KPIs on fingertips – Healthcare by Jyoti Sahai @JyotiSahai

That set me thinking on what could be those top key performance indicators (KPIs) which if available on fingertips (at the click of a button) could aid a CEO in achieving the organizational objectives more effectively, and what could be the ones relevant for a hospital CEO!   .

I presume that any hospital CEO’s top priority is to strive to earn the patients’ trust, and that is possible only if the hospital could meet and exceed patient expectations.

What a patient expects from the hospital is a treatment that is effective, timely and fair. The following KPIs keep the hospital CEO and other stakeholders informed on how effectively that is happening?

The top hospital stakeholders should be worried if higher % of patients who have been already discharged (whether out-patients from day-care or inpatients with hospital-care) return to hospital for re-treatment or re-admittance for the same ailment. That will show that either the initial diagnosis was flawed, or some critical elements were missed out while administering the treatment. Either way it would be matter of great concern for the hospital CEO, who should always be aware of the Re-admittance Index – % of discharged patients who required re-treatment or re-admittance.

One of the most critical performance indicator within a day-care hospital is the TAT, the turnaround time – the elapsed time between entry of the patient in the hospital (registration) and start of consultation of that patient by the physician. Other important TATs that are tracked within a hospital include – for a test being conducted, the elapsed time between the ordering of the test till the report collection, and most importantly for an inpatient, the elapsed time between the decision to discharge and the actual vacating of the bed. Inordinate delays in these lead to irritated patients, increased costs, and avoidable queueing issues too. Typically hospitals set internal benchmarks, or compare with any available industry benchmarks, to track the various TATs. In case of inordinate delays, hospitals could carry out a root cause analysis and take preventive and corrective actions.

What any hospital CEO should strive for is that the TAT Index for any given period is less than 5%, that means not more than 5% patient-visits experience a delay beyond a set benchmark in treatment or in discharge.

I remember once a CEO of a hospital was concerned about if any of the eleven consultants in the hospital were at any time prescribing investigations and/or medicines that were not warranted for the observed symptoms and the medical condition of the patient. Periodic audit of all prescriptions comparing those prescriptions with a defined set of rules (lines of treatment) for corresponding symptoms will give a fair idea of the deviations if any. What a CEO has to do to control it, is to always ensure that the Unfair Treatment Index (% of possible deviations from an appropriate line of treatment) is kept below the minimum acceptable tolerance benchmark.

A hospital may expect that it has earned a patient’s trust by providing treatment that is effective, timely and fair, but it can really know that for sure by arriving at the Patient Satisfaction (P-SAT) Index only. P-SAT can be derived by analyzing the feedbacks received from the patients, results of internal surveys, and the comments (adverse or commending) on the social media. A prudent CEO always depends upon the P-SAT Index to accurately gauge the extent of the hospital’s success and reputation.

We have now understood that patients’ trust can be earned by providing effective, timely and fair treatment. However none of that is possible unless the hospital itself is run efficiently and profitably.

How does the CEO keep track whether the hospital is run efficiently?

For meeting and exceeding the patients’ expectations it is imperative that the hospital operations including administrative and clinical processes are efficient and stable. Primarily it means that the all the hospital resources are used optimally, and are available for use when needed. The above-mentioned TAT Index is one such KPI. The following other KPIs too provide an indication of a hospital’s operational efficiency.

Hospital resources and infrastructure, if not used optimally, lead to lost opportunity, frittering away of resources, and most importantly increase in operating costs. The Management has to ensure that the various Wards, Operation Theaters, Labs, and various equipments, and even the service providers (human resources) are available for providing service to the patient when needed. Out of these various parameters, tracking of the bed utilization (% of hospital beds occupied at any given time) is considered very critical for any large hospital as it has a direct impact on the efficiency of that hospital. A consistently low bed utilization could mean among other things, either faulty planning (resulting in over-investment) or a low P-SAT. On the other hand a consistently high bed utilization could lead to severe strain on resources and maybe result in declining quality of service.

Thus it is imperative that the hospital CEO constantly monitor the Bed Utilization Index.

