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Performance Monitoring in Healthcare

Current Trends Research Study
Conducted by Michael L. Duke, Principal and CEO, The Crito Group

Performance management for healthcare organizations has been a priority for some time; however, the past technology fell short in functionality, cost of ownership, data integration and success of implementation. The steps necessary for improving performance management in the healthcare industry require the following: establishing a baseline, formulating new or improved
processes, implementing these processes, studying the data that result as an outcome of these new processes and then formulating additional processes that build on the results of the initial changed processes.

This report will explore the state of decision-making in healthcare organizations and the uses of performance management systems and processes. It will compare general usage by all industries to specific use in healthcare. This report follows the basic outline as described below:

    1. Industry challenges
    2. Key strategies to address the challenges
    3. Key findings from the research efforts
    4. The Crito Group’s conclusions

This research study illustrates that performance management in healthcare is fairly prevalent, but that most respondents feel the need for better tools and functionality.

This study pulls from three sources of research:

    1. The Crito Group (TCG) Performance Monitoring Survey
    2. “Business Intelligence for Operational Performance” by Ventana Research1 — general practice management research not specific to any industry
    3. “Strategies for Improving the Revenue Cycle” by the Healthcare Financial Management Association (HFMA) 2

TCG’s research bridges the reports from Ventana and HFMA in order to understand performance management for healthcare based on the needs of the industry.

Industry Challenges
Today’s healthcare environment presents many challenges to healthcare providers, ranging from clinical competitiveness and market/patient demands to capital funding and eroding revenues. Strong financial and operational management in this dynamic environment is contingent upon making effective decisions in a timely manner. Like any business, healthcare organizations need critical information to make the right decisions; however, what is typically available is large amounts of data that is difficult to turn into actionable information to facilitate decision-making.


Although it is a daunting outlook, this is nothing new in the healthcare industry. Maintaining positive operating margins has been a high priority for years, and many organizations have taken several steps to make improvements. Unnecessary, and probably some necessary, costs were cut from budgets in dramatic fashion. Creative staffing models were developed. Outsourcing of non-core services (e.g., the cafeteria) became the norm. Next, the industry moved into a period of mergers and acquisitions with the intent to reduce overall system costs and regional operational and clinical redundancies. During this time, new management trends, such as process re-engineering, Total Quality Management and, most recently, Six Sigma, have been adopted in an attempt to reduce operating costs while attempting to maintain high standards of care.

“Hospital will depend heavily on cash from operations to
fund capital growth in the future. Eighty-four percent of hospital
CFOs surveyed said they thought it would be more difficult to
fund capital expenditures in the future.”
— HFMA Financing the Future Report, Number 4


While it is true that some of these initiatives produced the expected results, most improvements were marginal at best. This is not to debate the validity of the concepts, but to highlight that the lack of credible and actionable information could have been a contributing factor to the poor results. If more sophisticated information is available, then there is a higher probability that management can drive toward a desirable outcome.

“Sixty-three percent of hospital CFOs surveyed said they
expect to be more dependent on cash from operation to fulfill
capital needs. If payer reimbursement doesn’t keep up with
costs, however, this major source of capital could evaporate.”
— HFMA Financing the Future Report, Number 4

Several factors are continuing to put pressure on healthcare organizations’ ability to have profitable operating margins. Third-party payers are constantly attempting to reduce reimbursement. Staffing shortages in key areas are driving up operating costs. Aged plant and equipment are always in need of improvement. Regulatory changes and compliance remain a moving target and require considerable resources to manage. Competition always threatens to decrease patient volumes. Supporting these concerns, the HFMA Revenue Cycle Survey reported the top environmental issues affecting respondents’ organizations as unpaid care (e.g., write-offs, bad debt), policy and regulatory issues and delayed payment for services rendered.

In order to function effectively and thrive in this highly complex environment, healthcare organizations need to continue to operate as efficiently and effectively as possible. This will require better decision-making capabilities in a more timely manner so that executive and management personnel can take action as intelligently as possible.

Key Strategies
In order to meet the business challenges inherent in today’s complex healthcare environment, organizations are going to be required to use different techniques and adopt different overall performance management strategies than they have in the past. Successful organizations will take advantage of new business intelligence and performance management software tools so they can make better decisions in a more timely manner.

Unfortunately, simply assigning new tools to monitor the same Key Performance Indicators (KPIs) will not allow for the increased intelligence that must be inserted into the daily decision-making process. The information must be used to drive the procedures and staff to improved performance. Three key strategies for improved performance through monitoring are
discussed as follows.


Link Strategic Objectives to Operational Outcomes
In order to make more intelligent decisions, there must be a bridge between the strategic goals of the organization as a whole and/or the individual departments and their respective operations. If the day-to-day operations are not tightly aligned with the overall objectives, a large opportunity exists for failure or, at a minimum, the objectives will not be as successful as possible.

In order to link strategy to operational outcomes, a performance management system should be utilized that provides feedback on progress toward strategic objectives based on the actual operational performance of the organization. With this type of solution in place, executive and line management can better understand performance that misses the mark of the stated objectives and take appropriate action to improve performance.

