Aaron Murski of VMG Health discusses how ambulatory surgery center leadership can use benchmarking data to improve their center operations and understand trends affecting the whole industry.
Q: For ASC administrators that are just starting out with benchmarking data, what tips can you give for using it properly?
Aaron Murski: There are two main points to keep in mind when approaching benchmarking. The first is that the point of benchmarking is not necessarily to be better than the peer group statistic (statistics such as net revenue per case, staff hours per case, etc.). The exercise of benchmarking is to engage in a process that helps provide insight on operating trends relative to your peers.
The second point to keep in mind is that due to the facts on the ground at a particular ASC (geographic location, case mix, etc.), the drivers of each peer group statistic needs to be understood separately. Spend time understanding the similarities and differences between your ASC and the sample you are benchmarking against for each metric you look at.
Q: You say ASC administrators should not look to be "better" than the peer group statistic. Why not?
AM: Well, I guess the point is to be better than the group in the end. That's the goal. But what everyone forgets is that benchmarking data should be used to keep your ASC moving in the right direction. It's not necessarily about being better than everyone else. When you focus solely on that, you may forget why you're doing it and you may end up skimping in certain areas to be better than the average.
Benchmarking is a means to understand your business better and stay on top of industry trends. If the whole industry is experiencing a trend and you aren't benchmarking, you won't know if it's just you or the peer group. Do you want to be better than average? Sure. That's the goal. But the important point that gets lost is how data can help you look at your business and the industry.
Q: How often should ASC leaders look at benchmarking data?
AM: Well, it really depends. Some statistics should be looked at more frequently, and others change slowly. Reimbursement contracts and Medicare changes take time to show up. If you have a case mix shift, that's also not going to show up overnight. You may look at net revenue less often, whereas if you're going through staffing and looking at whether you're under- or over-staffed, you may look at those more frequently. I have ASC clients who are really at the margin, and everyone is cross-trained and they're managing their staff and hours per case almost daily.
Q: What should ASC administrators do to make sure they're comparing "apples to apples" when looking at national benchmarking data? What characteristics should their internal data have to make an accurate comparison to national benchmarks?
AM: You sometimes have to roll up your sleeves to make sure you are calculating your internal statistics consistently over time, and in a comparable manner to the benchmark data.
An ASC's statistics should be calculated using the same methodology every time, and from the same data source or system. It is not uncommon to have the task of calculating certain statistics assigned to different staff over time who may have little understanding of how the statistics fit into the larger picture. This can create problems over time.
One obvious and easy way to benchmark, which is often overlooked, is to not only look at external benchmark data, but also look at internal statistics over time. While you may have a question as to how external data is calculated, you can be certain that internally calculated statistics are apples to apples. This is valuable, as even if an ASC is performing worse than average, the gap may be closing over time, which means the ASC is headed in the right direction.
Q: You mention that ASC leaders should understand how benchmark data was calculated. How can they find out that information?
AM: It's about getting the information — and not just the information in VMG Health's Intellimarker, but data from the national ASC Association and other companies. With all these products, you have to be familiar with how the data was collected. Sometimes that means calling the data source. Make sure you understand where the data comes from, how the averages are calculated and whether this is survey data or not.
Every ASC has a different reporting system, so you may need to use more than one reporting system [to benchmark against published data accurately]. But it's more about establishing a standard process.
Q: What mistakes do you see ASC leaders making with benchmarking data?
AM: Speaking to clients across the country, the most widely used approach to benchmarking seems to be very ad hoc. Many well-run, successful ASCs "spot check" some of their numbers and benchmarking data inconsistently and irregularly. That's what overall profitability can do — it can mask trends until at some point there is a marked decrease in performance, whether due to competitive changes or usual ASC life-cycle issues. Then it is often too late, and the obvious immediate solutions (such as reducing staff) can destroy morale and exacerbate problems.
This is one area where setting up an internal process on the front end, in writing, really helps out. Standardization is key. The benchmarking process should ideally be standardized such that a person at the ASC who is not necessarily experienced with the process can perform the data collection and statistic calculation if necessary.
