Managing by Benchmarks: Making the Case for Accountability

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Benchmarks enable managers to gain knowledge of their organizations and build a culture of accountability Corporate CEO Jack Welch adopted a statement of management expert Peter Drucker (1909–2005) as a favorite saying: What gets measured gets managed. This phrase is particularly true when applied to radiology and imaging practices. To be an effective manager and strategic leader, it is vital to use the many resources available to you and to apply them studiously to your practice setting. To hold yourself accountable to the goals, mission, and vision of your organization, however, you must first create the financial reports, statements, and benchmarks necessary to measure these goals. Benchmarks are a tool that managers can use to measure the effectiveness of the organization, both historically and in future years. They allow standard measurements to be established and can graphically depict moments in time in an organization’s financial structure. Part of the challenge of producing meaningful benchmarks is sorting through the mountains of data that are available to a practice administrator, followed by synthesizing those data into concise and relevant formats. Benchmarking begins with understanding your specialty, then creating the tools needed to measure and examine your performance. Understanding Your Business Health care, in particular, is a complicated industry. Take the revenue cycle as an example: From the moment that a patient schedules an appointment to the point when payment is received, a multitude of steps and procedures are conducted. Many people are involved, including front-desk personnel, clinical staff, physicians, coders, transcriptionists, and billing/collections staff. In addition, it is not unusual today to see electronic medical records, claim submissions, and payment deposits, and these functions play a vital role in the collection of revenue. All of these factors emphasize the importance of understanding the components of your particular type of practice. These components will become some of the critical measurement factors that an effective benchmarking tool will include. The revenue cycle is a key component of any practice’s success, but is only one example of an area of a practice that should be tracked. Other critical areas for measurement could include physician productivity, office overhead, accounts-receivable management, radiology procedures or patient visits/encounters, staffing ratios, and fee-schedule analysis.
Figure 1 Physician compensation per total RVU, as compared with Medical Group Management Association (MGMA) benchmarks.
With respect to physician-productivity benchmarks, there are several options available to a manager. Historically, gross charges or billings were the standard measurement for physician productivity, and in some cases, this is still a worthwhile statistic. In recent decades, however, RVUs, as established through the Medicare Physician Fee Schedule, have become the standard measurement of a physician’s productivity. RVUs establish a weighted value for most CPT® codes that is based on the physician’s time, the office expense, and the malpractice expense of the procedure. Most practice-management systems are capable of tracking RVUs by physician and by CPT code. Some systems are also able to track RVUs by physician by work RVUs, in addition to total RVUs. If this information is available, it should be used, as it is a more accurate measure of the physician’s work required for particular CPT codes. These data would be valuable in preparing several benchmarks. As shown in Figure 1, we could use these data to map physician compensation per total RVU. This figure shows that the average physician compensation per total RVU has dropped from $20.57 in 2007 to $17.18 in 2008, and it also shows some industry comparisons from the Medical Group Management Association (MGMA), Englewood, Colo. Specifically, an educated manager would be able to interpret these data in line with the typical reimbursement per RVU and could deduce the cost per RVU for the practice by subtracting the compensation per RVU from the typical reimbursement per RVU. This is a solid example of how industry knowledge would allow a manager to interpret multiple benchmarks from one set of statistics.
Figure 2. Physician compensation per work RVU, as compared with Medical Group Management Association (MGMA) benchmarks.
To take this idea one step further, we can look at Figure 2. This is the same analysis shown in Figure 1, with one exception: The RVU has been split to show only the physician-work component. This analysis is useful for comparisons across specialties because it removes the office expense and malpractice components of the RVU. It therefore allows us to compare physician compensation for both hospital-based and clinic-based work. The physician-productivity analysis would also be useful in comparing productivity within the group to the group’s average/median productivity figure. This can only be a meaningful analysis if such outside factors as administrative time and any time spent on patient consultations (which would be more extensive if the practice, for example, had a vascular clinic), are either excluded from the calculation or given an equivalent production weighting. This would allow complete apples-to-apples comparison. Another key factor in determining what to measure would be the typical statistical measurements for a particular practice niche. For example, a primary care practice would be likely to focus on production (based on evaluation-and-management codes), on overhead analysis of items such as physical space and staffing, and on front-desk collections. Radiology practices, however, would have little need for these types of benchmarks. Radiology managers would be more interested in interpretation volumes, on-call tracking, and the number of days worked per radiologist. Billing/collections percentages would be a benchmark common to both kinds of organizations, yet even this statistic may be quite different because primary care practices typically use more staff time in the coding and billing areas.
Figure 3. Billing cost per procedure, as calculated in the RBMA's 2007 Imaging Center Performance Survey.
