New Zealand

Benchmarking is a term that has been around for many years in the business world and it can come in an out of fashion just like your favourite pair of jeans. So in today’s health care industry is benchmarking still relevant?  How does it work and how do you interpret results?  This month’s article will examine these issues to assist you in determining whether benchmarking will be worthwhile for your practice.

Benchmarking – what is it?

Benchmarking is a process where key items of your practice are compared against other similar practices.  The key to a successful benchmark is firstly to ensure that meaningful items are measured.  What are the key things that worry you about your practice?  Do you worry about your performance against your competitors?  Are their areas that you think you may be able to improve upon?  These are the items that you should talk about with your advisors to ensure they are covered in the benchmark.  Secondly, a benchmark is only as good as the data base that is used to make the comparison.  In general, it is very difficult to accurately benchmark a specialist practice, as there is simply not enough similar data to compare against – the practices are quite variable.  By comparison, benchmarking can be very useful for general practices and in some cases, you can even benchmark by region to get a clearer picture of how your practice is performing.

Why is it useful?

Many people perceive the primary role of benchmarking is to compare your practice against competitors.  To do only this would miss the power of what benchmarking can do for your business.   The real power of benchmarking is that it enables you to identify any issues in your practice before they develop into big problems.  Think of it as a flashlight that you shine into the corners to find things that may be lurking unnoticed.   Here are some of the key issues that can be identified, in particular, for a general practice:

  • Are you generating as much revenue as you can?  If not, why? Is it due to your pricing, your appointment mix, your policy on private billing, your use of item numbers etc?
  • Are you paying doctors and staff within industry averages? Does this match with the perception in your practice?
  • Are there any expenses that are much higher than they should be?
  • What things are you doing better than your competitors?

What areas should be benchmarked?

There are two types of benchmarking that you can consider – clinical and financial.

From a financial perspective, the key areas to benchmark include:

– Number of available appointments
– Pricing schedules and opening hours
– Percentage of bulk vs private billing
– Patient fees generated vs patient fees capable of being generated
– Key expenditure such as medical supplies, wages, rent
– Doctor contract payments

This will give you a broad range of results to help you to review your practice.

How to use the results?

If the real power of benchmarking is the identification of issues, make sure that you get advice on how to interpret the results.  Ideally, it should lead to a discussion with your advisors on some key actions that you can implement into your practice to improve your results or address the issues that have come to light.  The power is in this action plan, not the numbers that are generated.

By way of example, I recently benchmarked a practice that had been under performing for a few years and despite everyone working harder, the results were not improving. They came to us tired and disillusioned.   We benchmarked the practice in order to identify where the key problems were and the results showed that the problem was not in expenses, but in revenue. It was found that their appointment rostering system did not utilise all of the available doctors and rooms and accordingly, they were not maximising the number of patients that could be seen.  This information helped them to focus their energy in an area that would give them better results – work a little smarter, not harder.

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