Financial benchmarks pinpoint efficiencies, deficiencies

A column about keeping your practice in good health

By Mike Norbutcovered practice management issues during 2002-06. Posted May 23, 2005.

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When it comes to treating patients, physicians search out plenty of information at their disposal, from textbooks to journal studies, to see how other doctors might act in a similar clinical situation. When it comes to evaluating the financial health of their practices, however, physicians don't always have the same instincts.

Whether it's for a lack of time or a lack of understanding of what factors are important, some doctors might not bother tracking their own data against regional and national averages to see how they compare.

Using benchmarks, however, can be a helpful, inexpensive way to see if your practice is in a typical financial position and not losing money where it shouldn't, physicians said.

Surveys such as those released annually by the Medical Group Management Assn. and the American Medical Group Assn. offer comprehensive data broken down according to group size and specialty.

The surveys give snapshots of what a typical practice sees in terms of compensation, productivity and costs, and they often break the information down per physician.

From a practical perspective, a group should know what other practices in the region and within its specialty are paying its doctors, because it's almost guaranteed a physician candidate will come to an interview armed with that information, said Fred Rasp, MD, a pulmonary critical care physician and medical director and chair of The Heart Center Medical Group, a multispecialty group with 44 physicians in Fort Wayne, Ind.

"We try to hit the median for compensation within each specialty," Dr. Rasp said. "We feel physician retention is more likely to occur if we hit those medians. If you don't hit the medians, the candidates may go somewhere that does."

Benchmarks also are valuable for helping to find deficiencies in your office, either in terms of excessive overhead costs or uncollected revenue. A good manager has a feeling when one area of business is amiss, but having data available to help substantiate these hunches can save time and money, administrators said.

"If our group falls outside a reasonable realm for important data points, we would take a close look at it," said Jim Palazzo, CEO of the Iowa Heart Center, a 55-physician cardiology group based in Des Moines. "Those groups that are not benchmarking may be missing opportunities to be more efficient."

One of the positive results of comparing your practice to averages is that you actually take the time to collect information about your group -- information which you can scrutinize over time to find out where your practice might be improving. Erica Swegler, MD, a family physician in Keller, Texas, said her group, North Hills Family Practice, compiles basic productivity data for its six physicians and five nurse practitioners and physician assistants on a monthly basis. The group also compares its annual data to survey results, she said.

While benchmarking their information helps practices financially, analyzing their own monthly information also helps them clinically. The group strives for efficient, cost-effective care, and it pays close attention to quality, she said.

Beware of the data you're consulting

Quality is still an issue that can get lost in benchmarking statistics, especially when the information comes from managed care companies. Insurers often provide data to medical groups that highlight when physicians are exceeding cost norms for a particular category. What insurers fail to recognize, however, is extra pharmacy costs can mean lower hospital costs, Dr. Swegler said.

"Report cards are not based on encompassing costs," she said. "They break them out in silos. When you're looking at information, your own generated data is probably the best data."

Surveys that are built on physician-provided information are probably more useful for practices, but there are caveats when reviewing those benchmarks as well. Sample sizes could be too small to make them statistically reliable, and the information provided may be categorized differently.

Joel Sauer, CEO of The Heart Center Medical Group, said he has been at conferences where, in discussing surveys, executives had wildly different opinions about what should be considered part of overhead expenses. Yet, surveys simply average the results, he said. "You wouldn't want to hang your hat on it, but if it's wildly out of whack, there's probably some fire to that smoke."

What may be more telling is if there is a wide disparity between two physicians of the same specialty in the same group. A practice that has been compiling its data and can issue reports to its individual physicians can let the doctors address the productivity differences themselves.

"There's peer pressure there to make sure you're in the right ballpark," Dr. Rasp said. "We use our own data more than state or national data. In a way, it's more valuable."

Mike Norbut covered practice management issues during 2002-06.

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