CPOM Module 5, Section 4: Benchmarking Internal vs. Industry Standards
MODULE 5: PERFORMANCE MEASUREMENT & FINANCIAL REPORTING

Section 5.4: Benchmarking Internal vs. Industry Standards

An exploration of how to use external benchmarking data from organizations like Vizient and Premier to compare your pharmacy’s performance against peer hospitals, identify opportunities, and set ambitious but achievable goals.

SECTION 5.4

Benchmarking Internal vs. Industry Standards

From Introspection to Inspiration: Finding Your Place in the Healthcare Landscape.

5.4.1 The “Why”: Moving from “Are We Doing Well?” to “How Well Are We Doing?”

You have successfully established a robust internal performance measurement system. Your dashboards are active, your KPIs are being tracked, and you have a solid grasp of your department’s operational and financial vital signs. You know that you improved your STAT turnaround time from 22 to 16 minutes last quarter. You know that your drug cost per patient day is $150. These are facts. The next, and far more powerful, question is: Is that good?

Without external context, your internal data exists in a vacuum. A 16-minute STAT TAT might be exceptional if the national average for similar hospitals is 25 minutes, or it might be alarmingly slow if top performers are achieving it in under 10 minutes. This is the fundamental purpose of benchmarking: it provides the context necessary to interpret your own performance. It is the process of systematically comparing your department’s metrics against those of other, similar organizations to identify your relative strengths, uncover hidden weaknesses, and discover best practices from top performers.

For a pharmacy leader, benchmarking is not an academic exercise in curiosity; it is a strategic imperative. It is the single most effective tool for setting ambitious, yet credible, goals. Instead of pulling a target out of thin air (“Let’s aim for a 10% reduction in drug spend!”), you can set an evidence-based goal (“Top-quartile hospitals in our Vizient peer group have a drug cost per CMI-adjusted discharge that is 18% lower than ours. Our strategic goal is to close 50% of that gap over the next two fiscal years.”). This approach transforms your requests to the C-suite. They are no longer just your opinion; they are data-driven strategies aimed at achieving top-tier performance as defined by the industry itself. Benchmarking elevates your perspective from managing a department to competing on a national stage.

Retail Pharmacist Analogy: Competing in the Local Market

As the owner of an independent community pharmacy, you would never dream of running your business by only looking at your own internal sales data. Your survival depends on understanding your local market. This is informal benchmarking, and you do it instinctively.

  • Financial Benchmarking: You look at the weekly circulars from CVS and Walgreens. You see they are selling a bottle of vitamin C for $5.99. You check your cost and see if you can match or beat that price for your patients. Their advertised price is your benchmark for a key front-end item.
  • Operational Benchmarking: You hear from a patient who transferred from a competitor that they were tired of waiting 45 minutes for every prescription. You know your average wait time is 12 minutes. This external data point validates that your operational efficiency is a key competitive advantage.
  • Quality Benchmarking: You see your pharmacy has a 4.8-star rating on Google, while the big-box pharmacy down the street has a 3.2-star rating. This is public benchmark data that you can leverage in your marketing to highlight your superior service quality.
  • Best Practice Discovery: You learn that another successful independent pharmacy in a nearby town launched a highly popular medication synchronization service. You call that owner (your “peer”) to learn about their workflow, staffing model, and marketing. You are using their success as a benchmark to guide the development of your own new service line.

Hospital pharmacy benchmarking is the formal, structured, and data-intensive version of this essential business practice. You are no longer just comparing your prices on vitamin C; you are comparing your cost per case of sepsis against the top academic medical centers in the country. But the core principle is identical: you must look outside your own four walls to truly understand where you stand and to discover the path to becoming a top performer.

5.4.2 The “Who”: A Landscape of Healthcare Benchmarking Organizations

To engage in benchmarking, hospitals typically subscribe to services that collect, anonymize, and analyze vast amounts of data from their members. These organizations provide the platforms and peer networks necessary for meaningful comparison. While many regional and specialty groups exist, two of the most prominent national players in the United States for hospital pharmacy benchmarking are Vizient and Premier.

Deep Dive: Vizient, Inc.

Vizient is a healthcare performance improvement company with a massive membership that includes the majority of U.S. academic medical centers and large, integrated health networks. Its strength lies in the depth and clinical richness of its comparative data. For pharmacy leaders, Vizient provides several critical tools:

  • Group Purchasing Organization (GPO): Like other GPOs, Vizient negotiates competitive drug pricing contracts for its members, but its value extends far beyond pricing.
  • Clinical Data Base (CDB): This is one of the most powerful clinical benchmarking tools in the industry. It captures detailed, risk-adjusted clinical outcome and resource utilization data at the patient level. For pharmacy, this allows for sophisticated comparisons of drug utilization, cost per case, and length of stay for specific disease states (e.g., pneumonia, heart failure) against peer institutions.
  • Pharmacy Program: This is a dedicated program that provides pharmacy-specific analytics, networking opportunities, and best-practice research. It allows pharmacy directors to compare their performance across hundreds of financial, operational, and clinical metrics.
  • High-Value Networks: Vizient facilitates networking among pharmacy leaders from similar types of institutions (e.g., Academic Medical Center Pharmacy Directors, Pediatric Pharmacy Directors). These networks are invaluable for discovering and sharing best practices that explain the “why” behind the data.

