Orthopaedic practice executives discuss the value of benchmarking
Are you ready for 2018? For many practices, using benchmarking data is a good way to start planning for the year ahead. Not only does the data help practices determine their performance in comparison to their peers, the information also enables them to identify their own strengths and weaknesses.

To learn more, I spoke with the following American Alliance of Orthopaedic Executives (AAOE) members about their experiences with benchmarking:

• Terry Anderson, MBA, informatics director at OrthoIllinois, Rockford, Ill.
• Jessie Goodman, RMC, office manager at Nevada Orthopedics, Reno, Nev.
• Chris Greenman, MBA/MHA, CMPE, administrator at Tahoe Fracture & Orthopaedic, Carson City, Nev.
• Terrance Rosenthal, MBA, administrator at The Orthopaedic Clinic PC, Opelika, Ala.
• Olivia Wolf, CPC, practice administrator at Alaska Hand Elbow Shoulder, Anchorage, Alaska

Ms. Anderson: Benchmarking data are not only important for determining how your practice is doing right now, but also for developing the strategy for where you want to go in the future. For example, if you're considering adding a new service, looking at data from other practices who currently provide that service can give you an idea of how many units you may need.

Mr. Rosenthal: We use benchmarking data quite a bit for strategic planning and when considering large capital purchases. For instance, we can compare the capacity of our MRI to that of similar practices. This information helps us identify which purchases we might need to consider.

Ms. Wolf: I appreciate that benchmarking data can be used on both a macro and a micro level. The data are useful in strategic planning and also helpful in the day-to-day execution of that plan. Developing a plan is great, but execution is a totally different beast. The ways in which benchmarking data inform day-to-day execution are therefore very helpful.

Mr. Greenman: Benchmarking data helps provide a framework to what we're doing. It makes our numbers meaningful when we're comparing ourselves to other practices. Otherwise it's just a big guessing game when figuring out where we should be, what we should do, and how we should do it.

Dr. Sprague: What are some of the specific benchmarks that are important for orthopaedic practices to have when making decisions?

Mr. Greenman: One of the most important benchmarks is physician compensation, which provides a reference for how much money your physicians make compared to what physicians are making at similar practices. It's helpful to look at production, relative value units (RVUs) as a measurement of production, collection as a measurement of money actually brought in, and actual compensation.

Ms. Goodman: For a practice of our size (two orthopaedic surgeons and two physician assistants), we use benchmarking for overhead to see where we compare with other practices of our size. Another important benchmark for small practices is staff compensation.

Ms. Wolf: I also manage a smaller size practice (we have five providers right now). In addition to compensation benchmarks, we found that using benchmarking data to check staffing levels has been very helpful. When a practice grows by adding providers, it's important to figure out how staffing should also grow. In my experience, it's nice to be able to take benchmarking data to practice owners and say, "Okay, we're at this number of providers now, so we need this number of billers based on the increased amount of revenue that we're generating."

Dr. Sprague: How have you used benchmarking data to make decisions in your practice?

Mr. Greenman: Our practice was looking at compensation by subspecialist to try to realign our overhead and determine how we allocate it so that physicians who were producing at a certain level of RVUs were receiving a similar level of compensation. We looked at the benchmarking data and if the physician was in the 75th percentile of production, then we tried to get him or her as close as we could to the 75th percentile of compensation.

Ms. Wolf: Our practice had two providers when I started and has since grown to five in a very short amount of time. It was key for me to be able to take benchmarking data and see how many full-time billers we needed based on the number of providers we had. After we added new staff, I was able to compare average number of days in accounts receivable before those staffing decisions, versus 90 days later when we had caught up to the industry average.

Ms. Goodman: Recently, we've used benchmarking data for annual reviews and to determine raises, compensation, and overall benefits packages.

Mr. Rosenthal: When three-fifths of our partners were getting ready to retire, we struggled to determine the optimal number of providers we would need afterward. To make that determination, we looked at the benchmarking numbers for practices of similar size and also at our yearly numbers.

Dr. Sprague: How do you present benchmarking data to physicians or others in your practice?

Mr. Rosenthal: I use a Microsoft Excel spreadsheet. We take all the benchmarking data for our practice's size and plug it into the spreadsheet and then plug in our clinic's data. Different physicians want to look at different things, so we just put together a big spreadsheet and provide it at a meeting for them to look through. We use the spreadsheet to talk about what we feel are the key numbers and key things that we need to be looking at.

Ms. Anderson: We use benchmarking data in our business intelligence tool as a gauge of how we're doing. That's one of the comparisons that our physicians have asked to see. It's easy to create a dashboard with just your data to see how well you're doing, but being able to compare your data to practices similar to yours provides a more accurate measure of how you're doing.

Dr. Sprague: There are several sources of benchmarking data available in the healthcare industry. What should practice administrators look for when deciding which source to use?

Mr. Greenman: I think you need to be mindful of whether the participants are from hospitals or private practices. Your practice type will determine which data is most meaningful to you. I'm with a private practice, so I'm not as concerned with hospital-based orthopaedic groups' numbers. The incentives, the structure, the pay, the expense, and other things in the two groups are different.

Ms. Anderson: I think you should look for the availability of data from practices similar to yours; factors such as practice size and region. It's also important to be able to ask questions about the data so that you are sure of what it means.

Mr. Rosenthal: One thing that I've found very useful about benchmarking is the breakdown of physician compensation. Not all practices have surgery center income or real estate income, and I think that's valuable information to know when you have physicians trying to compare what they're doing versus their peers.

Ms. Goodman: I like benchmarking data that are orthopaedic-specific, that let you look at information based on practice size and the services provided. Our practice doesn't have ancillary services, but we can look at data for practices with or without ancillary services.

Dr. Sprague: What suggestions do you have for orthopaedic practices that have never used benchmarking data before? How should they get started?

Ms. Wolf: The first question you need to ask is "What do we need?" For instance, if I want to look at compensation, I'm going to look at benchmarking data that's specific to orthopaedics.

Mr. Greenman: It's easy to get overwhelmed with how much data are available. My recommendation is to keep it simple and focus on your practice's key data points. If you have access to the data, you can always dig deeper as time passes.

Mr. Rosenthal: For new users, knowing the key areas you need to focus on can help you get comfortable with using benchmarking data. Once you're comfortable, you can start looking at some of the other data, and that's when you'll start getting into more strategic planning and using data that you maybe didn't even know was out there to help you make decisions.

How to get started
Ready to get started using benchmarking data? The AAOE Benchmarking Results for Data Year 2016 include data from 180 orthopaedic practices that vary in state, region, specialty, and size. The results also show 3 years of trend data representing 250 practices.

Access the latest orthopaedic specific data, including revenue and expense data, productivity and compensation data, overhead expenses data, ancillary service data, and more. The interactive AAOE Data Portal allows you to view results by filters to ensure you're looking at the data most relevant to your own. The Results eBook includes all 50 reports from the Data Portal, plus tables providing benchmarking results by practice size. For more information, visit aaoe.net/benchmarking.

Vicki Sprague, PhD, director of data solutions for the AAOE, has more than 15 years of experience in data analytics and outcomes management. She can be reached at vsprague@aaoe.net.