What is a Hospital KPI and Why is it Important?
A hospital key performance indicator (KPI) is a quantifiable measure that monitors the quality of healthcare provided by the hospital and measures the overall success of the business.
Like many other service providers, hospitals depend on their customers (patients) to run their business. However, in order to thrive, they must also operate sustainably and mange costs. A successful hospital runs efficiently, provides life saving services and plays a valuable role in driving public health measures.
How to Choose the Most Impactful Hospital KPIs?
Now that we have defined what a hospital KPI is and why it is important, let’s discuss what it takes to choose the most effective metrics.
The first step in establishing a KPI monitoring program is to identify the most vital areas of the organization. Much like other for-profit businesses, hospitals must keep track of their finances, optimize their operational practices, and provide a healthy work environment for their people. However, for a hospital to stand out amongst other healthcare providers, it should also monitor its impact on public health and asses the quality of its services.
The second step in creating a KPI monitoring program is choosing a few metrics within each area of your business. The most effective way is to start small. This way you can allocate the right amount of resources to monitoring each metric. An easy way of achieving a short list of KPIs is to rank all the identified metrics from highest impact on business to lowest. Measuring impact is subjective and will vary from hospital to hospital.
Even with only a few divisions, there are hundreds of hospital KPIs to choose from. Familiarize yourself with all the possible KPIs in this article, but only choose metrics that will have the most impact on your business. Take your time in this step. KPIs tell a story about your hospital. For the story to be complete, it must include a few critical elements. Find your hospital’s essential storyline and focus your resources on those, don’t get bogged down by unimportant details.
The third and final step in forming a KPI monitoring program is tracking the metrics. Remember that just choosing KPIs doesn’t guarantee a successful KPI program. If you want to tap into the full potential of any key performance indicators for hospitals, you must accurately and consistently measure them. Therefore, it’s important to understand the resources that go into a KPI program prior to rolling it out to different departments.
The following KPI elements have been collected to help you recognize the time and manpower required for an effective KPI program. They will also help you standardize your hospital KPI metrics:
- Baseline: All hospital KPIs must have a baseline. It doesn’t matter if you’re starting a KPI program from scratch or if you are just introducing a new metric. Choose a point in time and record the baseline for each of your hospital KPIs. These values are what future KPIs will be compared to.
- Analysis: The metrics should be properly analyzed, and all trends should be identified. The analysis should bring light to any correlations, and it should offer new insight. It is crucial to view the data without bias. Growth sprouts from an impartial understanding of the current state of the business.
- Action: All hospital KPIs must be acted on. If the KPIs you have chosen don’t inspire action, they are not the correct metrics. A KPI’s purpose is to identify opportunities for maximization and optimization.
- Review: A common feature of all KPI programs is regular reviews. You must bring visibility to the numbers and showcase how they are affecting your decisions. Include all essential staff in these reviews as it will solidify a sense of accountability in employees and highlights how their efforts are contributing to the success of the hospital.
An important note to remember is that if you don’t have good data, you won’t make good decision. It is difficult to analyze the KPIs and make decisions without accurate metrics. Remember that “garbage in, garbage out.” To take targeted actions, you must ensure the hospital data that you are basing your metrics on is up-to-date and high quality. Business Intelligence Software offers an all-encompassing solution that allows you to merge multiple databases and communicate with a variety of stakeholders.
This article has chosen the top 16 metrics for hospitals to consider. These KPIs are grouped into 5 divisions of finance, operations, quality of care, public health, and people metrics.
Financial Key Performance Indicators for Hospitals
A hospital’s main objective isn’t generating revenue. But without a healthy financial outlook, a hospital cannot stay in businesses and provide the services it was built for. Financial metrics are the backbone of every KPI program and must be included in every review. Without a strong financial monitoring system, a hospital cannot plan for the long term and risks having to make abrupt decisions at the expense of customer satisfaction.
- Average Treatment Costs: This hospital KPI highlights the average amount spent by the hospital per patient. It might be tempting to want to reduce this cost to increase the hospital’s profit, but it is worth re-iterating that a hospital’s main purpose isn’t to make a profit. Providing quality healthcare must remain the number one goal for any hospital. Patient satisfaction shouldn’t be sacrificed in favour of a larger profit margin.
Average treatment cost can be used in conjunction with maximum or range of treatment cost to bring light to patient cost patterns. For example, all patients with similar chronic conditions will have similar average treatment costs. A pattern like this will allow the hospital to plan for the care of such patients with much more preparedness. It will also help management spot spending anomalies faster. Average treatment cost could be broken down by age group, condition, patient history and risk factors to provide further insight.
