1. Copyright 2008. Medical Group Management Association. All rights reserved. Benchmarking: Using Internal and External Data to Measure Performance Practice Change Fellows Audioconference David N. Gans, MSHA, FACMPE Vice President Practice Management Resources Medical Group Management Association August 14, 2008

2. Copyright 2008. Medical Group Management Association. All rights reserved. Learning Objectives Understand the benchmarking process Identify areas for operational and organizational improvement Measure practice performance over time Compare performance to similar organizations Develop improvement strategies Present comparative information 2

3. Copyright 2008. Medical Group Management Association. All rights reserved. Name, credentials Organization Date Benchmarking Process 3

4. Copyright 2008. Medical Group Management Association. All rights reserved. 4 Benchmarking Rules to Remember # 1 You can drown in a lake that averages three foot deep.

5. Copyright 2008. Medical Group Management Association. All rights reserved. What is Benchmarking? Comparison to a known standard The continuous process of measuring and comparing performance internally (over time) and externally (against other organizations and industries) Determining how the “best in class” achieve their performance levels and using the analysis to change what you do and how you do it (process benchmarking) 5

6. Copyright 2008. Medical Group Management Association. All rights reserved. Benchmarking Enables You To… Evaluate – Objectively evaluate performance and understand organization’s strengths and weaknesses Observe – Observe where you have been, and predict where you are going Analyze – Analyze what others do, to learn from their experiences Determine – Determine how the “best in class” achieve their performance levels so you can implement their processes Change – Convince internal audiences of the need for change (overcome mural dyslexia) 6

7. Copyright 2008. Medical Group Management Association. All rights reserved. Why Comparison Is Important Practice Improvement –Understand performance over time and compared to peers –Objectively identify improvement opportunities –Set goals for higher performance Decision-Making (Evidence-based Management) –Reduces uncertainty and builds confidence –Helps explain decisions and supports your management expertise Industry Advancement –Data is a resource for all practices –Allows advocates to speak more authoritatively 7

8. Copyright 2008. Medical Group Management Association. All rights reserved. Sources of Benchmarking Measures Internal information External information (surveys & networking) “Better Performing Practices” – Modeled on organizations selected for attaining a particular goal or achieving an increased level of performance “Best-of-Industry” – Organizations, inside or outside of healthcare, noted for exemplary performance 8

9. Copyright 2008. Medical Group Management Association. All rights reserved. Benchmarking Goals Increase: –Productivity –Revenue Decrease: –Operational costs –Organizational overhead Optimize staffing levels Improve efficiency 9

10. Copyright 2008. Medical Group Management Association. All rights reserved. Name, credentials Organization Date Benchmarking Theory 10

11. Copyright 2008. Medical Group Management Association. All rights reserved. 11 Benchmarking Rules to Remember # 2 Reality is not a bell shaped curve.

12. Copyright 2008. Medical Group Management Association. All rights reserved. Benchmarking Example: Comparison to a Known Standard Comparing your data to the benchmark Benchmark = A point of reference for measurement 12

13. Copyright 2008. Medical Group Management Association. All rights reserved. Benchmarking Theory Step 1: Determine what is critical to your organization’s success –What activity supports the organization’s mission and vision Step 2: Identify metrics that measure the objectives (key indicators) –A metric or measure of organizational performance –Quantitatively reflects the factors that drive business efficiency, profitability, capacity or quality –Standard unit of observation that facilitates comparison Step 3: Determine source of internal/external benchmarking data 13

14. Copyright 2008. Medical Group Management Association. All rights reserved. Benchmarking Theory Step 4: Measure your performance Step 5: Compare your performance to the benchmark Compute the difference of your data from the benchmark = Your data – Benchmark Compute the percent difference = Your data – Benchmark Benchmark Benchmark 14

15. Copyright 2008. Medical Group Management Association. All rights reserved. Benchmarking Theory Step 6: Determine if you need to take action Step 7: If you need to take action, identify who does the process best and how Step 8: Adapt the processes used by others in the context of your organization Step 9: Implement changes, reassess practice objectives, evaluate benchmark standards, recalibrate measurements Step 10: Do it again — Benchmarking is an ongoing process, and tracking performance over time allows for continuous improvement 15

16. Copyright 2008. Medical Group Management Association. All rights reserved. Benchmarking Theory 16

17. Copyright 2008. Medical Group Management Association. All rights reserved. Applied Demonstration: Situation You manage a 3 doctor gerontology department and are concerned that practice revenue is low. You review the practice management system and extract the productivity information from the reports. You have a meeting scheduled to discuss the issues and want to have recommendations for how to correct the problem.

