October 2000 Bulletin

Beware of benchmarking pitfalls

Benchmarking is a valuable practice management tool if you understand the data and what it means. If not, you may do more harm than good.

First, be sure you are using the appropriate benchmarks. Each source of benchmark data may have its own definitions. For example, some may consider net income to be gross receipts minus contractual allowances and refunds. Others may consider net income to be income available for physician compensation after overhead has been deducted. Be sure you are comparing "apples to apples."

Next, be sure the data is statistically sound. Small sample sizes may not yield accurate information. Also understand how the data was gathered and analyzed. If inconsistent methods are used, the data may not be useful. If the data includes a large number of faculty practice plans, the results may not be meaningful to a private practice.

Be aware that most data presented are averages: means and medians. If you are striving to be better than average, you should use "best of class" benchmarks whenever the data is available.

Consider the source of the information you receive. Information obtained from managed care companies, for example, may contain certain biases.

Recognize that benchmarking is only the starting point. You must further investigate variances from the norms.

Never look at the individual data bits in a vacuum. For example, if your gross receipts fall below the average, check to see if you take more vacation time than the average doctor. That may explain the variance.

Likewise, if your staff costs are above the average, do you have more people than necessary to get the job done? Or, do you have the right number of employees, but you are paying them well above average?


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