Benchmarking experts say the practice of using performance yardsticks has been around the healthcare industry for at least 20 years – long enough for it to gain traction, assimilate into the hospital culture and be recognized by most senior executives as a useful measurement tool.
But given the ever-mounting financial challenges healthcare organizations face, they may be wondering whether they’re using benchmarking to the fullest extent possible and how they can make it more effective.
Benchmarking professionals say that despite its longevity and established recognition in healthcare, there is, indeed, more that administrators can do.
“Benchmarking isn’t just a measurement tool but a performance improvement tool,” said John O’Brien, president and CEO of Steamboat Springs, Colo.-based Total Benchmark Solution. “It’s about getting the ladder against the right wall.”
Although some see the statistical process control concept launched in the 1940s as the seeds of benchmarking, the movement started in earnest with Total Quality Management in the 1980s. As information technology advanced and generated increasingly higher volumes of data, benchmarking became institutionalized and synonymous with more contemporary management programs like Six Sigma.
O’Brien and partner Bradley Petersen maintain that benchmarking is still in “a nascent stage.” It is also growing in sophistication and incorporating more quality and financial indicators and a sharper focus.
“Over the years, many organizations have been successful using benchmarking to look at opportunities for improvement and performance,” Petersen said. “In the last three years, because of the availability of public data and healthcare transparency, benchmarking has become an even higher priority. Healthcare remains one of the few industries where we still don’t know the cost of services.”
Moreover, the industry’s financial future is getting cloudier than ever, he said, because baby boomers are starting to flood the Medicare program and the government’s only recourse is to continue ratcheting down reimbursement levels.
“Because reimbursement will continue to go down, hospitals are in a position to learn by benchmarking their performance to see where they can improve on costs, operations and financial management,” Petersen said. “They can’t sacrifice quality to compensate for financial performance, so they are between a rock and a hard place.”
One of the biggest inhibitors to generating momentum for a hospital’s benchmarking initiative comes in the planning stages, says Mark Czarnecki, a consultant with the Association for Benchmarking Health Care. Disagreements about the best way to approach benchmarking can stall its implementation or dilute its effectiveness, he said.
Czarnecki, author of the book “Benchmarking Strategies for Health Care Management,” says the most common sources of conflict are “too much focus on data, lack of focus on actionable process and competing processes such as activity-based costing.” This polarization can cause one faction to “weave around the competing processes for organizational improvement,” he said.
Although benchmarking has evolved into a multi-dimensional process, Czarnecki maintains that “standardization and simplification” is what generates the greatest organizational efficiencies.
O’Brien and Petersen equate the benchmarking process with peeling an onion, saying it should be taken one layer at a time.
“Tackle it incrementally,” Petersen said. “Analyze the cost of your information systems, then look at revenue cycle metrics and health information management and continue peeling it away that way. Understand what it costs to support desktop functions and clinical applications, coupled with the number of facilities to determine whether you are doing a good job or not.”
Do the same for financial components by getting into the infrastructure, Petersen said.
Then, he advises administrators to ask themselves, “‘Are we overpaying or underpaying?’ CFOs are typically frustrated because they haven’t been able to get satisfactory answers to those questions.”
If senior executives are not careful, the scope of a benchmarking program can easily grow too big, making it too unwieldy to be effective. Ultimately, Petersen said, the goal is to balance the energy spent getting the data with the optimal outcome.
“Don’t make it a huge process to derive costs, but something appropriate to get at meaningful, relevant data,” he said. “Put the key metrics in place, determine the cost per metric and then act on it.”