Racehorses often wear blinders to focus on the race ahead, but for medical practitioners this may be ill-advised. Occasionally looking at your competition won’t cost you the race but will instead ensure financial success for you and your practice which is where benchmarking comes into play. Benchmarking is the process of comparing your financial and non-financial metrics with that of the industry. By looking at the competition, you can see if your firm is profitable, competitive, or needs to improve.
Why is Benchmarking Important?
Benchmarking is critically important for medical practitioners. The three key financial metrics you should be benchmarking are:
- Gross revenue per patient.
- Direct expenses related to care.
- Indirect expenses (such as rent).
These three metrics will give you a snapshot into the health of your practice. Direct and indirect costs always increase – that’s a given. But if your sales remain flat then your profits will suffer. By comparing your cost to the industry you can see if you’re overpaying for medical supplies or if you need to focus on procuring new clients.
Benchmarking For Patient Outcomes
Benchmarking can be done for non-financial metrics as well. For example:
- Patient retention (for practices with reoccurring revenue streams like dentists).
- Patient health outcomes.
- Patients seen per hour.
- Number of nurses/hygienist/assistants per patient.
Benchmarking for non-financial metrics is just as important as benchmarking for financial metrics. Simply knowing the ratio between staff personnel and patients ensures proper staffing during the work week. Having too many staff members can erode the bottom line but having too few staff members can compromise patient outcomes.
How to Get Started
Finding financial and non-financial metrics in your specific healthcare industry can be difficult, especially if you’re working in a specialized industry. Healthcare practitioners aren’t too keen on sharing their financial performance and sharing non-financial indicators may be in violation of patient confidentially.
Luckily, there are a number of advisors who can help with benchmarking. For starters, a CPA who specializes in healthcare practices can be extremely helpful when it comes to benchmarking. Chances are they will have a pulse on the industry and can advise you if your financials seem off.
Secondly, there are numerous consultants who specialize in helping healthcare practices cut costs or grow top line revenue. These advisors will walk you through the ways to optimize your practice and help correct under performing metrics.
Understanding The Industry
Before consulting with an advisor you need to take steps to educate yourself about the industry. Med school is great at preparing doctors to deal with patients and their medical needs, but often fails to prepare graduates to run and operate a business.
Before consulting with an advisor you want to educate yourself on the business aspects of your industry. Reading a practice management book, skimming through industry specific journals, or reading an article online are all great ways to start this process.
Ultimately, learning more about the business aspect of running a successful practice will not only increase your bottom line but it will also increase your patient’s well-being.
This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Although we go to great lengths to make sure our information is accurate and useful, we recommend you consult a tax preparer, professional tax advisor, or lawyer. Photo Copyright: <a href='https://www.123rf.com/profile_elenabsl'>elenabsl / 123RF Stock Photo