Figure 3 shows billing cost per procedure, as calculated in the RBMA’s 2007 Imaging Center Performance Survey (sold at This type of data can educate the manager of a radiology practice in an area very specific and relevant to his or her own situation. In a more recent RBMA survey, the 2008 Accounts Receivable Performance Survey Results, the billing cost per procedure for 2008 for global billing (which should represent information submitted by imaging centers), was $8.01 for the mean, $3.55 for the 75th percentile, and $10.83 for the 25th percentile. Based on both surveys, the billing cost per procedure appears to be decreasing. This should be taken into account when assessing your practice against these outside benchmarks. In comparing their practices with these benchmarks, it is extremely important for managers to gather as much detailed knowledge as possible of the factors that affect the success of their particular practices. Without this knowledge, comparisons with benchmarks could be used to make decisions that are not in the best interests of the practice. For example, if the practice just purchased new billing software and had to spend money to create new interfaces for medical records and electronic claims submission, its billing cost per procedure will probably be high for that particular year, even though the expense will eventually decrease to a level closer to the 95th percentile of performance after the initial high-cost year. After establishing a strong base of industry understanding, building the benchmark tool becomes a more specific and direct process and can lead to a more thorough understanding of your practice (and the impact of decisions). Using Industry Resources The next step in establishing a valuable benchmarking tool is to gather data with which to compare your particular practice. The most effective management tools use comparative data from both internal and external sources. Historical practice data enable a manager to set goals and budgets for the near future, as well as to create comparisons with prior periods that can establish trends and identify anomalies. Historical comparisons can also allow predictive analysis, which enables a manager to identify possible problem areas if the data do not follow expectations.
Table 1
Table 2
Table 1 shows a three-year view of several key measurements for an imaging center. This type of schedule is a great example of how an imaging center manager would immediately be able to spot some trends, both positive and negative, and then use the benchmark to dig further into specific areas in order to formulate corrective actions, if necessary. Table 2 is a similar view tailored for a primary care practice. Although this analysis is of internal data, the measures used are from an outside source of benchmarking data, the RBMA’s 2007 Imaging Center Performance Survey. Just as important as using internal data to build benchmarks is the information available in the marketplace, which can be a very valuable resource. Many health care organizations conduct annual surveys that can provide strong marketplace data that would be very useful in the setting of benchmarks. The MGMA produces several surveys each year that are available for purchase. These surveys cover measures such as physician production by charges or RVUs, collections percentages, clinic and physician-practice operational costs, and physician compensation. They are collated by size of group, type of group, geographical area, and type of revenue. Another excellent source of industry data is the RBMA, which produces several useful statistical surveys every year, including a survey that measures accounts-receivable management performance and a survey that specifically measures imaging center performance. The RBMA surveys radiology groups throughout the United States to gather these data. Searching for best practices within your specialty is an excellent starting point. Trade journals, online resources, and networking through association meetings can expose a manager to peers who may be willing to share some of their successes.
Figure 4. A scorecard allowing users to visualize practice health, available through the Medical Group Management Association, Englewood, Colo.
Figure 4 shows the scorecard that is available from the MGMA. Graphical reports of this kind are often an excellent way to present financial data to physicians in an interesting manner. To a visual learner, for example, they can communicate important financial results in a way that is much more understandable than a financial report might be. An important factor, in considering the use of outside data, is the number of respondents to the survey (sample size), which can help determine the validity of the data. Another factor to consider is how closely the information relates to groups of your specialty, size, geographical area, or revenue mix. Although comparing your practice’s data to those of a relevant subgroup can be a valuable exercise, the practice manager should look at the number of respondents in that subgroup. There may be a sufficient number of respondents to the survey as a whole, but there may not be a sufficient number within the subgroup with which you intend to compare results. Create the Benchmarks Once you have a clear understanding of the internal and industry data that you would like to use in your benchmark reports, it is time to build the management tool. Some key factors to consider in establishing a useful report are timeliness, accuracy, simplicity, and comparability. Benchmark reports must use accurate, current data in order to be relevant to their purpose. They must also be relatively easy to prepare. There is no surer way to create a useless management tool than to make it difficult to create and maintain. Keeping it simple, but relevant, is the ultimate goal. Figures 5 and 6 show simple benchmarking tools designed to track some key radiology statistics that are easy to gather and readily available. Ultimately, no matter how much research is done within the industry or how much internal and external information is used to formulate benchmark reports, it is the analysis that follows that really creates the value of benchmarking. Benchmarks make administrators and managers accountable. The trends and anomalies that are identified using these management tools should lead to fruitful dialogue and discussion within a physician organization. The dialogue, analysis, and call to action that result from the benchmarking exercise are what will hold your organization accountable for its future results.
Figure 5. Radiologist benchmarks that are relatively easy to track and measure.
Figure 6. Accounts-receivable benchmarks that are easily accessed and presented.
On a personal level, benchmarking tools should significantly enhance the ability of practice administrators to hold themselves and their management teams (including physician leaders) accountable for achieving the organization’s goals. Benchmarks will allow managers to build the necessary knowledge and understanding to facilitate their individual growth, and the overall success of the practice, within their industry. In a complex and constantly changing environment such as health care, finding those relevant and measurable benchmarks can mean the difference between clarity and chaos.