helpful in providing blind client data.

Identify and act on performance gaps
Analyzing performance gaps in the practice’s results consists of two aspects, including determining the magnitude of the gaps using the benchmarking metrics originally identified, and pinpointing the enablers that facilitated the practice’s performance. During this phase, it is often a good idea to compare the practice’s performance with that of other practices by using up-to-date blind data. Once areas needing improvement have been determined, organizing the data and presenting it in easy to read graphic formats can allow other thought leaders within the practice to see where the issues lie. Comparisons of the practice’s current performance against the original benchmark, while also projecting future performance, creates better planning and implementation of benchmarks moving forward.

Communicate results for ultimate success
No benchmarking program can be successful without full buy-in from a practice’s staff, physicians and leadership. Once a practice is on the same page as to its goals, whether financial or process-driven, it will drive discussion toward improvement. Monthly or quarterly board or staff meetings often provide a good forum for discussing benchmarks, data comparisons and improvements. Other areas of communication used by the practice, whether it is an internal newsletter or online intranet-based internal site, can also be used as a consistent way to communicate practice benchmark results and improvements.

Randal Roat is the vice president of radiology services with Medical Management Professionals, Inc. (MMP) and can be contacted at rroat@cbizmmp.com.