Deep Dive: Premier Inc.

Premier is another major healthcare improvement company that also operates one of the nation’s largest GPOs. Its membership is broad, encompassing thousands of hospitals and health systems of all sizes. Premier’s historical strength lies in its ability to leverage its vast purchasing data to provide powerful financial and operational insights.

  • Supply Chain and Purchasing Analytics: Premier’s platform, PremierConnect®, provides incredibly detailed analytics on drug purchasing trends. It allows a pharmacy manager to benchmark their contract compliance, generic purchasing rates, and pricing against peers with granular precision.
  • Operational Benchmarking: The platform integrates operational data, allowing for comparisons of metrics like labor productivity (e.g., pharmacy FTEs per adjusted discharge) and inventory management.
  • Clinical Surveillance and Quality Improvement: Premier offers tools that integrate with EHRs to provide real-time clinical surveillance alerts and track quality metrics, which can then be compared against the national database. They are particularly strong in areas like antimicrobial stewardship and adverse drug event monitoring.
  • Collaboratives: Like Vizient, Premier hosts numerous collaboratives that bring together members to work on specific improvement projects, such as reducing sepsis mortality or improving glycemic control, providing a framework for sharing and implementing best practices.
Masterclass Table: Other Key Sources of Benchmarking Data
Organization Area of Focus How to Use Their Data
American Society of Health-System Pharmacists (ASHP) Professional Practice and Workforce ASHP periodically conducts major national surveys (e.g., the National Survey of Pharmacy Practice) that provide invaluable benchmarks on practice models, staffing levels, technology adoption, and compensation. Use this data to justify your staffing models and advocate for the adoption of new clinical roles.
Institute for Safe Medication Practices (ISMP) Medication Safety ISMP is the nation’s leading authority on medication error prevention. They publish Best Practices and conduct confidential self-assessment surveys. Use their self-assessment tools to benchmark your safety practices against national recommendations and identify critical vulnerabilities in your medication-use system.
The Leapfrog Group Public Quality & Safety Reporting Leapfrog is an employer-driven watchdog organization that grades hospitals on their safety and quality. They have specific standards related to CPOE systems and pharmacist staffing in ICUs. Your hospital’s Leapfrog grade is public. Use a poor score in a pharmacy-related area as a powerful lever to advocate for resources to fix the underlying problem.

5.4.3 The “What”: Deconstructing a Benchmarking Report

When you first open a benchmarking report, it can be an overwhelming flood of data. The key is to deconstruct it systematically. A well-designed report will always include several key features that allow for a fair and insightful comparison.

Core Concept #1: The Power of the Peer Group

The most fundamental principle of benchmarking is that you must compare your hospital to other, truly similar hospitals. Comparing a 750-bed, urban, academic medical center with a massive transplant program to a 100-bed, rural, critical access hospital is worse than useless; it is actively misleading. Your benchmarking service will work with you to place your hospital into one or more appropriate peer groups.

Common Peer Group Criteria

A good peer group is defined by multiple attributes to ensure an “apples-to-apples” comparison:

  • Bed Size: (e.g., < 150 beds, 150-300 beds, 301-500 beds, > 500 beds)
  • Teaching Status: (e.g., Major Academic Medical Center, Minor Teaching Hospital, Non-Teaching Community Hospital)
  • Geographic Region: (e.g., Northeast, South, Midwest, West)
  • Patient Acuity (Case Mix Index – CMI): A CMI is a number that reflects the average complexity and resource needs of a hospital’s patients. A hospital with a high CMI treats sicker patients. This is a critical variable for normalizing cost data.
  • Specialty Services: (e.g., Trauma Level, Transplant Program, NCI-Designated Cancer Center)

Core Concept #2: The Meaning of Percentiles

Averages (means) are rarely used in high-quality benchmarking reports because they can be easily skewed by one or two extreme outliers. A far more powerful and stable way to understand your relative performance is through percentiles and quartiles. This approach ranks all the hospitals in the peer group from best to worst for a given metric and then shows where you fall in that ranking.

Understanding Percentile Ranks

Imagine 100 hospitals in your peer group, ranked for a single metric.

Bottom
Bottom Quartile

0-25th Percentile

Second Quartile

26th-50th Percentile

Third Quartile

51st-75th Percentile

Top
Top Quartile

76th-100th Percentile

Is “Top Quartile” Always Good?

