SOURCE: The Healthcare Management Council, Inc.

The Healthcare Management Council, Inc.

February 16, 2009 10:00 ET

As Hospitals Turn to Performance Improvement Benchmarks to Save, Beware the Hidden Costs

NEEDHAM, MA--(Marketwire - February 16, 2009) - Hospitals around the country are struggling to stay profitable when revenues are declining, donations are down, and costs are up.

Many hospital executives and boards of directors purchase performance improvement benchmarks to determine where their hospital's costs are high and savings are possible. These benchmarks compare the cost structure of different hospitals across the country, at various levels of detail, to determine where any individual hospital's costs are out of line with their peer group's costs.

Hospital benchmarks are very helpful in targeting specific drivers of high cost if used effectively. However, before any hospital executive or board of directors decides to purchase a particular benchmark, they should consider the hidden costs of those benchmarks and weigh them against the other available benchmarks:

-- The hidden costs in the price of the product

-- The hidden cost of hospital staff acquiring and verifying data

-- The hidden cost of continued waste during implementation delay

The hidden costs in the price of the product

Benchmarks offered by competing companies may have the same base price tag. However, there are often hidden costs in acquiring features or analyses which are essential for a successful performance improvement initiative but are not included in the base product price. HMC's benchmarks include these features and analyses with the base cost of the product, so there are no hidden costs and no "upsell" surprises after the purchase.

The hidden cost of hospital staff acquiring and verifying data

The cost of loading data, mapping data, and verifying data are often very high for hospital staff to do themselves. Often this hidden internal cost is actually higher than the cost of the benchmark itself.

HMC has developed tools and expertise in efficient loading, mapping, and verifying, so that hospital staff are not required to take on these tasks and so HMC's benchmark does not cost more than competing benchmarks even though they include this service.

Additionally, data that is submitted by hospitals and not loaded, mapped, and verified by the benchmarking company is often unreliable, as hospitals do not have expertise in these areas. Therefore, cost data and improvement targets are often wrong, which contributes to confusion and hospital staff disbelieving the benchmark. This lack of faith in the benchmark is a tremendous hidden cost, as staff do not commit to making change and cost savings are not achieved.

HMC loads, maps, and verifies the data submitted by all our hospitals, so there is no room for staff to question the data. This translates into faith in the benchmark and what cost savings are possible.

The hidden cost of continued waste during implementation delay

Every day that a hospital continues inefficient or low-quality practices is a day that the hospital's costs are excessive. Thus any delay in implementing a performance improvement benchmark results in hidden costs for the hospital.

Those hospital benchmarks which rely on hospitals to submit data themselves often take at least a month just to get started with data preparation by the hospital. This usually means the benchmark is not ready for at least three months after purchase. In contrast, HMC's benchmark is delivered and ready to act upon in one month, due to our highly efficient data loading, mapping, and verification systems.

For example, if a hospital benchmark identifies least $1.2 million in savings opportunity, an implementation delay of two months equals a hidden cost of $200,000, which is far beyond the actual cost of the benchmarking product.

HMC's benchmarks provide all required features in the base cost of the products, have very low cost of data loading/mapping/verification, and are delivered without implementation delay. The net result is that even if HMC's competitors gave away their products for free, HMC's overall cost of use would still be much lower, even though HMC offers more features and analyses.

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