Financial Benchmark

A financial benchmark is a population-based spending level that is used to establish PBP rates for providers. Financial benchmarks may be based on a provider organization’s spending in the previous year (i.e., “historical” benchmarks), on regional or national spending levels (i.e., “regional” and “national” benchmarks), or through some mechanism (e.g., bidding). Once a method for setting benchmarks is in place, updated benchmarks must be risk-adjusted to take into account patient mix. Additionally, financial benchmarks should be adjusted to account for geographic variation in input costs (e.g., wages, rents, etc.) if variations exist across the covered region, but they should not be adjusted on account of variation in utilization of medical care.