One of the most critical KPIs for a hospital is the Average Length of Stay (ALOS) of inpatients for specific types of ailments or procedures carried out. The hospital could compare its such averages with either the industry benchmarks, or internally set benchmarks. For example assume that for a specific operation procedure (including the pre-operation and post-operation in-hopsital care) the ALOS is 6 days. If elsewhere in the industry the ALOS for the same procedure is 7 days, that will mean either your administrative and/or clinical processes are more efficient than others or you may be missing out on some necessary hospital-care (a point not in your favor). On the other hand if the ALOS elsewhere is 5 days, that will mean either you are providing some additional necessary services that others are not offering (a point in your favor) or your treatment more often is less efficient (your processes take extra time and/or resources for the same procedure).

Either way the CEO should keep a close watch on ALOS to optimize the services provided under the various procedures offered by the hospital.

However, even an efficiently run hospital having earned it patients’ trust to may fail if it is financially weak.

For a hospital to ensure efficiency in its operations, it is imperative that its finances are stable and profitable. Without that the hospital will not be able to sustain its efficient operations for a longer period. It is the hospital CEO’s prime responsibility to ensure that that does not happen. The hospital CEO can depend upon the following KPIs to keep a check on the financial health of the hospital itself.

Whether you are an individual or an establishment, the universal fact remains that you cannot consistently spend more than what you earn if you have to sustain financially in the long-term.

What is critical for the hospital Management is to know what is the hospital earning on an average for each visit that a patient makes to it for treatment. Once ARPV is known for a period, and is compared with the average cost of operations for that period (ACPV), the hospital CEO knows whether the hospital operations at the current levels are sustainable or not.

Trends of ARPV and ACPV over a period give sufficient insights to the CEO to arrive at fair pricing of services, and take steps to manage optimal utilization of resources.

However a strong ARPV or a manageable ACPV alone will not be sufficient for financial stability unless the cash management is also strong.

Once a CEO of a 100-bed hospital was complaining that though he knew that the hospital had been having a strong revenue stream during that period, he was finding it difficult to pay on time for even the relatively small purchases made for materials and services. Why was that? A quick look at the hospital accounts revealed that (as is typical of all medium-large hospitals) almost 75% of the hospital revenue was derived thru insured patients, provided care under cash-less treatment schemes. It was also found that a substantial portion of that money was blocked in over-due claims submitted to the insurance companies and remaining outstanding for various reasons. That meant that the cash-flow was heavily dependent upon the timely settlement of insurance claims.

Any prudent CEO keeps a tight watch on the number of days claim outstanding (DCO) with the insurance companies; monitoring closely the TPAs – Third-party Administrators – ensuring that the claims are settled by the insurance companies as per agreed contractual terms. Timely settlement of insurance claims results in improved and predictable cash-flows and strengthens financial stability.

A hospital CEO may track the above-mentioned KPIs and ensure that the hospital is earning patients’ trust, and is operationally efficient and is financially stable too. But the litmus test of a hospital’s reputation and success is when its performance is compared with its peers, the other similar hospitals in the geography or with the same specialization.

Several independent agencies periodically rank the participating hospitals based on various performance factors, and the ranking could be geography-wise, type of hospital-wise, or specialty-wise.

For a CEO it is imperative that whichever ranking is most important for the hospital is thoroughly analyzed, and a proper strategy to improve/maintain the ranking in future put in place.

How does the CEO keep track of the above-mentioned top KPIs? The CEO’s Dashboardcould display the current status of the KPIs, available at any time at the click of a button (literally putting those on fingertips). A typical dashboard containing the critical KPIs could look like as shown below:

(The numbers and the traffic-light shown against each KPI in the dashboard are for illustration purpose only and do not represent any industry benchmark or desired value)

The above list contains the typical KPIs critical for gauging any hospital’s performance on various operational and financial parameters. However depending upon the criticality for a particular hospital, different and more relevant KPIs could replace those less relevant for that hospital.

By design, I have not included any KPIs or insights produced by clinical analytics, as those will be specialized and specific to each individual hospital.

[Glossary:

ACPV – Average Cost per Patient-Visit; ALOS – Average Length of Stay; ARPV – Average Revenue per Patient-Visit; DCO – Days Claims Outstanding; KPI – Key Performance Indicator; P-SAT – Patient Satisfaction; TAT – Turn-around Time]