LUTZ BUSINESS INSIGHTS
Benefits & Tools for CAH Benchmarking
ASHLEY BREDTHAUER, HEALTHCARE MANAGER
How do you measure your organization’s performance? One option is to review your current financial results against your historical performance. Financial statements are often presented in a comparative format, with prior year(s) results provided as a point of reference. Reviewing your financial results through a budget-to-actual variance analysis is also a meaningful comparison.
Another best practice is to compare your financial results against other critical access hospitals (CAHs) through benchmarking analysis. In addition to their core financial statements, CAHs often provide some ratio and benchmarking analysis as part of their monthly financial packet to the board of directors. Comparative financial statements, budget-to-actual analysis, and ratio and benchmarking analysis are a few examples of how to provide context to analyze current financial results. The following is a summary of some resources and best practices that are available to assist CAHs with expanded benchmarking and financial analysis.
Benefits of CAH Benchmarking
The benefits of benchmarking your results against your peer CAHs include the following:
- Gain an independent perspective on your performance
- Drive continuous quality and performance improvement
- Assist with management of resources
- Reduce costs by increasing efficiency
- Improve cash flow
- Monitor liquidity to prepare for potential downturn in operations or negative economic impacts
- Monitor need for facility improvements
- Measure progress toward strategic goals
Tools to Guide CAH Benchmarking
1. Small Rural Hospital and Clinic Finance 101 Guide
On August 30, 2022, the annual update of the Small Rural Hospital and Clinic Finance 101 Guide was released. It includes 2020 U.S. Critical Access Hospital (CAH) medians that can be used as a gauge for progress and comparison.
To implement benchmarking, CAHs need to know where to obtain and how to understand the data available within their organizations. The guide notes that “to be successful, providers need to understand their data. For some this will require organizations to develop new strategies to create or obtain the necessary data for analysis. Once the data is obtained, it needs to be converted into quality information that can be used to create actionable strategies. […] Once actionable strategies have been identified, responsibility and accountability will need to be assigned in the organization.”
The guide includes the following table with what participants of the CAH Financial Leadership Summit identified as the ten most important indicators for evaluating CAH financial performance. For CAHs that do not yet have a process in place to calculate these financial indicators and analyze them against the U.S. median results, we recommend implementing this as part of your monthly financial analysis.
This document also provides detail on how to calculate and analyze each of these indicators. For example, for “days in net accounts receivable,” high values represent longer collection periods and may signal problems with billing and collecting payments. The guide notes that high values can be a sign of problems such as out-of-date chargemasters, poor registration processes, and bad communication.
2. Critical Access Hospital Measurement and Performance Assessment System (CAHMPAS)
CAHMPAS provides a variety of metrics to assist CAHs with comparing their financial performance to peers. The Flex Monitoring Team calculates financial indicators using data from hospitals’ Medicare cost reports. Data on the twenty-three financial indicators is updated on a quarterly basis. This tool can be accessed here.
The financial data in the CAHMPAS is password protected for the security of the hospitals. The financial portion of CAHMPAS is available to CAH executives, state Flex Programs and federal staff. If you meet one of those user groups and need access to your login information, you can email email@example.com and provide your name, position, organization/hospital, and city/state.
Lutz Can Help!
In conclusion, CAHs can benefit from benchmarking their financial results to their peers, and tools have been developed and made widely available to assist CAHs in doing so. Please contact us for assistance with expanding your benchmarking analysis.
ABOUT THE AUTHOR
ASHLEY BREDTHAUER + HEALTHCARE MANAGER
Ashley Bredthauer is a Healthcare Manager at Lutz with over 15 years of experience in accounting. She is responsible for providing accounting and consulting services to healthcare organizations with a focus on financial reporting and reimbursements.
AREAS OF FOCUS
- Accounting & Consulting
- Monthly Financial Reporting
- Medicare Cost Reports
- Healthcare Industry
AFFILIATIONS AND CREDENTIALS
- Nebraska Society of Certified Public Accountants, Member
- American Institute of Certified Public Accountants, Member
- Certified Public Accountant
- MBA, University of Nebraska, Lincoln, NE
- BSBA in Accounting, University of Nebraska, Kearney, NE
- United Way, Financial Review Team Member
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