One of my oldest and most current tools to help healthcare organizations reduce costs and ascertain where they stand on consumption and utilization is benchmarking. Simply put, benchmarking is about finding the best practice in a particular category, process, or deliverable to which you can gauge your own hospital or health system against comparable cohort, regional, national, or system-wide comparable organizations.
We need ways to look beyond price and take into consideration the total cost of the products and services in order to optimize our costs further. The best way that I have found to do this is to utilize benchmarking through activity-based costing which is an accounting principle as old as accounting itself. Marrying patient volume centric metrics, like surgical cases or patient days, to purchase and inventory history on a monthly, quarterly, and fiscal year basis will give you the key performance indicators to marry up to your benchmarks.
4 Keys to Benchmarking
1. You Have to Prove the Savings to Yourself First – The biggest critic of benchmarking will be yourself and that is okay. You will need to investigate your benchmark reporting to make sure it is on point before you share it with your VA or departmental leaders. By investigating the benchmarks you plan to present, this will ensure that they are rock solid and will not get talked away the second after you present them.
2. You Are Searching for the Best Practice with Benchmarking – Benchmarking is not comparing one hospital or department to another – it is about finding the best cohort matches with equal characteristics and operating volumes. You are never going to find hospitals that will compare exactly to each other, but you will find lab departments with similar modalities and volume statistics. The same will go for patient mixes and ER volumes. You may have to sometimes work like a home appraisal and find the best comparable within hospitals and health systems that meet your organization’s unique operating characteristics as close to apples to apples as you can.
3. The Importance of Triangulating Your Benchmarks – No matter what category you look at, you cannot hang your hat on just one benchmark type such as cohort benchmarking. This will carry weight, but it could leave the door open to the department head to just brush you off and say, “We are different/unique.” Your benchmarks need to carry more weight than that which is why you need to have more like three benchmarks that will prove your point. For example, if your foley catheter costs are running higher within your cohort, plus you are running higher in your year over year as well as your system level benchmarks, then you have a real opportunity for savings.
4. Benchmarking is a Learning Process for Health Systems – Hospitals and health systems do not like to be benchmarked, especially in supplies and purchased services. Your Supply Chain Department does not want to hear that any category’s costs are higher than they should be even though they are doing all the right things by attaining the best price. You have to educate your organization that benchmarking is not about just price or usage but a combination of both compared to best practice organizations.
Gain an Additional 7% to 15% Savings with Benchmarking
There is still an additional 7% to 15% in new savings for healthcare organizations but it is not going to be found in traditional price or contracting areas. We must configure our reporting and value analysis resources to benchmark and track each and every major and minor category of product/service to uncover the hidden savings beyond price.
If you want to have this process fast tracked, we stand ready to assist you and/or your health system today!
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