Map Operational Outcomes to Performance Management Indicators
Once the strategic objectives are sufficiently linked to operational outcomes, a successful organization will map these operational outcomes to key performance indicators. This mapping should accurately reflect operational effectiveness as it relates to the stated objectives. As an operational process breaks down, the corresponding key performance indicator(s) will highlight the negative outcome before it becomes detrimental. This will allow management to better understand process workflows and their impact on performance.

Combine Performance Management Approach to Technological Solution
The process for monitoring performance should be mapped out. Technology solutions should be implemented that will support the understanding of operational outcomes and their impact on strategic objectives and on the underlying workflow process. This system should be completely automated so that there are no delays in monitoring capabilities due to aged data or questions about data integrity or accuracy.

By combining strategic objectives, performance management techniques and the appropriate business intelligence technology, healthcare organizations can make more intelligent decisions and have a higher likelihood of controlling their environment, instead of the environment controlling the organization.

Key Findings
Fortunately, as better information is demanded by the industry, the convergence of two forces, healthcare leadership and business intelligence software, will drive the opportunities to make improvements in performance management. Healthcare leadership is quickly progressing toward a greater focus on advanced performance management, and Business Intelligence(BI) software companies are continually improving their capabilities with the appropriate set of features for the healthcare industry.

The following findings identify not only the current, general performance management landscape, but also the requirements necessary for healthcare organizations.

Relevant Non-Industry-Specific Findings 1
BI for operational performance is widespread
. Small-scale deployments (0-500 users) were prevalent; however, large-scale deployments (10,000+ users) were represented, too. Ventana Research believes that operational use of business intelligence, as opposed to strategic or tactical use, is a large and fast-growing market segment. It may, in fact, be the largest factor driving
adoption of BI technology. Ventana Research expects rapid growth of larger-scale deployments (1,000+ users) as organizations recognize value and gain trust in technology capability.

BI applications are used weekly or more frequently. The largest group (46%) of the respondents used their applications on a daily, hourly or more frequent basis. Only 28% used them on a weekly basis. Twice as many respondents cited hourly and daily use for applications perceived as successful. For many organizations, BI technology is an integral part of software infrastructure deployed for business operations. Ventana Research expects the penetration of BI into operations to accelerate as organizations recognize the value.

Businesses benefit from BI systems. Study results state that organizations intending to deploy business intelligence applications for operations can expect to gain not only improved data access, but also improved efficiency and customer service, and reduced costs. Organizations should review benefits evaluated in this study to characterize goals achieved by other similar projects.

BI applications are beneficial, regardless of scale. According to the respondents, operational use is not exclusively large scale (e.g., hundreds or thousands of users); in fact, approximately 35% to 50% of applications served 25 people or less. Operational deployment is as likely departmentally concentrated as enterprise encompassing. This means that even small-scale deployments of business intelligence for operations are of value to organizational operations. The important point here is that business intelligence technology can provide significant benefits to business operations on a daily basis.

Many modes of analyses are beneficial. Comparison of actual to plan/forecast/variance was the most frequently cited form of analysis (83%). KPIs’ ability to uncover threats/opportunities, root-cause analysis and a complete customer view were similarly cited as “important” or “very important.” This indicates that performance management and monitoring are leading reasons for deploying BI applications to operations.

Exportation and data drilling are important ad hoc capabilities. “Export to Excel” was the most frequently cited as an “important” or “very important” ad hoc capability (81%). However, several other ad hoc capabilities, including sort/filter, pivot/drill and drill-through, were cited with only slightly less frequency (79% to 70%). Excel should not be viewed as a demon to be exorcised, but as an asset to be embraced and managed. Organizations should analyze and categorize the problems and advantages of Excel. Through the categorization process, systems can be devised to support and manage Excel usage. An example would be delivering reports already in Excel format to ensure consistency of use and re-use.

Database integration is one of the most important technical capabilities. Respondents believed the ability to source data from multiple databases was more important than the other listed technical capabilities (69% to 79%). BI applications for operations will likely need to be embedded into daily operational processes used by line-of-business workers. To do so, integration with other operational applications will be required. Organizations should consider how easily technology they chose enables these kinds of integration.

Healthcare Industry-Specific Findings
Key performance monitoring is widespread in healthcare, but not fully automated.
Performance management processes and systems use is widespread, as 84.3% of survey respondents said that they have some capability in place to monitor KPIs. However, based on additional survey results, at least some portion of this monitoring is done manually, which severely affects an organization’s ability to truly understand operational performance except at the most elementary levels.

Few are completely satisfied with their current performance monitoring capabilities. Although performance monitoring is fairly pervasive throughout healthcare organizations, only a small percentage of respondents (25%) were completely satisfied with their current environment. This suggests that more sophisticated solutions are needed to meet the growing demands within the healthcare industry.

Performance monitoring is reported less frequently in healthcare. This was one of the most startling findings of the entire survey. When asked how often they use performance monitoring, most respondents indicated that they only look at organizational or departmental performance on a monthly basis (37.8%). This is indicative of an industry that has not typically had the capability to review performance indicators in a more timely manner. If KPIs are only reviewed monthly, identification of problems and corrective actions may be delayed.