This is a critical point of interpretation. Whether being in the top quartile (e.g., 90th percentile) is good or bad depends entirely on the metric. You must ask yourself: For this metric, is a higher number better or is a lower number better?

  • For Cost or Undesirable Event Metrics: (e.g., Drug Cost per APD, Medication Error Rate, Staff Turnover Rate), a lower number is better. Being in the 90th percentile means you are one of the worst performers. Top performance is in the 10th or 25th percentile.
  • For Quality, Revenue, or Efficiency Metrics: (e.g., Smart Pump Compliance, Clinical Intervention Savings, Inventory Turnover Rate), a higher number is better. Being in the 90th percentile means you are a top performer.

5.4.4 Masterclass: Reading a Sample Pharmacy Benchmarking Report

Let’s analyze a sample report for “Our Hospital” against its peer group of 125 large academic medical centers. We will look at one key metric from each of the four pillars.

Financial Metric: Total Drug Cost per CMI-Adjusted Discharge

This metric normalizes total drug spend against both patient volume (discharges) and patient acuity (Case Mix Index). A lower value is better.

$7,000$6,000$5,000$4,000
Top Decile
$5,000
Top Quartile
$5,400
Median
$5,900
YOU
Our Hospital
$6,500
Bottom Quartile
$6,800
Analysis and Actionable Questions

The Story: Our hospital’s drug cost per case is $6,500, which places us between the median ($5,900) and the bottom quartile ($6,800) of our peers. We are significantly higher than top-performing hospitals. Specifically, we are spending $1,100 more per patient than top quartile performers.

Actionable Questions:

  • Which specific DRGs (Diagnosis-Related Groups) are driving this variance? Is our cost for sepsis or pneumonia cases higher than our peers?
  • Are we under-utilizing biosimilars or other cost-saving therapeutic interchanges compared to top performers?
  • Is our length of stay for certain conditions longer, leading to more days of therapy?
Operational Metric: Pharmacy Technician FTEs per 100 Average Daily Census (ADC)

This metric measures labor productivity for your technical staff. It normalizes your number of technician full-time equivalents (FTEs) against the hospital’s average patient volume. A lower value indicates higher productivity (fewer staff needed for the same volume).

151296
Top Performer
8.0
YOU
Our Hospital
9.0
Median
10.0
Bottom Performer
12.0
Analysis and Actionable Questions

The Story: At 9.0 Technician FTEs per 100 ADC, we are performing very well. We are more productive than the median (10.0) and are approaching top-performer status (8.0). This is a strength to highlight.

Actionable Questions:

  • What are we doing right? Is this due to our high level of automation (carousels, packagers)? Do we have an exceptionally efficient workflow?
  • Can we leverage this efficiency? Does this data suggest we have the capacity to take on new tasks without adding staff?
  • How can we get from 9.0 to the top-performer level of 8.0? What are those top hospitals doing that we are not? (This is a perfect opportunity for networking).

5.4.5 From Data to Action: The Benchmarking Strategic Cycle

Receiving a benchmarking report is not the end of the process; it is the beginning. The data is only valuable if you use it to drive meaningful change. This should be a continuous, cyclical process of analysis, investigation, action, and re-measurement.

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Step 1: Identify & Prioritize Gaps (The Opportunity Analysis)

Comb through your benchmarking report and identify the metrics where the largest “gap” exists between your performance and that of the top quartile or decile. You cannot tackle everything at once, so you must prioritize. A simple but effective way to do this is with a 2×2 matrix, plotting the size of the performance gap against the estimated ability of your team to influence that metric.

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Step 2: Network to Discover Best Practices (Investigate the “Why”)

The report tells you your drug cost is high, but it doesn’t tell you that the top performers all use pharmacist-driven protocols for managing albumin use. The only way to find this out is to network. Use the connections provided by your benchmarking organization to identify and contact the leaders at top-performing hospitals. This is not about stealing secrets; the healthcare improvement community is highly collaborative. People are generally very willing to share their successful strategies.

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Step 3: Build the Business Case & Set Goals

Use the benchmark data to build a powerful, data-driven business case for the resources you need to improve. Frame your request around the “opportunity cost.” The “cost” of not investing in your proposed solution is the savings or quality improvement you are leaving on the table by continuing to perform at a suboptimal level. Set your new S.M.A.R.T. goal based on closing a portion of the benchmark gap.

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Step 4: Implement, Track, and Re-Benchmark

Implement your new initiative (e.g., the new protocol, the new technology, the new staffing model). Track your internal KPIs to see if they are improving as expected. When the next quarterly or annual benchmarking report is released, you can measure your progress not just against your own baseline, but against the moving target of your peer group. This demonstrates true, meaningful improvement to the C-suite and completes the cycle, which then begins anew.