Healthcare
Helpm31990
9781284118308_SLID_CH19.pptChapter 19:
Estimates, Benchmarking, and Other Measurement Tools
Definition of Estimate
- According to the dictionary, estimate “implies a judgment, considered or casual, that precedes or takes the place of actual measuring or counting or testing out” (Merriam Webster’s Collegiate Dictionary, 10th ed., s.v. “Estimate”).
Estimates
Such estimates may be of:
- Amount
- Value
- Size
Estimates
- The first question should be: “Is it capable of being estimated?”
- If so, using an estimate often involves a trade-off, such as gaining a quick answer that is less accurate.
- So relying on estimates for input to reports means sacrificing some degree of accuracy.
Estimates
Four common uses of estimates are typically due to:
- Timeliness considerations
- Cost/benefit considerations
- Lack of data
- Internal monthly statements
Estimating the Ending Pharmacy Inventory
- Certain healthcare organizations (or departments such as pharmacy) require accounting for inventory. Internal monthly statement usually use ending inventory estimates.
- The following slide (Figure 19-1) illustrates steps in the ending inventory computation.
Figure 19-1 Estimating the Ending Pharmacy Inventory.
The Scope of Estimates
- Estimates can be extremely general, or they can reflect considerable judgment and well-thought-out detail.
- An example of a general estimate and its subsequent impact due to unrecognized indirect costs is illustrated in the next slide.
(Refer to the chapter, along with Figure 19-2, for full details about this example.)
Figure 19-2 Estimated Economic Impact of a New Specialist in a Physician Practice.
Other Estimates
- Other commonly used computations are actually estimates.
- For example, the weighted average inventory cost described in Chapter 9 is in fact an estimate.
Performance Measures
- A variety of performance measures must be in place for the organization.
- Many types of such measures are available. Generally different organizations lean toward using one type over another.
Performance Measures
- Adjusted performance measures over time.
- We have previously discussed the advantages of comparative analysis—the comparison of various time periods, one to another.
- Measures that compare performance over various time periods are especially effective.
- Figure 19-3 illustrates measures over time combined with a two-part case mix adjustment.
Financial Benchmarking
- Benchmarking is the continuous process of measuring products, services, and activities against the best levels of performance.
- The best levels may be found inside the organization or outside it.
Benchmarking (1 of 3)
- There are three types of benchmarks:
- A financial variable reported in an accounting system
- A financial variable not reported in an accounting system
- A nonfinancial variable
- Benchmarks are used to measure performance gaps.
Benchmarking (2 of 3)
How do you benchmark? Three possible methods include:
- Studying the methods and results of your prime competitors;
- Examining the process of noncompetitors with a world-class reputation; or
- Analyzing processes within your own organization that are worthwhile to replicate.
Benchmarking (3 of 3)
- Financial benchmarking compares financial measure among benchmarking groups. It is the most common type of peer group method used in health care.
- Statistical benchmarking is another related method.
(See Table 19-1 for an example of financial benchmarking.)
Measurement Tools
- Pareto analysis is a measurement tool based on the Pareto Principle.
- The Pareto Principle is often called the “80/20 Rule.”
- For example, “80% of an organization’s problems are caused by 20% of the possible causes.”
Measurement Tools
- Pareto Analysis is an analytical tool that helps managers improve some steps in a process.
- The analysis quantifies these steps through construction of a Pareto diagram.
- Figure 19-4 and accompanying text explain how to construct and interpret a Pareto diagram.
Figure 19-4 Pareto Analysis of Billing Department Data.
Measurement Tools
- Reporting by quartiles is an effective way to show ranges of either financial or statistical results.
- Quartiles are based on a quantitative method of computation and can effectively illustrate a variety of performance measures.
- Chapter text plus Table 19-1 illustrate how to compute and construct a report using quartiles.
Performance Measures
- Remember: Several types of performance measures will be in use in the organization.
- Familiarity with the use of such measures lets the manager do a better job analyzing performance.
