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Benchmarking is the process of analyzing practice business data and applying that information to achieve business growth and improvement.  It also helps with earlier detection of existing and potential problems. The benefits of benchmarking can be significant and become a vital part of your internal practice feedback system, allowing consistent monitoring of performance and identification of efficiencies and opportunities.

Your practice should use both internal and external standards in its benchmarking approach. Internal standards include the practice's financial statements, productivity and accounts receivable information. They can be compared against themselves by "trending" information or by comparing internal standards of your practice to external standards. In contrast, external standards are benchmarking tools or information from sources outside your practice and can be obtained from your individual specialty society, as well as a number of national medical associations. These standards are a good comparison indicator to how you measure up against other practices similar in size or specialty.

The first step of the benchmarking process is to determine exactly what you would like to benchmark. Factors such as geography, age, size and style can impact your practice and should be examined to determine accurate data. An excellent start to your benchmarking process is to use the following six measures that are in effect, the "vital signs" of your practice and are readily available from your internal records.  

Average Gross Charges

When combined with other indicators, this is a meaningful benchmark factor and measures how hard and efficiently the physicians are working. Since medical services are discounted by insurers, it is not a good gauge of how much money they are generating, but when used within the same specialty group, can be a useful tool to evaluate production patterns.

Average Net Receipts

This number represents the total cash receipts deposited in the bank for all services rendered, reflecting the amounts paid after discounts, contractual adjustments and write-offs.  By comparing net receipts to gross charges and trending over time, billing effectiveness, potential collections issues and internal security can be determined.

Gross Collection Ratio (GCR)

This ratio gives a first look at billing efficiency and effectiveness and is calculated as net receipts divided by gross charges. It shows how much is received on every dollar charged. However, it needs to be assessed with care as the ratio is dependent on the payor mix and fee schedules.

Net Collection Ratio (NCR)

This calculation is determined by dividing net receipts by gross charges less adjustments. This measurement is more sensitive than the gross collection ratio as an indicator of billing effectiveness but the two measures should be monitored together to gain a proper billing assessment. For example, if a practice's NCR is almost 100 percent, while their GCR is around 60 percent, this may indicate that the practice is not charging enough. Insurers will pay only up to what practices ask for up to their maximum allowances. If the GCR is high but the NCR is low, this could indicate a serious problem with collections. On the other hand, if the GCR is low relative to the benchmarks, the practice may be charging too much. Ideally, collection rates should be between 90 and 100 percent after write-offs are taken. For a thorough and complete evaluation, you should understand your payor mix and what the reimbursement rates are in the market in which you practice. Ultimately, how much you collect out of what you are entitled to, according to your contracts, requires close monitoring of contractual and non-contractual write-offs.

Overhead Percentage

This percentage includes the non-physician expenses of the practice. The ratio used is expressed as a percentage of overhead expense divided by total revenue. To obtain the clearest picture of non-physician overhead, physician compensation, payroll taxes, benefits and retirement contributions, as well as dues subscriptions and CME expense should be excluded from total expense.

Average Physician Compensation

Care should be taken in selecting benchmark data for comparison for this metric as there are many different nuances in how the data is collected, defined and reported. For example, compensation data is reported by geography, specialty, percent of capitation revenue, etc. Physician compensation can be compared to production data to determine how well your compensation plan is working.

Each of these benchmarking indictors can be easily tracked and analyzed by putting together a spreadsheet comparing the practice (or sub-group) to the benchmark and then calculating the comparison. Ideally, your benchmarking efforts will show that your practice is best in class and areas in which your practice's bottom line could benefit from adjustment.

The above examples are just a few of the many benchmark indicators that can be used to assess your practice. Benchmarks can not only be used to measure financial soundness and overhead expenses but also managed care factors, patient encounters, services production and client satisfaction. Each practice is unique and there may be other factors that should be considered as well. Benchmarking should be performed at least once a year or more frequently if possible.  

Accountable Care Organizations ("ACOs") are being created in order for health care providers to work together to treat an individual patient across care settings. This is in the hopes of creating savings through stronger preventative care measures and other items that will ultimately drive down the overall cost of health care. The Medicare Shared Savings Program will reward the `s that lower their growth in health care costs while meeting and maintaining performance standards on the quality of health care services provided. In order for the aforementioned to be possible, one must have the rules to play by and therefore the Affordable Care Act authorizes the Centers for Medicare and Medicaid Services to establish the program and implement the rules.

After issuing proposed rules and allowing time for necessary feedback, the final rules for the Medicare Shared Savings Program were issued in late 2011. These rules have changed significantly based on the feedback provided from the proposed rules and have helped simplify the extremely complex set of rules that were originally proposed.

The following highlights the final rules that were issued and how they differ from the proposed rules:   

Transition to Risk in Track One 

Under the proposed rule, all ACOs could choose one of two tracks each of which was subject to a three year agreement. Track one would consist of two years of one-sided shared savings and in the third year the ACO would be required to adopt a two-sided model of shared savings and losses. Track two would consist of the ACOs entire three year agreement falling under the two-sided shared savings and losses model. Under the final rule, the two-sided shared savings and losses model would be removed. However, there are still two tracks that would offer a higher sharing rate to those ACOs that were also willing to share in the losses.  

