Historical Benchmarks Can Be Even Better Than Good

Most department heads don’t believe third-party benchmarks.

While our firm has over one million supply chain expense comparative benchmarks, more and more we are employing our clients’ own historical benchmarks since they can’t be disputed, discounted or ignored. This is because most hospital department heads and managers don’t believe third party benchmarks, so why not go with the flow.   

Go With The Flow

We learned years ago that it is better to go with the flow than to fight it. This is the case with third-party benchmarks, which aren’t believed by your department heads and managers – even if they are right on target. We now see hospitals, systems, and IDNs following this same course. This is because it is much easier to explain how you (or we) obtained a department or unit’s historical benchmark rather than trying to justify some other hospital’s benchmark, too often, from an unknown entity.

The reason for employing this new tactic (historical benchmarks) is to give your clinical and non-clinical staff ownership and accountability over their supply and purchase service expenses, since they are the only ones that can make change happen. This can’t happen if they don’t believe the benchmarks you are providing to them.

Historical Benchmarks

Our definition of “historical benchmarks” is year-over-year metrics that show the activity of a supply or labor cost that represent a department or unit over time. Our technique is to show graphically at least four quarters of activity on a supply or purchase service to a department head or unit manager. If a supply or purchase service cost by unit of measure (patient days, adjusted patient days, clinic visits, etc.) over this period is higher than today, it needs to be addressed by your department head or manager.

For example, if your anesthesia I.V. sets have jumped over four quarters from $10.42 to $15.11 per surgical procedure, then you have a reason to bring this to the attention of your anesthesia department head. Otherwise, how would they know that they had a 69% jump in their I.V. set cost (not price).

We have one client who sits down with his department heads on a quarterly basis to share this historical information with great success. In my opinion, this supply chain manager is successful since he has made it a routine to visit with his department heads on a quarterly basis, instead of surprising them with this information in a random fashion.

What Has Changed

One of the questions we always ask when sharing a department’s historical benchmarks over time that is unfavorable is, “What has changed” over the period being reviewed. Inevitably, something has changed that has caused their cost (not price) to be out of balance.

I remember a story about an anesthesia department that had a 27% jump in the cost (not price) of anesthesia trays over four quarters. Upon investigation, it was found that 10% of their trays were being received damaged and then being thrown away. As you can see by this example, there is always a reason for your supply or purchase service cost to jump, so don’t ignore it.