- Insurance Claim Processing Time and Cost: These hospital KPIs show the amount of time and money spent by the hospital staff processing insurance claims instead of providing healthcare. Insurance claim processing time and cost provide insight on the compensation rate of the hospital and have a direct relationship with patient satisfaction. If insurance claims are processed faster and with a higher success rate, patients incur less cost and are therefore more likely to return to the hospital. A low processing time and cost signals an efficient internal structure and a streamlined workflow.
- Claim Denial Rate: This hospital metric provides a small window to the inner workings of the hospital and it is closely related to insurance claim processing time and cost KPIs. A low claim denial rate shows that the hospital is not buried in fruitless paperwork and is able to prioritize its patients. This KPI is expressed as a percentage.
Claim denial rate = number of denied claims / total number of submitted claims
- Total and Operating Margin: These hospital KPIs showcase the balance between expenses and revenue and therefore profitability of the healthcare provider. It is important not to confuse hospital total margin and operating margin KPIs. Total margin is the difference between total revenue and cost as a proportion of total revenue.
Total margin = (total revenue – total costs) / total revenue
Operating margin is the difference between total operating revenue and cost as a proportion of total operating revenue.
Operating margin = (total operating revenue – total operating cost) / total operating revenue
In a hospital’s operation, total revenue and cost include non-operating factors as well as operating elements. Non-operating income is revenue from donations, government grants or income from affiliate groups. And non-operating cost includes interest payments and investment losses. If these non-operating contributors are extracted from the hospital’s revenue and cost, only patient and healthcare related aspects remain.
If the total and operating margin ratios are positive, the hospital is profitable. If they are at zero, it’s at break-even, and if they are negative, the hospital is operating at a loss. These ratios are expressed as a percentage.
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Operations Key Performance Indicators for Hospitals
Operations metrics measure the efficiency of the day-to-day business. By monitoring operational KPIs, a hospital gains insight in its internal workflow, becomes aware of ineffective practices, and is able to optimize where needed.
- Patient Room/Bed Turnover: This hospital metric demonstrates how fast patients leave the hospital and are replaced by new patrons. This metric provides insight from two different perspectives:
- How effective the hospital’s quality of care is. Patient room turnover rate showcases the average duration of each patient’s stay. A low number should be investigated to ensure that the care provided to the patient was adequate and they didn’t leave while still sick. Similarly, a high number should be scrutinized to make sure the patient wasn’t neglected leading to a longer stay than necessary.
- How efficient and effective the room cleaning process is. Cleaning is a major part of patient room turnover rate. It is important to quickly clean and prepare the room for the next patient because it will allow the hospital to maximize its revenue. But, it’s equally vital to ensure a high cleaning standard is adhered to. The consequences of cross-contamination between patients could be dire. Therefore, hospitals should aim to have a balanced turnover rate that is fast but doesn’t sacrifice quality of service.
- Bed Occupancy Rate: This hospital KPI brings insight to the availability of beds. This metric is expressed as a percentage and is calculated using the following formula:
Bed occupancy rate = number of beds in use / total number of beds
Bed occupancy rate is often measured within a specific period or is categorized by different departments to highlight seasonality of diseases. A high occupancy rate should generally be avoided as it leads to staff fatigue. Additionally, a low occupancy rate should be investigated for its root cause. A desirable bed occupancy rate is one that allows for good utilization of hospital’s equipment and doesn’t put too much pressure on its staff.
- Use of Medical Equipment: This hospital metric highlights the utilization of equipment and consequently, the maintenance cost associated with it. It is important for hospitals that have been in service for a few years to keep track of their equipment. Medical advancement happens almost daily and inevitably, equipment becomes outdated or obsolete. Monitoring use of medical equipment will ensure that the hospital’s machines are up to standard and no equipment is sitting in a corner collecting dust. Most technologies could either be repurposed or decommissioned and sold. If the medical equipment utilization KPI is neglected, it will lead to high maintenance costs and wasted manpower.
Quality of Care Key Performance Indicators for Hospitals
No matter how advanced a hospital’s operation is or how immaculate its financial books appear, if patient satisfaction rates are low, it won’t succeed. Below are a few handpicked hospital KPI metrics that directly affect quality of care.
- Medication Errors: This hospital metric demonstrates the competence of the health professionals employed by the hospital. This KPI should be monitored meticulously to catch patterns early and allow the hospitals to identify and address root causes of the problem. Medication errors encompass a large spectrum of blunders that could affect a patient. A mistake could be made in diagnosis, while prescribing medicine, or even in providing dosage. Hospitals should aim to keep this metric as low as possible.