Q: How much does region play a role in benchmarking?
AM: Region can play a large role, depending on the statistic. ASC size can also play a factor for certain statistics as well. I usually suggest starting with national data comparison, as this is the largest sample size and a sets a baseline.
From there, looking at a regional data comparison for certain statistics is more appropriate — for example, salary data and net revenue per case — while [looking at national data, organized by] surgery center size by number of operating rooms and annual case volumes may be more appropriate for other statistics, like EBITDA margin and A/R turnover.
Q: Is there some data that's more useful to benchmark on a national basis?
AM: Some statistics mean more nationally than regionally. Some mean more regionally than nationally. For instance, with occupancy costs per square foot, you would see much greater meaning when you benchmark by region. With salary and wages, there is also more meaning by region.
On the other hand, if you look at net revenues per case, that may or may not be more applicable regionally. There's always an outlier. You may have one ASC where they've managed to keep managed care out, but everyone else in the community has managed care. You may think," I know everybody has a different payor mix, so I'll go ahead and benchmark to the national average instead of local."
Q: Obviously not every surgery center's data will match up to national averages. How close to the "average" does a surgery center want to be?
AM: Anything better than average is usually a good sign, even if it's marginal. In reality, the real benefit of benchmarking is that it allows you to understand where variances are relative to your peer group, and how you have been able to affect the statistic internally over time. There may be many reasons why an ASC's net revenue per case will never be greater than the average — due to, say, managed care penetration at that particular ASC. That is just fine, as it allows an ASC operator to focus on the things they can change and understand where other opportunities may be in the future.
Benchmarking is a process that should be performed over time, so even if a certain statistic is better than average, directional improvement may still be made. A surgery center doesn't necessarily need to be better or worse than average, but — especially in this era of reform — should be positioned to react to changes in the industry and local market. Benchmarking is one more tool that enables this.
Learn more about VMG Health.
Related Articles on ASC Operations:
10 Top Concerns for Surgery Center Physicians in 2012
10 ASC Must-Reads From the Week of Nov. 21
8 Tricks to Save More Money at Your Surgery Center
Q: For ASC administrators that are just starting out with benchmarking data, what tips can you give for using it properly?
Aaron Murski: There are two main points to keep in mind when approaching benchmarking. The first is that the point of benchmarking is not necessarily to be better than the peer group statistic (statistics such as net revenue per case, staff hours per case, etc.). The exercise of benchmarking is to engage in a process that helps provide insight on operating trends relative to your peers.
The second point to keep in mind is that due to the facts on the ground at a particular ASC (geographic location, case mix, etc.), the drivers of each peer group statistic needs to be understood separately. Spend time understanding the similarities and differences between your ASC and the sample you are benchmarking against for each metric you look at.
Q: You say ASC administrators should not look to be "better" than the peer group statistic. Why not?
AM: Well, I guess the point is to be better than the group in the end. That's the goal. But what everyone forgets is that benchmarking data should be used to keep your ASC moving in the right direction. It's not necessarily about being better than everyone else. When you focus solely on that, you may forget why you're doing it and you may end up skimping in certain areas to be better than the average.
Benchmarking is a means to understand your business better and stay on top of industry trends. If the whole industry is experiencing a trend and you aren't benchmarking, you won't know if it's just you or the peer group. Do you want to be better than average? Sure. That's the goal. But the important point that gets lost is how data can help you look at your business and the industry.
Q: How often should ASC leaders look at benchmarking data?
AM: Well, it really depends. Some statistics should be looked at more frequently, and others change slowly. Reimbursement contracts and Medicare changes take time to show up. If you have a case mix shift, that's also not going to show up overnight. You may look at net revenue less often, whereas if you're going through staffing and looking at whether you're under- or over-staffed, you may look at those more frequently. I have ASC clients who are really at the margin, and everyone is cross-trained and they're managing their staff and hours per case almost daily.
Q: What should ASC administrators do to make sure they're comparing "apples to apples" when looking at national benchmarking data? What characteristics should their internal data have to make an accurate comparison to national benchmarks?
