Cracking the KPI code in healthcare

ISE Magazine Volume : 49, Number : 12
By Casey Bedgood

Design the right metric system to find out if you are leading or lagging
As the healthcare industry continues to evolve and maneuver around everchanging political, regulatory and environmental constraints, organizations need a self-reflection to assess whether they are leading or lagging. At the heart of this assessment is developing, reviewing and integrating key performance indicators (KPIs) into the business model.

What to measure
The first and most important question to ask is, “Is the organization measuring the right KPIs?” In order to answer this question, your healthcare enterprise needs to dissect itself into a minimum of three levels and determine what KPIs are being measured as compared to the ideal future state.

The enterprise KPIs are the overarching high-level KPIs that affect the strategic direction of the organization, something that is monitored by and reported to top leaders. Typically, enterprise KPIs should be limited to a dozen or so. The divisional KPIs focus on the major segments of the organization tied to strategic goals, and the operational KPIs are tied to front-line areas that tend to face the customers. While the number of enterprise KPIs tends to be limited, operational and divisional KPIs can easily reach dozens.

It is important to note that although each level may have different KPIs depending on the business unit, all KPIs should roll up and revolve around organizational strategic goals. If not, then the organization more than likely is not measuring the right KPIs.

The KPI development process
A good starting point when developing organizational KPIs is to define and focus on strategic goals and imperatives. The organization’s performance should correlate directly to the strategic direction of the enterprise, and KPIs will signal if the organization is heading in the right direction.

Once the KPI focus is established, determine if the data for each KPI is currently real time or retrospective, meaning does the data represent weeks, months or even years past. The goal would be to have as much real-time KPI data as possible to provide an accurate picture of the organization’s current performance relative to service, cost and quality.

Retrospective KPI data carries many problems. After all, the healthcare environment changes constantly, and customer requirements are now in the forefront of how an organization performs regarding service, cost and quality. Lagging KPI data may provide a false sense of security, because more times than not small issues will become major issues before those in charge realize what’s happening. Also, lagging KPI data may present a challenge in meeting current customer requirements in a timely fashion. Although some healthcare KPI data will have to be retrospective simply due to the regulatory environment and reporting mechanisms, the goal is to limit this as much as possible.

Next, the focus should revolve around the data source for each KPI. Ideally, each data source would provide an automated real-time report or dashboard data feed of accurate data. It is imperative to validate the data from each KPI source to ensure the data are accurate, reliable and trustworthy. Bad data are useless and could result in disastrous consequences for the customer and organization if used in strategic or operational planning and execution.

Third, it is imperative to consider form then function during KPI development. Form is represented by historical demand analysis of the actual number of units per hour for each day of the week that the business unit is processing or servicing. For example, it could be the number of bills completed per hour by a billing office, the number of 911 calls received by an ambulance provider or the number of clinic patients seen per hour in a clinic. This principle applies to any business type or business unit and is critical in configuring structure (i.e., staffing levels) for the business unit.

After form is complete, KPI development should focus on function or process. These KPI measures could consist of global KPIs such as length of stay or cost per adjusted discharge, as well as operational measures such as response times, turnaround times or other metrics. KPI development will be specific to your industry and business unit, but the metrics chosen always should be tied to strategic goals and imperatives.

Finally, KPI development should focus on how the data will be displayed to end users. The ideal display platform is a user-friendly dashboard. It is imperative to include voice of the customer during dashboard design and implementation. The KPI display should be clear, concise and accessible to all relevant stakeholders.

More advanced KPI displays may include graphs, colorcoded gauges and options for time series of KPI data for historical performance comparisons. The simpler the better. After all, most end users, whether they are C-suite executives or front-line leaders, need a KPI story board that will paint the current state operational picture quickly, because in healthcare time is at a premium and can mean the difference in saving or losing lives.