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Medical Group Management Association

Statistically Speaking: Benchmark Report

Insight Article - March 4, 2019

Tunnel vision can tend to creep up on healthcare administrators. When operating a large and complex organization, the inclination to keep their heads down and noses to the grindstone can be powerful. Despite one's initial instincts, it's critical to stay on the pulse of how one’s organization stacks up to its contemporaries. Such is the importance of benchmarking. The American Productivity and Quality Center defines benchmarking as "the process of continuously comparing and measuring an organization against business leaders anywhere in the world to gain information that will help the organization take action to improve its performance."1 Maintaining good benchmarking habits can be invaluable for organizations of any size.

Kenneth T. Hertz, FACMPE, principal, MGMA Consulting, has written extensively on the topic of benchmarking. With nearly 30 years of experience in senior-level and executive management, as well as extensive consulting experience with practices ranging from two to 700 FTE physicians, he's a qualified, trusted resource.

Organizations that have already employed benchmarking strategies should take a closer look at them, as they may be underutilizing the method and missing out on valuable insights. Hertz warns against benchmarking to the median – asking, "Why would anyone want to be average in their approach or performance?" He lists several important questions organizations should consider when it comes to benchmarking:
  • What questions should the benchmarking answer?
  • Is performance reported compared to a prior period or industry data? 
  • What does the practice want the benchmarking data to show? 
  • What behavior within the group should be modified? 
  • What process needs to be improved? 
He encourages practices to consider looking at how things like overhead expenses and cost per visit stack up with those of the industry at large. The practice's work relative value unit (wRVU), production per FTE provider, and cost per wRVU should be thoroughly cross examined. 

total cost per encounter
Source: 2018 MGMA DataDive Cost and Revenue

Awareness of factors and changes that may affect the numbers when benchmarking data to past performances is also important, as these may result in an uneven distribution of costs from year to year (things like office moves, providers working part time, etc.). 

Similarly, when benchmarking to industry normative data, keep in mind how other organizations differ. Hertz suggests noting things like the number of survey respondents, geography, specialty, compensation model and practice ownership, writing "I learned the hard way as a practice manager, that it was important to read about the survey, the data, definitions, and what table correlated with another table, and what didn't before I did the benchmarking." The narrative of the data is just as important a piece of the puzzle as the numbers themselves.

Benchmarking is an invaluable practice, and it is only effective when the full scope of the data is taken into consideration. Don't let tunnel vision cloud the entire story.

Want to learn more about using compensation data for benchmarking? Fill out the form on this page to request MGMA's Research & Analysis report on the subject, featuring a thorough how-to guide and 10 best practices. 

1Ettorchi-Tardy, Amina MD, "Benchmarking: A Method for Continuous Quality Improvement in Health" Healthcare Policy, May 2012
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