Medication errors KPI is expressed as a percentage and is calculated as follow:
Medication errors = (total number of wrong diagnoses + wrong medications + wrong dosage) / total number of patients
- Hospital Induced Infection Rate: This KPI is a measure of patient safety. Hospitals should try to reduce infection rates to promote a higher quality of stay for their patients and eliminate extra work and stress on their staff. Hospital induced infection rate is expressed as a percentage and is calculated by the following formula:
Hospital induced infection rate = number of patients who catch an infection during their hospital stay / total number of patients
- Patient Wait Time: This metric is one of the key performance indicators for hospitals that directly affects patient satisfaction. Much like the other hospital KPIs mentioned in this section, patient wait time is a hospital KPI that has a target of zero. The lower the wait time, the more likely a patron is to return to the hospital. To calculate patient wait time, measure the time it takes from when a patient registers with the front desk to the time they see a doctor.
Patient wait time could be calculated for individual departments including emergency room (ER) and urgent care. It could also be trended through time in quarterly, monthly, or even hourly blocks to provide insight on hospital’s busiest times. The hospital could use this information to make adjustment to staffing.
- Staff to Patient Ratio: This hospital metric shows the availability of healthcare staff. This KPI is calculated by dividing the number of available health professionals by the number of patients:
Staff to patient ratio = number of healthcare staff / number of patients
The purpose of monitoring this KPI isn’t to achieve a target. This hospital metric should be trended for its consistency and analyzed for its peaks and valleys. It will be helpful to correlate this KPI with other quality of care metrics to find patterns. For example, if there is a sudden decrease in staff to patient ratio from July to August, find out if there is also an increase in patient wait times or medication errors. The answer to these inquisitive questions will help you narrow down an optimal range of operation for your hospital.
Public Health Key Performance Indicators for Hospitals
Hospitals play a significant role in maintaining good public health for communities. Without hospitals, attempts to eradicate disease or control epidemics are challenging to execute.
- Number of Preterm Births: This hospital KPI counts the number of births occurring before 37 weeks. Preterm birth complications are directly associated with child mortality rates around the globe. As such, one of the signs of good public health in a community is having a low number of preterm births. Hospitals should strive to keep this number low. There are many reasons why a person might give birth early, but hospitals should treat the patients proactively and strive to eliminate known causes of preterm births. A hospital’s preparedness and technical readiness could help reduce this number.
- Childhood Immunization Rate: This hospital metric showcases the percentage of children that have received immunization. A high childhood immunization rate is indicative of good public health because vaccines help prevent illnesses that cause lifelong complications. Hospitals should aim to keep childhood immunization rates high.
People Key Performance Indicators for Hospitals
Similar to any other organization, a hospital needs its people to stay afloat. Without hiring the right people and implementing the right management system, patients will not receive the care they need, and hospital’s operations will be slow and inefficient.
- Staff in Training Ratio: This hospital KPI highlights the number of healthcare staff in training compared to the total number of employees. This metric is an indictor of hospital excellence and is expressed as a percentage:
Staff in training ratio = number of staff in training / total number of staff
This KPI shows the qualification of hospital’s staff. It also demonstrates that the hospital cares about their employees. By regularly training staff, the hospital ensures that the professional health workers are at the top of their game and that the patients receive the most outstanding care.
- Staff Retention Rate: This metric reveals the health of the hospital as a work environment and is directly related to employee satisfaction rate. This KPI is usually measured within a certain period and is expressed as a percentage:
Staff retention rate = number of employees who leave / total number of employees
Staff retention rate showcases the treatment of staff by the hospital and points to employees’ level of motivation. A high staff retention rate should be avoided as it is indicative of mismanagement within the hospital’s operating team.
- Professional Health Staff Ratio: This hospital KPI showcases the number of healthcare professionals in comparison to the total number of employees hired by the hospital.
This metric is calculated as follows:
Professional health staff ratio = number of health professionals in employment / total number of employees
A hospital employs not only nurses, doctors, and technicians, but also maintenance and administrative personnel. If professional health staff ratio is too high, then the hospital’s maintenance and operation will fall behind and quality of hospital stay for patients could diminish. If it’s too low, then the patrons might not receive the care they need. This ratio must be maintained at a level that ensures the hospital has enough health workers to meet the need of its patient without foregoing essential maintenance and administrative work. This metric is a unique people key performance indicator for hospitals.
As mentioned before, it is recommended to start your KPI program small and expand as your resources allow. If you are interested in learning more about healthcare KPIs, visit this article to read about the best healthcare KPIs and metric examples for 2021 reporting.
We understand that establishing and maintaining a KPI program complete with a dashboard is time consuming and resource intensive. It could be overwhelming for businesses to embark on this path. We acknowledge the nuances of a KPI program and that’s why we have created a versatile solution that will allow quick access and monitoring of metrics. insightsoftware’s business KPI dashboard is comprehensive, easy to use and tested by industry professionals. By investing in insightsoftware, you invest in the right tool to gain insight about your business and make better decisions.