At the American Academy of Ophthalmic Executives (AAOE) meeting, Derek A. Preece, MBA, from the BSM Consulting Group, Orem, UT, talked about the importance of understanding exactly what benchmarks are and how to use them effectively during his presentation, "Using benchmarks to improve your practice."

"A benchmark doesn't usually tell us exactly what to do, but it can help us figure out what to do in our practice," he said. Preece often sees practices using benchmarks in the wrong way. He said that it is important to use several related benchmarks to get the full picture of practice problems and not to rely too heavily on one in particular.

"Don't strictly adhere to any one benchmark," Preece said. "Every practice is different."

The real comparison is how an ophthalmologist's practice is doing over time. Also, comparing apples with apples, such as comparing one month with the same month last year, is crucial. Otherwise, you get bad information, which leads to bad decisions, he said.

Be aware, too, that unlike action that needs to be taken when a patient presents with an increased pressure in the eye, action often does not immediately need to be taken in a physician's practice if ratios are slightly above or below the benchmark.

One key benchmark is overhead ratio, which is the total practice expenses (excluding doctors' pay and benefits) divided by total collections (or revenues). The healthy range, according to Preece, is 48% to 68%. The average is between 62% and 63%. Another key benchmark is the opposite of overhead ratio—profit ratio (or doctor income ratio). This ratio is the result of taking the doctors' income and dividing it by total collections. The healthy range is 32% to 52%, according to Preece. This ratio also is what will see the most change if Medicare reimbursement declines.

Other important benchmarks include ratios of: staff payroll, collections per patient encounter, collections per FTE billing staff member, and facility expense, to name a few. Another example is the new patient ratio. According to Preece, new patients are the "lifeblood" of all practices, because if practices don't grow, they eventually will dwindle, he said.

To help ensure a solid database for benchmarks that all practices could use, the American Academy of Ophthalmology (AAO) called for a system a couple of years ago that would be easy to use and that would be as accurate as possible. Because of that initiative, the AAO/AAOE Benchmarking Project, a confidential online program, was created.

Preece said participation in the project has been good, but it's not enough. In the first year, out of the 700 participants that signed up, only 180 actually provided useable data. Not only would practices benefit from strong participation but the AAO would benefit as well, as advocates; the data would provide a solid track record for Medicare, showing that costs continue to increase.

Participation in the project for 2008 data will begin in early 2009, according to Preece. To learn more, visit www.aao.org/benchmarking.