Benchmarking is Essential for Your Value Analysis and Utilization Management Success

Benchmarking is Essential for Your Value Analysis and Utilization Management Success
Robert T. Yokl, President/CEO, SVAH Solutions

We have found that benchmarking, or the search for all industries’ best practices, is the best technique we know of to improve your value analysis and utilization management performance. Likewise, without benchmarking you will never know if you are at your best in all areas of value analysis and utilization management. For instance, how many hospitals have value analysis steering committees to guide their VA program? What are the ideal number of training hours that our value analysis team requires to be proficient? How many hospitals have bought the medical device we are considering buying? What is the IV set utilization cost of hospitals our same size and with similar operating characteristics? These are just a few benchmarking questions that can’t be answered with any other technique. So, ignore the value of benchmarking at your own peril.

Why Isn’t Benchmarking More Popular?

As we see it, benchmarking has been unpopular in supply chain circles because their metrics have too often been wrong for the following reasons:

  • Didn’t compare apples to apples: We have observed benchmarks that compared a 300-bed community hospital with a 770-bed university teaching hospital, thus, negating the relevance of this data. This can happen when artificial intelligence is employed instead of human intelligence to select the parameters for the benchmarking exercise.
  • Errors in the data: Many times, there are errors in the hospital’s data that is given to the benchmarking agency. Or the agency doesn’t perform quality control checks on the data given them. Either way, your benchmarks could be flawed.
  • Lack of context: Not knowing how your benchmarking partners or peers achieve their benchmark (i.e., processes, practices, procedures, etc.) makes it difficult to pinpoint meaningful areas of improvement.
  • Measurement issues: Sometimes it is hard to find a match for a benchmark because your metrics are unique. For instance, if you measure your telecommunication cost with a metric of cost by employee, your benchmarking partner or peer hospitals might measure it by cost by (adjusted) patient day. The answer to this dilemma is to change your metric to conform to the industry standards.

As these reasons suggest, benchmarking is an art and science. If applied artfully, consistently, and carefully, benchmarking can be of enormous benefit to value analysis practitioners.

Benchmark Triangulation Can Assure The Correct Answers

Now that I told you all of the things that can go wrong with your benchmarking, here’s a technique called Benchmark Triangulation (or a series of measurements) that can assure that you obtain the correct answers to your benchmarking questions. Consequently, triangulation requires three consistent benchmarks (historical, peer, and internal) to confirm that your benchmarking exercise is giving you the correct answer. The differences between these three benchmarks are as follows:

  • Historical Benchmark: This is your own year-over-year metric on any parameter you are investigating, such as your own healthcare organization’s cost per lab test per discharge or number of IV sets utilized per (adjusted) patient day.
  • Peer Benchmark: Requesting the same metric from a hospital, system, or IDN that mirrors closely your healthcare organization’s size, type, and with similar operating characteristics.
  • Internal Benchmark: Requesting the same metrics from hospitals in your system or IDN. It’s something we do with our CSUM software that automatically shows similar metrics from your cohort group. This should be a best practice for you, too.

The end result of this three-way comparison is that all three Triangulation Benchmarks should be very close. If not, then you need to question your peer comparison, quality of your data, or measurement issues. Generally, after reviewing these reasons for poor quality benchmarks, you will find the reason for the discrepancy. Based on our experience, it’s a matter of trial and error until you get it right.

Don’t Just Benchmark In Our Industry

We have a tendency in healthcare to only benchmark industry leaders and competitors within our own industry, instead of all industries, where applicable. This means that we could be missing some of the best practices in other industries that can be applied to our own healthcare organization. For instance, KPI benchmarks in contract management, telecommunications, inventory management, etc., that could also relate to your healthcare operations.

Achieve Superiority Over Your Peers And Competitors

We would all like to think that we have the best value analysis and utilization management program, but have you tested this assumption? Do you know where you stand against your peers and competitors? For example, how many new product, service, and technology requests are you receiving annually per hundred occupied bed? Is it within acceptable limits or do you have requisitionitis? How much are you saving annually per discharge? What is your copier utilization cost per employee? All of these and more questions can and should be answered through benchmarking before you can be reliably assured that you have achieved superior performance with your value analysis and utilization management program. However, to maintain this position, you will need to continuously benchmark with your peers and competitors to maintain that status. Then, and only then, you will be considered best in class!

About Robert T. Yokl, Founder & Chief Value Strategist for SVAH Solutions
Robert T. Yokl is President and Chief Value Strategist at SVAH Solutions. He has four decades of experience as a healthcare supply chain manager and consultant, and also is the co-creator of the Clinitrack Value Analysis Software and Utilizer Clinical Utilization Management Dashboard that moves beyond price for even deeper and broader clinical supply utilization savings. Yokl is a member of Bellwether League’s Bellwether Class of 2018.

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