Full automation of performance monitoring is rare in healthcare, and it has an impact effective monitoring. The results from this section of the survey give insight as to why most organizations are only reviewing KPIs on a monthly basis. In a troubling, but not surprising finding, when asked about the automation level of their performance monitoring system or process, few respondents indicated that their current environment was fully automated (11.9%). The majority responded that at least some manual intervention was required (72.6%), and the remaining respondents indicated that their current capability was completely manual in nature (15.5%).

This lack of automation is not surprising due to the proprietary nature of most healthcare information systems used by hospitals and physician practices and the inability of these current transaction-based systems to systematically supply business intelligence tools with accurate data transfers.

The troubling finding was derived from the question that asked participants if the lack of full automation delayed their ability to monitor performance and therefore affect their ability to make timely decisions. The majority of respondents indicated that the delay in receiving data compromised their ability to effectively monitor performance (65.8%). This is a major indicator that better tools and systems need to be found to support timely decisions within the healthcare industry.

Finance KPIs are most frequently monitored. When asked which functional areas they monitored, the majority of respondents used some form of KPIs for general finance (78.5%), with patient accounting/patient financial services (72.3%) being the second leading indicator. This is indicative of the limited availability of actionable data within most healthcare organizations. Financial data is the most accessible based on traditional management reports and is usually the easiest to monitor. The following table illustrates the response levels for each functional area.

Linking KPIs to strategic objectives is important. In an effort to understand what the survey respondents would most like to see changed regarding their current performance management solution, they were asked how important specific leading technology features were to their ability to monitor performance.

Low cost of ownership is one of the main influences on purchasing decisions. The two dominant responses to questions regarding system characteristics influencing purchasing decisions were “quick and easy setup” (90.2%) and “low cost of ownership” (84.1%). The findings by category are illustrated in the following table. These responses seem to indicate that although prevalent, performance management is not considered worthy of a high financial or implementation investment.

Healthcare users do not have an implementation preference. In an effort to understand preferences for different technology implementation models, the respondents were asked to indicate whether they preferred a secure remote hosting model or an on-site implementation. There appears to be no strong indication either way, with the results completely even. Fifty percent of respondents preferred a hosting model, while 50% preferred an internal implementation model.

Summary: Although overall performance management is pervasive, healthcare organizations seem to be behind other industries, particularly in the timeliness of usage and integration. Given the complexity of managing most healthcare facilities, monthly monitoring no longer seems to be sufficient for effective management and decision-making. While the healthcare industry appears to recognize the need for better tools and access to information, it does not seem to value the technology to perform sophisticated monitoring, as indicated by the low cost of a solution being a key characteristic of a decision to purchase. This mindset reduces the opportunity to improve operational efficiency and effectiveness.

The Crito Group’s Conclusions
The Crito Group believes that the increasing interest in performance monitoring and the proliferation of different software solutions will come together and give healthcare organizations the capability to make better decisions in a more timely manner. The challenge is that the variety of tools and options is undefined in the healthcare industry. This means that decision makers must diligently evaluate the potential performance management systems, their desired functionality and their ability to extract meaningful data from a diverse group of legacy systems that typically have closed and proprietary databases. If implemented appropriately with diligence to clear objectives and focus on details, then a performance management system will give any organization a stronger position in this complex business environment.

According to the HFMA Revenue Cycle Survey, respondents indicated that they are already monitoring several key areas, including:

The HFMA report also continues with the following statement: “From an industry perspective, we are noting more performance measurement by area. For example, more people are considering patient access and registration performance as factors in revenue cycle improvement.”

Although this shows a desire to monitor KPIs, The Crito Group believes this is only the beginning for performance management with the healthcare industry. As KPI monitoring becomes more common, management and staff are going to require increased analytic capability. This higher understanding of operational performance from a key indicator level will naturally evolve into two additional branches for successful and innovative organizations.

First, users of a performance management system will require the capability to drill down from an indicator, not only to the detail data level, but also to the business process level. Management will want to know where the breakdown has occurred at the workflow level, as opposed to just understanding that it has broken down. This will require the evolution of current performance management systems to incorporate and support business process mapping linked to KPIs. Some companies are able to support these requirements, but the software is not widespread throughout the healthcare industry.

Second, users of a performance management system will require connectivity of KPIs to organizational and departmental strategic initiatives. Once the ability to monitor performance is fully adopted by the organization, it will be a necessity to understand operational performance as it relates to goals and objectives. To do this, healthcare organizations will need to implement solutions that allow users to view performance from a summary level based on each strategic objective. This system will indicate if the objective is being met and, if not, the user will need the ability to drill down to the underlying data set in order to determine the source of the adverse outcome and provide enough insight to allow actionable decisions to be made.

Once these performance monitoring tools and techniques have progressed throughout the organization, decisions makers will have better information to make more informed and intelligent decisions.

References
1 The full research document can be found at www.businessintelligence.com/featurewp.asp?id=5
2 The full research document can be found at www.hfma.org/resource/400417.pdfThe Crito Group regularly publishes white papers on topics that are of interest to its clients.