Benchmarking for better results in your practice

When dealing with the business of healthcare, it’s helpful to have some basic understanding and background in analytics — and even basic statistics — because most business decisions require the support of data and evidence. Being proficient in the areas of data analytics is not only good for your organization but also good for your career as many companies would rather hire someone with strong analytical skills than go through the time and expense to train from within.

Analytics in the workplace

If you’re not a trained mathematician, terms like math, statistics, analytics and data mining, may all sound the same and cause your eyes to glaze over, but they are different. For the sake of this article, I’ll limit the conversation to statistics and analytics.

Statistics is defined as “the practice or science of collecting and analyzing numerical data in large quantities, especially for the purpose of inferring proportions in a whole from those in a representative sample.”  The use of statistics is widely applied in healthcare management and administration and we see a high prevalence in extrapolation audits and risk assessment.

With analytics, we expand the definition to encompass every area of management and administration. Data are rampant in our industry and while our biggest problem used to be getting access to data, now the problem is with too much available data, a problem that is becoming increasingly difficult to manage. In our quest for data, we often run into the Law of Diminishing Returns, which infers that additional data beyond some threshold adds error and redundancy rather than value. We know there is a price for good data, but is there a higher price for bad data?

The answer is a resounding yes! In fact, since information scales exponentially, knowing the difference between good and bad data and being able to validate the data is of critical importance.

Analytics and practice management
This need to understand analytics affects almost all areas of practice management. For example, we have seen quite significant activity around productivity-based compensation for physicians. Much of this focuses on some form of compensation, whether it’s salary split, bonus, shared risk or another method of payment and involves the use of the work RVU.

Now, if you aren’t familiar with what that is, you some homework to do. The RBRVS or Resource-Based Relative Value Scale has been in play since 1992, and while the primary goal was to establish a common method for calculating Medicare payments, it is used for much more than that. And every practice manager and administrator should have a solid understanding of the RBRVS. When calculating compensation this way, you will need to understand how RVU analytics affect the calculations.

For example, how many work RVUs define one full-time equivalent (FTE), provider? And how does that relate to time under the RUC time data set? You will need to understand how to use benchmarked data to identify where your providers may be compared to their peers. And you will need to know where to get that peer benchmark data. Then, you will need to know how to confirm it to make sure that it is useful for your goals and objectives.

Cost accounting
Another solid application of analytics has to do with cost accounting. Again, many practices have moved towards a lean method, which is to associate the cost directly to the procedures and services provided. This is easy with measurable items, such as DME, drugs, etc. But what about other procedures and services that don’t have a fixed comparative cost such as an office visit or a surgery?

Granted, we can distribute things like fixed expenses and even assign variable expenses based on the items consumed, but we also should look at how these and other expenses are distributed and once again, there is a movement towards using RBRVS for this. The database is the same but the analytics are totally different. For example, how can you tell if the practice is profitable under a given contract? Well, you can calculate cost-per-RVU and then compare that to revenue-per-RVU for every contract. Or you can calculate your collection and determine a break-even fee for every procedure.

The bottom line: Just like the onerous and overwhelming sets of rules, laws, policies, and procedures that govern healthcare in this country, analytics should be incorporated into the practice management reality. The better you get at understanding and executing analytical processes, the better off you and your organization become. In addition to the two examples given above, we can apply this knowledge to compliance, risk, fee scheduling, revenue cycle management, denial analysis, team building, decision making, problem-solving, and the list goes on and on.

The opening sentence to Tolstoy’s Anna Karenina goes like this: “Happy families are all alike; every unhappy family is unhappy in its own way.” And, I posit that successful practices are all alike; every unsuccessful practice is unsuccessful in its own way. Success, then, will come from your ability to accept, understand, process and integrate analytics into the organization.