18. Copyright 2008. Medical Group Management Association. All rights reserved. Applied Demonstration: Benchmarking Steps 1 and 2 Step 1: Determine what is critical to your organization’s success –Have sufficient revenue to continue operations Step 2: Identify metrics that measure the objectives (key indicators) –Total collections (geriatric physicians) –Total ambulatory encounters (geriatric physicians) 18

19. Copyright 2008. Medical Group Management Association. All rights reserved. Applied Demonstration: Benchmarking Step 3 Step 3: Determine source of internal/external benchmarking data –Internal: Practice Management System reports –External: MGMA Physician Compensation and Productions Survey Report 19

20. Copyright 2008. Medical Group Management Association. All rights reserved. 20 Applied Demonstration: Benchmarking Step 4 Step 4: Measure your performance

21. Copyright 2008. Medical Group Management Association. All rights reserved. 21 Applied Demonstration: Benchmarking Step 5 Step 5: Compare your performance to the benchmark

22. Copyright 2008. Medical Group Management Association. All rights reserved. Applied Demonstration: Benchmarking Step 6 Step 6: Determine if you need to take action based on the benchmark 1. What is shown in the data? 2. Are the physicians under performing? 3. What appears to be the problem? 4. What should you do?

23. Copyright 2008. Medical Group Management Association. All rights reserved. Applied Demonstration: Benchmarking Steps 7 to 10 Step 7: If you need to take action, identify who does the process best and how Step 8: Adapt the processes used by others in the context of your organization Step 9: Implement changes, reassess practice objectives, evaluate benchmark standards, recalibrate measurements Step 10: Do it again — Benchmarking is an ongoing process, and tracking performance over time allows for continuous improvement 23

24. Copyright 2008. Medical Group Management Association. All rights reserved. Name, credentials Organization Date Presenting Data 24

25. Copyright 2008. Medical Group Management Association. All rights reserved. 25 Benchmarking Rules to Remember # 3 If you torture the data long enough, it will confess.

26. Copyright 2008. Medical Group Management Association. All rights reserved. Benchmarking Dilemma Caveats & Limitations Benchmarks & Measures Validity = meaningfulness Reliability = repeatability Costly, Slow, & Accurate Cheap, Quick, & Dirty 26

27. Copyright 2008. Medical Group Management Association. All rights reserved. Most Common Benchmarking Statistics Median Mean (Average) Standard Deviation Percentile Count / “N” (Number of observations) 27

28. Copyright 2008. Medical Group Management Association. All rights reserved. EXCELLENT POOR 90th %tile = _________ 75th %tile = _________ 10th %tile = _________ 25th %tile = _________ Median = ___________ Mean = ____________ Your Practice = _________ Indicate position of your practice’s value on vertical line using the ◊ symbol Presenting Data to Physician Leaders 28

29. Copyright 2008. Medical Group Management Association. All rights reserved. Standardizing Organizational Data for Comparison Organizations of different sizes can be compared using appropriate ratios – Examples: Per unit of input – Per FTE physician – Per FTE provider – Per square foot Per unit of output – Per patient – Per RBRVS unit – Per procedure 29

30. Copyright 2008. Medical Group Management Association. All rights reserved. MGMA Benchmarking Data Physician Compensation & Production Survey – information from more than 50,000 providers Cost Surveys – information from more than 1,500 single and multispecialty practices Performance and Practices of Successful Medical Groups – “Better performers” who exceeded a recognized performance standard –Focuses on the underlying business practices and “success stories” with case study information that share successful behavior 30

31. Copyright 2008. Medical Group Management Association. All rights reserved. Name, credentials Organization Date Common Formulas and Ratios 31

