Correct, careful use of benchmarks key to successful practice

November 10, 2008

At the American Academy of Ophthalmic Executives (AAOE) meeting, Derek A. Preece, MBA, from the BSM Consulting Group, Orem, UT, talked about the importance of understanding exactly what benchmarks are and how to use them effectively during his presentation, "Using benchmarks to improve your practice."

At the American Academy of Ophthalmic Executives (AAOE) meeting,Derek A. Preece, MBA, from the BSM Consulting Group, Orem, UT,talked about the importance of understanding exactly whatbenchmarks are and how to use them effectively during hispresentation, "Using benchmarks to improve your practice."

"A benchmark doesn't usually tell us exactly what to do, but itcan help us figure out what to do in our practice," he said.Preece often sees practices using benchmarks in the wrong way. Hesaid that it is important to use several related benchmarks toget the full picture of practice problems and not to rely tooheavily on one in particular.

"Don't strictly adhere to any one benchmark," Preece said. "Everypractice is different."

The real comparison is how an ophthalmologist's practice is doingover time. Also, comparing apples with apples, such as comparingone month with the same month last year, is crucial. Otherwise,you get bad information, which leads to bad decisions, he said.

Be aware, too, that unlike action that needs to be taken when apatient presents with an increased pressure in the eye, actionoften does not immediately need to be taken in a physician'spractice if ratios are slightly above or below the benchmark.

One key benchmark is overhead ratio, which is the total practiceexpenses (excluding doctors' pay and benefits) divided by totalcollections (or revenues). The healthy range, according toPreece, is 48% to 68%. The average is between 62% and 63%.Another key benchmark is the opposite of overhead ratio-profitratio (or doctor income ratio). This ratio is the result oftaking the doctors' income and dividing it by total collections.The healthy range is 32% to 52%, according to Preece. This ratioalso is what will see the most change if Medicare reimbursementdeclines.

Other important benchmarks include ratios of: staff payroll,collections per patient encounter, collections per FTE billingstaff member, and facility expense, to name a few. Anotherexample is the new patient ratio. According to Preece, newpatients are the "lifeblood" of all practices, because ifpractices don't grow, they eventually will dwindle, hesaid.

To help ensure a solid database for benchmarks that all practicescould use, the American Academy of Ophthalmology (AAO) called fora system a couple of years ago that would be easy to use and thatwould be as accurate as possible. Because of that initiative, theAAO/AAOE Benchmarking Project, a confidential online program, wascreated.

Preece said participation in the project has been good, but it'snot enough. In the first year, out of the 700 participants thatsigned up, only 180 actually provided useable data. Not onlywould practices benefit from strong participation but the AAOwould benefit as well, as advocates; the data would provide asolid track record for Medicare, showing that costs continue toincrease.

Participation in the project for 2008 data will begin in early2009, according to Preece. To learn more, visitwww.aao.org/benchmarking.

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