4 Points on Benchmarking & Assessing Hospitals’ Financial Strength

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At the Becker’s Hospital Review Annual Meeting in Chicago on May 9, a panel of hospital executives and experts discussed benchmarking and assessing the financial strength of a hospital.

The panel included Ben Dunford, chief financial officer for Texas Regional Center at Sunnyvale; Joseph Guarracino, senior vice president and chief financial officer for The Brooklyn Hospital Center; Jane Jerzak, CPA, RN, partner for Wipfli; and Dennis Hesch, executive vice president and chief financial officer for The Carle Foundation. Adam Lynch, vice president of Principle Valuation, moderated the session.

Here are four points the panel made on properly using financial benchmarking in a hospital or health system.

1. Only use meaningful statistics. Benchmarking statistics are vast, and often physicians or executives will want metrics on a topic without a real need for meaningful answers. However, Mr. Hesch said, financial officers must find a balance between what information is a priority and what is curiosity. Meaningful, relevant data are worth the effort to gather and can bring necessary changes.

2. Know your specific goals. Always start with a question you need to answer through benchmarking, Mr. Dunford said. Having an endless supply of data is not useful unless you know what you are going to do with it. Getting specific with your goals can help narrow your search and streamline the amount of time to meet those goals.

3. Use data to benefit contract negotiations. In the past, managed care contract margins were larger for health systems than they currently are. Hospitals have to find a way to reduce information asymmetry, Mr. Dunford said. “Access to benchmarks matter,” he said.

Market share is the biggest leverage point systems have, and financial officers must understand the data within their markets — the share, the going rate, the differences based on markets, Mr. Hesch said.

Quality metrics can also help boost reimbursements. Insurance companies like to look at data as black and white according to costs, but financial officers can help them see the myriad factors that play into costs, Ms. Jerzak said. “Health systems need to challenge insurance. You need to point out to insurers all those functional metrics and quality metrics that go way beyond claims data or unit costs,” she says.

4. Engage hospital employees by simplifying the message. Financial statistics and metrics are convoluted, but to get physicians and hospital staff on board with cost-saving measures, CFOs must simplify the message to make it directly applicable, Mr. Guarracino said. When looking for physician savings, he often breaks down costs into full time equivalents rather than dollars. Having the point of comparison better illustrates the impact dollars can have.

“You have to understand the culture of the hospital,” he said. “Make them understand we are in this together. If you have a great idea to save costs, make it their idea.”

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