32. Copyright 2008. Medical Group Management Association. All rights reserved. 32 Benchmarking Rules to Remember # 4 “Sometimes what counts can’t be counted and what can be counted, doesn’t count.” Albert Einstein

33. Copyright 2008. Medical Group Management Association. All rights reserved. Common Formulas & Ratios Staffing Accounts Receivable & Collections Bad Debt Profitability & Expenses Productivity 33

34. Copyright 2008. Medical Group Management Association. All rights reserved. Common Formulas & Ratios: Staffing Support Staff Breakouts –Total FTE Administrative Staff –Total FTE Front Office Staff –Total FTE Clinical Support Staff –Total FTE Ancillary Staff Total FTE Support Staff per FTE Physician Total FTE Support Staff Expense per FTE Physician Total FTE Support Staff Expense as a Percent of Total Medical Revenue Total FTE Support Staff Expense per RBRVS Relative Value Unit 34

35. Copyright 2008. Medical Group Management Association. All rights reserved. Common Formulas & Ratios: Accounts Receivable & Collections Adjusted FFS Collections –Goal: Higher the better Percent of Total A/R over 120 Days –Goal: Lower the better Months Gross FFS Charges in A/R –Goal: Lower the better Bad Debt due to FFS Activities as a Percent of Gross FFS Charges –Goal: Lower the better 35

36. Copyright 2008. Medical Group Management Association. All rights reserved. Common Formulas & Ratios: Profitability & Expenses Total Medical Revenue after Operating Cost per FTE Physician –Goal: Higher the better Total Medical Revenue after Operating Cost as a Percent of Total Medical Revenue –Goal: Lower the better Total Cost per Medical Procedure (Inside the Practice) –Goal: Lower the better 36

37. Copyright 2008. Medical Group Management Association. All rights reserved. Common Formulas & Ratios: Productivity Total Gross Charges per Physician –Goal: Higher the better Total Collections for Professional Services per Physician –Goal: Higher the better Total / Work RVUs per Physician –Goal: Higher the better Physician Weeks Worked per Year Physician Clinical Service Hours Worked per Week 37

38. Copyright 2008. Medical Group Management Association. All rights reserved. Internal Data Sources 38 Standard Financial Statements –Income Statement –Balance Sheet –Appointment Schedules Special Reports –Appointment Schedules –Patient billings systems ad hoc reports –Clinical information systems ad hoc reports Special Surveys, Inventories, or Assessments –Number of staff –Periodic patient satisfaction survey –Stop watch assessment of patient waiting time

39. Copyright 2008. Medical Group Management Association. All rights reserved. mgma.com David N. Gans, MSHA, FACMPE Vice President, Practice Management Resources Medical Group Management Association dng@mgma.com 39 Questions?

40. Copyright 2008. Medical Group Management Association. All rights reserved. 40 Benchmarking Rules to Remember # 5 In life’s classroom everything not covered in lecture or in the readings will be covered on the final exam.

41. Copyright 2008. Medical Group Management Association. All rights reserved. Biographical Summary: David Gans David N. Gans, FACMPE Vice President, Practice Management Resources Medical Group Management Association Mr. Gans administers research and development at the Medical Group Management Association (MGMA) and its research affiliate, the MGMA Center for Research. In addition to his management responsibilities, Mr. Gans serves as the association’s staff resource on medical group practice management. He is an educational speaker, author of a monthly column in MGMA Connexion, and provides technical assistance to the association’s members in all areas of practice management. Mr. Gans received his Bachelor of Arts degree in Government from the University of Notre Dame, a Masters of Science degree in Education from the University of Southern California, and a Master of Science in Health Administration degree from the University of Colorado. Mr. Gans is retired from the United States Army Medical Service Corps in the grade of Colonel, U.S. Army Reserve. He is a Certified Medical Practice Executive and a Fellow in the American College of Medical Practice Executives. Address:Medical Group Management Association, 104 Inverness Terrace East, Englewood, CO 80112 Phone:(303) 799-1111, ext. 1270 E-mail:dng@mgma.com 41