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The Importance of True Benchmarking in Healthcare’s New World

June 14, 2021

In the aftermath of a global pandemic, hospitals and health systems are now beginning to move into financial recovery. As leaders continue to seek new ways to revive margin and grow revenue, many organizations lack the usual year-over-year analyses they would have used in years past to guide their strategic efforts and monitor key areas, like recovering volumes.

But as these leaders search for fresh ideas and new cost reduction opportunities, many are discovering there’s strength in numbers. Some of the best strategies to close gaps, drive efficiencies and establish a renewed culture of continuous improvement right now are coming from other organizations in healthcare.

The History of Benchmarking in Healthcare

In the past, comparing your organization’s performance to that of your peers in healthcare was often difficult with outcomes seen as untrustworthy. This distrust came with good reason: benchmarking systems and engagements typically involved high costs, heavy internal lift and mismatched data between health systems and hospitals with disparate ways of collecting and reporting data.

The history of benchmarking in healthcare is riddled with complexities like getting trustworthy data and executive buy-in on comparisons.

Originally introduced at the Xerox Corporation starting in the 1970s, competitive benchmarking has a long history across industries. But the pressure to perform has infiltrated healthcare and over the last 10 years. Thought leaders have observed healthcare delivery systems focus on comparing themselves with the market to establish a culture of continuous improvement, reduce cost where possible and improve the patient experience. These worthy efforts only continue to grow as healthcare organizations must add the need to drive financial recovery following COVID-19 and prepare for new challenges that lie ahead.

The Trouble with Relying on Benchmarking for Comparisons in Healthcare

Since its inception, trouble with benchmarking for healthcare delivery systems has always surrounded the difficulty of creating true cost comparisons between two entirely unique organizations. Establishing a true “apples to apples” comparison between the data of two different peer organizations has historically required extensive internal resource lift from FTEs and the involvement of outside groups. Working with outside benchmarking vendors takes time and investment, without promising trustworthy results your team can use to make decisions, drive down costs or budget and plan.

Key Challenges of Using Benchmarking in Healthcare:

  • “Apples to apples” comparisons between organizations are complex and challenging, requiring all data to be normalized to the same set of standard
  • Self reporting means normalizing all data is a virtual impossibility
  • Generic benchmarks offered as an alternative are not very trustworthy or useful
  • Traditional solutions for benchmarking are expensive, requiring heavy internal lift

Organizations can incur such significant costs and spend a lot of time attempting to work with outside vendors for benchmarking outputs, then require even more time and energy to translate those outputs back into their own format. In healthcare, each organization has its own way of collecting and reporting data, making benchmarking a real challenge. Healthcare systems then end up relying on ratios and estimations to measure their performance against peers, never quite getting the insights they need to make strategic decisions. In fact, organizational buy-in and trust is still cited as the most problematic part of benchmarking.

The Goal of True Comparative Analytics in Healthcare

In a 2019 HFMA interview with leaders from Intermountain Healthcare and the Cleveland Clinic, Chris Bruerton, FHFMA, assistant vice president, finance at Intermountain summed up some of the common difficulties health systems have with traditional benchmarking:

              Benchmarking is the hardest thing to do, but if we can achieve a common understanding of how we apply this and are able to get meaningful cost benchmarks—which is the internal costs to the healthcare system, not an external measure like charges or some RCC methodology, which is typically what I have seen people trying to do benchmarking of costs with—benchmarking can be immensely valuable because everybody is looking to understand how we can take costs out of the healthcare process. Being able to look at high-performers and payers across the industry and see what they are doing and where are we out of whack will be huge for us.

Especially now, healthcare organizations need resources and tools to be able to monitor performance against peer organizations tackling the same challenges.

The Future of Comparative Analytics in Healthcare

We created StrataSphere® Compare to help your organization advance and learn from our growing network of over 100 participating health systems. StrataSphere Compare uses machine learning algorithms to normalize your StrataJazz® data into the StrataSphere standard, leveraging the new StrataSphere Standard Cost Model to provide a true, apples-to-apples comparison of your data.

Leveraging comparative analytics in healthcare can assist your teams in strategic efforts to identify the most effective cost savings and quality improvement opportunities.

We normalize your StrataJazz data for you, to provide standard mappings for GL, departments, pay codes and job codes. Rather than taxing your internal team or relying on ratios for comparisons, you can leverage your own trustworthy data and our machine learning algorithms for true comparisons.

Performance Areas for Comparison Using StrataSphere Compare:

  • Financial
  • Operational
  • Quality
  • Labor expense
  • Overhead
  • Cost

Our solution is fully automated so there is no additional purchase, FTEs or implementation work or fees. Supplement your organization’s efforts to plan and identify improvement opportunities by using our fully automated benchmarking tool for relevant comparisons with minimal effort and at no additional cost or FTE support.

New Areas for Comparative Analytics with Peers in Healthcare

With StrataSphere Compare, your organization can leverage comparative analytics to compare performance with peers in the following areas.

Compare KPIs with Peers

  • Financial, operational and quality comparisons in StrataSphere Compare allow your organization to identify strategic improvement opportunities and set performance targets. Review comparisons at the health system, hospital and SG2 Service Line level.

Compare Costs with Peers

  • Cost comparisons in StrataSphere Compare allow your organization to identify strategic improvement opportunities and set performance targets. Review seven cost metrics and five filters for Patient Type, StrataSphere Cost Component Rollup, MS-DRG Code, StrataSphere Department Rollup, Clinical or Non-Clinical labor expense and Fiscal Year End.

Compare Labor Expense with Peers

  • Labor expense comparisons in StrataSphere Compare enable your organization to understand labor expenses like hours and pay separately, analyze premium pay and monitor clinical versus FTE spend as it compares to other similar organizations in StrataSphere. Adjust your targets, approaches and processes based on unique factors associated with your healthcare delivery system.

Compare Overhead with Peers

  • Overhead comparisons in in StrataSphere Compare allow you to review key metrics about your organization’s overhead through the lens of one of nine StrataSphere Department Rollups. Gain clarity and detail when comparing your organization’s performance in the area of overhead to similar peers in the StrataSphere network.

To learn more about the future of comparative analytics in healthcare and find out how your organization stacks up to peer organizations, check out a few resources below.