Benchmarking is one effective and increasingly popular approach to help physician practices better understand their financial dynamics, run those practices more efficiently, and focus more intensely on delivering quality patient care.
Physician practices owned by hospitals and health systems often operate as “loss leaders,” operating in the red while bringing patients into the system who will then utilize profitable laboratory and imaging services, surgical procedures, hospital stays, and other services. Cost containment is important throughout the organization, but it’s critical to maximize productivity at the lowest possible cost in areas that typically lose money.
By comparing physician compensation, productivity, expenses, and more against similar practices, both regionally and nationally, practice leaders can quickly hone in on areas for improvement, leveraging insights that can help run the practice more efficiently.
The challenge with comparative analysis and benchmarking often centers on bringing the right data together at the right time. Practices need both internal metrics and external data from peer organizations on a timely basis. Armed with this data, physician practice leaders can begin to understand how benchmarks improve financial performance, what metrics to track, and what initial steps to take.
Improve Financial Performance With Benchmarks
As higher pandemic-related labor and supplies strain already thin profit margins and volumes remain volatile, healthcare organizations are increasingly focused on cost containment. Departmental productivity is a critical success factor, as are the constants of improving care quality and the patient experience.
To successfully use benchmarks to improve financial and operational performance, physician practice leaders must clearly understand how a practice stacks up against relevant peers, which underscores the importance of a large set of external data. Given market volatility, finance leaders need data that’s refreshed on a monthly basis.
Benchmarking for physician practices starts with examining internal data such as billings, general ledger, volumes, work Relative Value Units (wRVUs), and payroll compensation. These metrics can establish a baseline, but a practice’s performance can’t be truly measured without external benchmarking data. How does a practice compare to local peer organizations? Those in other geographies? By specialty practice?
Axiom™ Comparative Analytics includes data on 135,000 physicians and over 10,000 practices across 130 specialty categories. Users can see monthly data on labor and non-labor expenses, physician salaries, provider productivity, and support staff, revenue, and volume metrics.
Measurement isn’t necessarily about hard and fast costs. Rather, it’s about productivity in a particular area, how it’s measured, and how it compares with other organizations. Market-type data helps organizations understand the financial demand dynamics of the practice, including staffing, physician productivity, real estate, and other dimensions. Data can be parsed by individual physician, specialty, and practice, while peer groups can be parsed by specialty, region, and whether a practice is urban or rural.
Physician Practice Metrics to Track
No single metric exists as a North Star that every hospital, physician practice, or department should track to improve financial performance. While commonalities certainly exist, each department has unique staffing, opportunities, and challenges.
For many physician practices, the following metrics are important to track:
- Investment per Physician FTE
- Physician wRVUs per Physician FTE
- Physician Compensation per Physician FTE
- Physician Compensation per wRVU
- Net Revenue per Physician FTE
- Net Revenue per wRVU
- Total Expense per Physician FTE
- Support Staff FTEs per 10k wRVUs
Following initial analysis of internal and external benchmarking data, aim for the areas where the most gain can be made and determine what levers you can pull to increase productivity and ultimately reduce costs. Although many organizations are comfortable with their physician practices operating in the red because of the benefits they bring to the health system, more efficient operations equal a smaller operating loss, offering the opportunity for the organization to invest in other areas.
Identifying areas for improvement is a moving target, however. Your organization is moving, but so are your competitors and the market. That’s why the ability to access the market’s most timely data is necessary to examine your organization in conjunction with other organizations and a changing market landscape.
Cost Containment Journey Example
Your internal data — from the general ledger, billing, and EHR systems — is already at your fingertips. To make well-informed, strategic financial decisions, pair this data with external benchmarking data that adds the necessary context to compare physician, practice, and organization performance against your peers.
For example, a health system in the Northeast with a 50-plus physician group that had revenue and expense gaps across the enterprise was evaluating its continued investment. The practice drove good outcomes for the health system, but the Board of Directors wanted to better understand the investment in relation to the broader market and partnered with Syntellis to answer key questions.
By benchmarking the practice against similar organizations, geographies, specific practices, and market conditions, the team determined that practice losses aligned with similar organizations and the market. Given the report, the Board determined it was investing properly and would continue its improvement plans in other areas of the health system.
Any focus on physician practices should examine the balance between productivity and compensation. High productivity and low compensation relative to peers and the market can indicate early signs of burnout. It’s likely worth the effort to retain important physician or staff members in your organization versus the time, expense, and frustration of recruiting new staff.
Cost containment and maximizing productivity are critical success factors for physician practices amid continued market and volume volatility. Improvement starts with an examination of internal data to provide a baseline. External benchmarking completes the puzzle, offering insights that help identify strengths and areas for improvement based on a specific market and practice specialty.
Insist on validated external data that’s updated monthly to analyze your practice with market context so that you can uncover areas for improvement. Start small and recognize that creating a culture of continuous improvement is more of a journey than a destination.
Watch this video to learn more practical uses of Axiom Comparative Analytics.