Understanding Benchmarks
Benchmarks are valuable tools that can help your home health agency or hospice accurately predict performance and determine new opportunities for growth. In this month’s feature, we discuss what makes a good benchmark and the type of elements that may influence a benchmark’s relevancy to your business.
What Is A Good Benchmark?
A good benchmark is relevant to your business and relates to factors your agency can affect. Merriam Webster defines a benchmark as, “something that serves as a standard by which others may be measured or judged.” How you measure up varies by the standard that you choose –so you must choose carefully. If a benchmark does not mean anything to your organization, you are wasting your time and valuable resources in gathering and analyzing the data.
To begin to understand the difference between relevant and misleading benchmarks, you must understand the data:
- You need to know what is meaningful and relatable to the factors you can affect.
- You need to understand what is behind the numbers.
Knowing how your performance stacks up against other providers is fine, as long as you also understand why there are differences and how you can address those differences to improve. Anytime you use data, you need to understand its source and its limitations.
What Factors Affect a Benchmark to Determine Its Relevance for Your Agency?
Plenty of benchmarks exist to measure agency performance, but some fail to capture the essential aspects of the variables you can affect. To make it relatable, you must understand the factors and conditions influencing benchmarks. If you don’t understand the source, then you could come to the wrong conclusion. Let’s take a look at a commonly used benchmark – the recertification rate – to uncover the types of elements that could affect benchmarks.
The recertification rate is defined as non-initial patient episodes divided by initial episodes for Medicare-covered home health services. Since the introduction of Prospective Patient System (PPS), chronic or multi-episode patients have become more profitable for some home health providers. Thus, the recertification rate is a useful benchmark for understanding how likely is it that an agency might benefit from the multi-episode patient reimbursement group.
The following three factors have a significant effect on the recertification rate benchmark:
1. Patient Mix
Patient mix is a key factor affecting recertification rates. If you have a significant volume of patients with diagnoses of chronic conditions, for example, you would expect a higher recertification rate. If your patient mix were more heavily weighted with acute patients, however, you would expect a lower recertification rate. By looking at the patient mix together with the benchmark, you can better understand why there are differences. This is referred to as disease-adjusting your benchmark.
2. At What Point Your Patients Are Referred
The point at which your referral sources are giving you the patients may also influence recertification rates. Are most of your patients admitted straight from the hospital, rehabilitation unit, or skilled nursing facility? Once you consider all the factors at play, you can begin to see their effect.
3. Geography Making Up Benchmark
Geography plays an important role in determining how relevant a benchmark is for your agency. In 2006, for example, the national benchmark for recertification rates was 71.8%. Keep in mind, however, that this benchmark is an average that includes the best and worst performers across all different types of markets including urban and rural areas, demographically diverse populations, as well as a multitude of varying state-level Medicaid policies. Recertification rates in 2006 actually varied by state from a low of 24% to a high of 287%, with about 80% of the states and territories falling below the national average. (See Figure 1)
Figure 1: Home Health Recertification Rates – US.
The national recertification rate is an interesting statistic, but it may not be relevant to your local market. That’s why the state level may be a better benchmark for your agency, since the comparison takes into account the same Medicaid policy you operate under and includes a less geographically diverse sample. As an example, let’s take a closer look at 2006 recertification rates in Ohio:
- The state recertification rate of 54% differs from the national rate of 71.8%.
- Of the 89 counties in Ohio, only one county was at the state average.
- 62% of the counties fell below the state average.
- Ohio’s recertification rates by county ranged from 13% to 198%.
- Cuyhoga County (Cleveland) represents 19% of the state’s episodes.
This example demonstrates how one or more large counties can sway a state benchmark. It also emphasizes why local benchmarking – knowing the specific rates in the counties you serve – may be the most relevant benchmark for your agency.
Benchmarking is a valuable tool that can help you determine where your agency is today and where it can go in the future. But it’s important to understand what makes a benchmark relevant to your business to find the best ones to help lead you in the right direction. Click here or give us a call at 215-657-7373 for more information about how Healthcare Market Resources can help your agency find and use the most effective benchmarks for assessing performance and identifying new opportunities for growth.