Executive IDN Insights are emailed to you bi-weekly to provide executive supply chain leadership insights from two of the most trusted healthcare supply chain leaders. For decades they’ve led large supply chain organizations and now offer you their strategic thoughts on pressing issues you should be considering.
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The Confusing World of Benchmarking
Brent Johnson

The IDN Summit and Reverse Expo offers great opportunities to network and learn.  In the Spring IDN Summit, I facilitated a very good panel on Benchmarking.  Benchmarking, in the healthcare supply chain, is an important topic that everyone wants to do, but I'm not sure how many are effective in their benchmarking efforts.

The program for the IDN Summit Session on Benchmarking said, “In the ideal world, benchmarking supports open comparison and sharing that allows organizations to continuously improve and transform.” That is a good statement, but evidence of good benchmarking in healthcare is lacking.  Clear communication and accountability between the supply chain side and the clinical side is critical in running an efficient organization. Proper documentation for each ‘team’ makes them unaccountable for their actions, procedures, decisions, etc.

According to the Aberdeen Group, “There is clear evidence that the failure to accurately measure, evaluate, and manage performance measures can increase a company’s costs, damage it’s product quality, and hinder its competitiveness in the marketplace” 

In this confusing world of benchmarking, questions are more prevalent than answers:  What is benchmarking?  Why is it so difficult? Is it worth it? What if you don’t benchmark? 

Just as a race car driver cannot win a race by only focusing on the speed of his car, and a pilot cannot fly a plane well by only focusing on his altimeter, a “team” can never truly be successful without keeping their eye on a number of key performance measures and indicators.

When I first came into the industry, in 2005, the major benchmark everyone seemed to use was Supply Expense as a % of Net Patient Revenue.  That is a metric that is not only hard to measure, but also falls short of measuring the impact of true supply chain management that is responsible to manage the entire non-labor spend of an organization.  Data is a key factor in expressing the importance of benchmarking. How often and well we collect, evaluate, and have the correct people submit the data for transparency will determine the efficiency of hospitals in comparison to previous years, or in fact, other facilities.

In November 2017, Gartner published a white paper called the “Introduction to IDN Supply Chain Benchmarking.” Gartner advocates that end-to-end supply chain benchmarking is needed to improve decision making in the industry.  They also mentioned that traditional healthcare supply chain benchmarks come up far short, especially in “measuring alignment to patient care, service,  capital intensity, and a total cost to serve.”

I was a member of the AHRMM Board in May, 2013 and chaired the committee to develop metrics for the new CQO program.  That was very difficult, as seeing how we only came up with 35 different metrics and none were ideal.  

There is no easy answer.  Healthcare is complex, and no two organizations are alike. We should search for organizations that perform the best in a particular area.  Anything that can be measured can be benchmarked, as it should be regardless.

But to NOT benchmark is to NOT measure your progress. If you do not know where you are going, you will not know when you get there.  Find a purpose for benchmarking, develop a process, and start measuring your progress. 

Send me your ideas on effective benchmarking, who knows, maybe together we can set some standards.