01 Dec Measuring Performance in Healthcare. The Rise of New Key Performance Indicators
Measuring performance in healthcare. The rise of new Key Performance Indicators (KPIs)
Understanding the performance landscape in healthcare
Key Performance Indicators, or KPIs, have long been utilized as measurable landmarks to demonstrate whether a company is achieving its business and financial goals. They represent an integral part of any business plan and a highly effective approach to measure accurately the efficiency and success with which a company is achieving both its operational targets and overall growth strategy.
At the heart of the healthcare and life sciences sectors, KPIs act as clearly defined landmarks that help monitor effectively and optimize punctually healthcare processes to improve patient outcomes and bottom line. However, innovations in technology, increasing intensity in the marketplace, and higher “health” customer expectations are now forcing businesses and decision-makers to reevaluate how they use key performance indicators to manage patient experience and achieve successful go-to-market (GTM) strategies.
Effective key performance indicators encompass both complementary and highly accurate targets. Some focus on actions already taken, while other KPIs provide metrics for planning organizational development going forward. Tactical KPIs, for instance, relate to the means already used to quantify progress towards business goals or objectives, in contrast to strategic KPIs that are more concerned with moving an organization from where it currently stands to where it should be within a specific timeframe.
Financial KPIs are used to measure a company’s success and it’s intrinsic ability to generate revenues and profits. They represent an efficient way to assess the financial health of a company and to determine whether or not it is capable to meet its bottom line. The most significant financial key performance indicators will target cash flow and sales growth, revenue generation, sources of income, profitability over a set period of time, and working capital.
Non-financial key performance indicators, or operational KPIs, on the other hand, assess the business activities needed to achieve a company’s vision and strategic objectives. Operational key performance indicators can improve business efficiency, help understand business outcomes, and bring attention to any specific areas of the value chain that require immediate improvements.
Financial key performance indicators have metrics that focus on earnings, profit margins, average order value, and return on assets, in contrast to operational KPIs that focus more on customer satisfaction, with metrics measuring category ownership, market share, and new product adoption rate.
In healthcare, it is vital to have access to the right key performance indicators at the right time. They are critical in providing insights into a company’s management structure, team development, and the ability to quantify patient outcomes effectively. To develop a complete picture of healthcare business performance, it is thus necessary to strike a perfect balance between the various KPIs, both financial and operational. This strategy helps guarantee maximum efficiency and productivity going forward.
How data availability is impacting Healthcare KPIs
Healthcare business leaders are struggling to implement a workable balance between tactical and strategic KPIs, operational and financial KPIs, and KPIs that effectively capture the present while anticipating the future. This imbalance is a source of measurable dissatisfaction and concern in healthcare and the life sciences sectors, as data made available for KPI improvements is increasing at an alarming rate. Healthcare executives are now torn between adding more detailed KPIs or lasering in on a smaller, simplified set.
The consensus in healthcare is that key performance indicators are useful, if not vital, for targeting improvements and enhancing performance and profitability. Amongst decision-makers, there is a significant increase in the general acceptance of key performance indicators as a reliable tool for driving businesses towards favorable outcomes. However, amongst them, a small group of companies is now exhibiting sophisticated data-driven and innovative approaches to maximize the impact of their KPIs.
Truth be told, many companies do not utilize the full benefits of key performance indicators as a way to promote change and introduce improvements to their value chain. Healthcare managers are aware of the benefits of collecting, analyzing and/or reporting information to monitor and improve performance, yet they rarely use these measurements as a core foundation to their strategies and tactics. Key performance indicators in these circumstances can only be regarded as “key” in name only, with the prevalent attitude towards them being one of complaisance, not commitment. For key performance indicators to be useful and effective, they need to be utilized as a driving force. This realization can be of particular relevance to management and marketing executives and those who are accountable for growth-oriented objectives.
Traditional performance indicators are now being set aside to make way for a new generation of KPIs that can accurately and efficiently assess growth and customer experience. Rapid advances in technology and machine learning (ML) can vastly contribute to achieving this goal. A machine’s ability to improve their own performance based on previous results has the potential to drastically impact how organizations use key performance indicators to monitor productivity and drive growth effectively in the future.
Healthcare businesses are evolving, and so are the KPIs that measure their growth process
As businesses incorporate next-generation predictive algorithms into business process planning and design, they seem destined to inspire the rise of next-generation digital dashboards. Artificial Intelligence and predictive algorithms can provide innovative and disruptive performance “command controls” to empower visionary executives with unique analytical capabilities. The intrinsic benefits of these new AI-driven KPI models could help, for example, optimize staffing levels that fluctuate as needed, eliminate unnecessary downtime in periods of lower demand while also avoiding “bottle-neck” situations at peak time. These machine-driven improvements can ultimately streamline business flow and increase patient satisfaction in a way that is still unheard of nowadays.
Embracing key performance indicators and acting on the valuable metrics they provide can result in positive ROI for all stakeholders from increases in productivity, improvements to the bottom line and streamlining rigid working environments. Using smart KPIs to lead, as well as manage performance empowers enterprises with the consistency of quality in the delivery of patient care and will become an integral part of the process to provide new patient-centric services that can be successfully monetized at scale.
In order to tackle the pattern of negative productivity, which has plagued the healthcare industry over the last two decades, we must adopt new key performance indicators. Beyond the more obvious negative impacts on patient care, the economic implications for both the industry and the consumers are significantly broader. In the U.S. alone, healthcare costs are increasing three times faster than the rate of inflation. In these circumstances, healthcare-focused KPIs need to become predictive and prescriptive indicators meant to drive change, rather than simply offer a sterile rearview-mirror.
Hospitals and data-driven companies that reconfigure their KPIs to meet the future requirements of the healthcare sector will enjoy unique competitive advantages and benefits from distinctive strategic benchmarking opportunities. Having the ability, through smarter key performance indicators, to accurately analyze the “benchmark” for a particular process and compare performance to the industry standards can highlight areas of weakness and indicate what preemptive actions are required to proactively meet set benchmarks.
Productivity can be a prominent factor in healthcare as it is in any other industry, but productivity alone as a KPI, however, cannot be the single driving force for growth. Equal weight must also be given to the quality of the products and services being provided. This point is particularly relevant for the healthcare sector where a duty of care and patient-centered services remain the primary aim.
When quality inadvertently suffers as a result of an over-emphasis on productivity, the real-time consequences usually lead to paradoxical decreases in productivity and profit margins. The unique challenge of the healthcare sector is therefore to achieve an optimum balance between productivity and quality throughout its industry. By tracking key performance indicators correctly through predictive models and actioning them through a data-driven approach, an integrated view of the customer and industry processes can be achieved successfully. This strategy can have a positive impact on patient care, operational efficiency and lead to significant improvements in patient outcomes.
Key performance indicators are tools aimed to bring transparency and ease of analysis to company performance. Smart KPIs designed to incorporate both the financial aspects of a business and the human element at its core, will offer an accurate and balanced strategy to model proactive growth and performance initiatives. Using “intelligent” KPIs to measure effectiveness in the healthcare sector can increase quality, stimulate productivity, and boost profits across the board.
Incorporating AI-driven KPIs into healthcare management models will soon become an essential consideration if businesses seek to improve as a whole and stay competitive in an ever-growing market that requires personalization at scale.