AM: You sometimes have to roll up your sleeves to make sure you are calculating your internal statistics consistently over time, and in a comparable manner to the benchmark data.
An ASC's statistics should be calculated using the same methodology every time, and from the same data source or system. It is not uncommon to have the task of calculating certain statistics assigned to different staff over time who may have little understanding of how the statistics fit into the larger picture. This can create problems over time.
One obvious and easy way to benchmark, which is often overlooked, is to not only look at external benchmark data, but also look at internal statistics over time. While you may have a question as to how external data is calculated, you can be certain that internally calculated statistics are apples to apples. This is valuable, as even if an ASC is performing worse than average, the gap may be closing over time, which means the ASC is headed in the right direction.
Q: You mention that ASC leaders should understand how benchmark data was calculated. How can they find out that information?
AM: It's about getting the information — and not just the information in VMG Health's Intellimarker, but data from the national ASC Association and other companies. With all these products, you have to be familiar with how the data was collected. Sometimes that means calling the data source. Make sure you understand where the data comes from, how the averages are calculated and whether this is survey data or not.
Every ASC has a different reporting system, so you may need to use more than one reporting system [to benchmark against published data accurately]. But it's more about establishing a standard process.
Q: What mistakes do you see ASC leaders making with benchmarking data?
AM: Speaking to clients across the country, the most widely used approach to benchmarking seems to be very ad hoc. Many well-run, successful ASCs "spot check" some of their numbers and benchmarking data inconsistently and irregularly. That's what overall profitability can do — it can mask trends until at some point there is a marked decrease in performance, whether due to competitive changes or usual ASC life-cycle issues. Then it is often too late, and the obvious immediate solutions (such as reducing staff) can destroy morale and exacerbate problems.
This is one area where setting up an internal process on the front end, in writing, really helps out. Standardization is key. The benchmarking process should ideally be standardized such that a person at the ASC who is not necessarily experienced with the process can perform the data collection and statistic calculation if necessary.
Q: How much does region play a role in benchmarking?
AM: Region can play a large role, depending on the statistic. ASC size can also play a factor for certain statistics as well. I usually suggest starting with national data comparison, as this is the largest sample size and a sets a baseline.
From there, looking at a regional data comparison for certain statistics is more appropriate — for example, salary data and net revenue per case — while [looking at national data, organized by] surgery center size by number of operating rooms and annual case volumes may be more appropriate for other statistics, like EBITDA margin and A/R turnover.
Q: Is there some data that's more useful to benchmark on a national basis?
AM: Some statistics mean more nationally than regionally. Some mean more regionally than nationally. For instance, with occupancy costs per square foot, you would see much greater meaning when you benchmark by region. With salary and wages, there is also more meaning by region.
On the other hand, if you look at net revenues per case, that may or may not be more applicable regionally. There's always an outlier. You may have one ASC where they've managed to keep managed care out, but everyone else in the community has managed care. You may think," I know everybody has a different payor mix, so I'll go ahead and benchmark to the national average instead of local."
Q: Obviously not every surgery center's data will match up to national averages. How close to the "average" does a surgery center want to be?
AM: Anything better than average is usually a good sign, even if it's marginal. In reality, the real benefit of benchmarking is that it allows you to understand where variances are relative to your peer group, and how you have been able to affect the statistic internally over time. There may be many reasons why an ASC's net revenue per case will never be greater than the average — due to, say, managed care penetration at that particular ASC. That is just fine, as it allows an ASC operator to focus on the things they can change and understand where other opportunities may be in the future.
Benchmarking is a process that should be performed over time, so even if a certain statistic is better than average, directional improvement may still be made. A surgery center doesn't necessarily need to be better or worse than average, but — especially in this era of reform — should be positioned to react to changes in the industry and local market. Benchmarking is one more tool that enables this.
Learn more about VMG Health.
Related Articles on ASC Operations:
10 Top Concerns for Surgery Center Physicians in 2012
10 ASC Must-Reads From the Week of Nov. 21
8 Tricks to Save More Money at Your Surgery Center