Prospective vs. Retrospective 

Under the proposed rule, there would be a retrospective assignment that was based on the utilization of primary care services and prospective identification of a benchmark population. Under the final rule, a preliminary prospective assignment method would be utilized with beneficiaries being identified on a quarterly basis. After each year, performance reconciliations would be performed on the patients that were served by each particular ACO.

Proposed measures to assess quality

Under the proposed rule, there would be 65 measures in five domains that entail patient experience care, utilization claims-based measures, and measures assessing process and outcomes. ACOs would also be paid in full for accurate reporting during the first year and then would be paid for performance based measures in the subsequent years. Under the final rule, the number of measures would be reduced to 33 measures in four domains. Over a three year agreement the first year the ACO would be paid for accurate reporting and then over the period of the second and third year the ACO would be paid for both reporting and performance.   

Sharing Savings

Under the proposed rule, using the one-sided model sharing with ACOs would begin at savings of over two percent and using the two-sided model sharing would begin from the first dollar of savings. Under the final rule, sharing would begin on the first dollar of savings for both models once a minimum savings rate has been attained by the ACO.   

Sharing beneficiary ID claims data 

Under the proposed rule, claims data would only be shared for patients that had been seen by an ACO primary care physician during a given performance year and additionally patients ("beneficiaries") must be given the option to decline at the point of care. Under the final rule, the ACO will be provided quarterly lists from which they can contact patients to notify them of data sharing and grant them the option to decline.   

Eligible Entities 

Under the proposed rule, eligible entities consist of the four groups specified by the affordable care act and critical access hospitals paid through method II have the ability to form an ACO. Additionally, ACOs can be established beyond these providers through broad collaboration. Under the final rule, additional entities such as federally qualified health centers and rural health clinics are eligible to participate and form an ACO. However, these entities must provide a list of practitioners who provide primary care in their facilities in order for beneficiaries to be assigned on the utilization of primary care services.   

Start Date 

Under the proposed rule, each ACO must enter an agreement for three years that must be based on calendar years. Under the final rule, the program itself will be established on January 1, 2012 with the first round of ACOs beginning April 1 and July 1 of 2012 and will cover three periods. For the first round of ACOs, the ACOs will have the option to receive interim payments during the initial period, which will consist of 18 or 21 months, providing they report quality measures. For the second and third periods of the initial agreement, quality measure reporting is mandatory.   

Aggregate Reports and Preliminary Prospective List 

Under the proposed rule at the beginning of each performance year, reports would be provided that include: name, date of birth, sex and health insurance claim number. Under the final rule, in addition to the reports that would be provided at the beginning of each performance year, reports would also be provided by ACOs on a quarterly basis.

Electronic Health Record (EHR) Use 

Under the proposed rule, it would be mandatory for ACOs to align themselves with EHR requirements meaning that 50% of primary care physicians must be defined as meaningful users by the start of the second performance year. Under the final rule, following the EHR requirements is no longer a condition of participation; however, the rule did retain EHR as a quality measure and weighted it higher than any other measure for quality-scoring purposes.

Assignment Process 

Under the proposed rule, there was a one-step assignment process in which patients were assigned on the basis of allowed charges for primary care services rendered by primary care physicians. Under the final rule, a two-step process has been created. Step one is for patients who have received at least one primary care service from a primary care physician. If the patient has multiple primary care providers, the patient will be assigned to the ACO with the largest amount of allowed Medicare charges for primary care and preventative services. Step two is for patients who have not received any primary care services from a primary care physician but have received specialty care from one or more specialists that are part of an ACO. If there is just one specialist that the patient has received services from, the patient will fall into that specialist's ACO. If the patient has seen multiple specialists, the patient will be assigned to the ACO whose professionals account for the largest amount of allowed Medicare charges for primary care and preventative services.

Right now the ACO program is completely voluntary. While the final rules are not as cumbersome as the original proposed rules, the information detailed above is a general summary and there is still a lot of data to comprehend and guidelines to be met.

Today's health care industry is a fast-paced environment where regulatory issues, competition and rapidly changing consumer expectations converge. Managing risks and realizing opportunities become a more important focus as providers decide how they will adapt and evolve their business models for long-term survival. UHY LLP recognizes the importance of adding value to our delivery of professional services to health care organizations. Our National Health Care Group has significant experience serving health care clients and we bring this understanding of your industry together with innovative solutions that have a positive impact on the bottom line.

UHY LLP's National Health Care Group understands the many challenges facing health care providers and facilities. Governmental pressures, regulations, contracting issues, staff shortages, patient satisfaction, and public responsibility affect all aspects of the business. Ensuring that today's actions will achieve long-term strategic goals can be a significant challenge for any health care organization. Many health care facilities lose their ability to consider the "big picture" as they are overwhelmed with urgent issues.  

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