Top Healthcare Financial Metrics and KPIs to Track
The healthcare industry is constantly changing and evolving, which means that the financial landscape is also in a state of flux. To stay ahead of the curve, it’s important to keep track of the latest healthcare financial metrics and KPIs. In this article, we’ll discuss some of the most important healthcare financial metrics and KPIs to track.
Before diving into all the financials, let’s have a look at the overall healthcare sector in recent years.
Healthcare Sector Overview
The global healthcare sector is expected to reach $10 trillion by 2022. The sector has been growing at a compound annual growth rate (CAGR) of around five percent. The United States is the largest healthcare sector in the world, accounting for nearly one-third of the global market.
Now that we have a general understanding of how big the healthcare sector is, let’s take a closer look at some of the key healthcare financial metrics and KPIs.
We have divided these metrics into the following sections:
- Operational Healthcare KPIs
- Healthcare Financial Metrics
- Internal Processes Monitoring Metrics
- Public Healthcare Metrics
Operational Healthcare KPIs
Operational KPIs are those that help you track and optimize the day-to-day operations of your healthcare organization. Here are some of the most important operational KPIs to track:
Number of Patients Seen Per Day
This KPI tracks the number of patients seen by a healthcare provider on a given day. This metric is important because it helps to gauge the efficiency of the organization’s operations. Hospital managers usually group patients based on treatment types and plans. This makes it easier to identify any potential bottlenecks in the system.
Average Hospital Stay
This KPI measures the average length of time a patient spends in the hospital. A shorter hospital stay indicates that the organization is providing effective care and that patients are satisfied with the level of service. You can also consider this Key Performance Indicator as a benchmark for the performance of different hospitals. Grouping patients by treatment type works here as well. For example, recovering cancer patients usually have longer hospital stays than those who come in for a routine check-up. When you group patients in this way, you can more easily identify potential areas for improvement.
Number of Cancelled or Missed Appointments
This KPI tracks the number of appointments that are canceled or missed. A high number of cancellations or no-shows can indicate a problem with the organization’s scheduling system. It can also be an indicator of poor customer service. To get a more accurate picture of this KPI, you should track it over time. You can also group the data by appointment type to see if there are any patterns.
Number of Readmissions
This KPI tracks the number of patients who come for readmission to the hospital within a certain period of time after their discharge. A high number of readmissions can be an indicator of poor-quality care. It can also be an indication that the discharge process needs monitoring.
Bed or Room Turnover
If you manage a larger healthcare facility with many rooms and beds, then this KPI is for you. It measures the number of times a bed or room is in use within a certain period of time. A high turnover rate can be an indicator of good operations. However, if the turnover rate is too high, it can be an indication that the facility is understaffed.
Medical Equipment Utilization
Keeping aside the healthcare institutions that utilize rental medical equipment, for most in-house medical equipment, it is essential to know the utilization rate. It helps in deciding when to replace the equipment and also if the number of machines can be reduced. A low utilization rate can indicate that the organization has too much equipment or that the staff is not properly trained on how to use it.
While the hospitals that rent medical equipment have to pay for every machine used, even they would want to keep the utilization rate high to get their money’s worth.
Average Patient Wait Time
If you have ever visited a hospital you already know what we are talking about. A lot of hospitals in the US have much longer wait times than in other countries. The average patient wait time is the metric that helps track the amount of time a patient spends waiting to see a healthcare provider. A high wait time can be an indicator of poor operations. It can also be an indication that the hospital is not meeting the demand of its patients.
These were the operational healthcare KPIs. Now, we will move on to the healthcare financial metrics (the most important ones).
Healthcare Financial Metrics
When it comes to the financial analysis of any healthcare institution, these are the top healthcare financial metrics to focus.
Now there is a difference between financial planning and financial analysis. And that is of course in the scope. When you want to find out how your hospital is performing financially, you will perform a financial analysis. We have observed that a lot of hospitals hire full-time CFOs while some go for special-purpose CFOs. In any case, they must know about all these specific healthcare financial metrics.
The reason for that is there are many generic financial analysis metrics. And most of them won’t give you an accurate picture of your hospital’s financial performance. For example, if we just talk about revenue in general, it won’t ring any bell for a hospital. While if we talk about the total patient revenue, it will give you a much better idea.
How Oak Business Consultant’s Experts Help You with Financial Analysis
If you already have had bad experiences hiring CFOs for your hospital, you might need professional financial consultancy. What this means is you need someone who knows the financial landscape like the back of their hand.
You need someone who will give you an unbiased and independent perspective of your hospital’s financial performance. And that is where our experts at Oak Business Consultants come in.
We are a team of highly experienced financial analysts who have helped numerous businesses with their financial analysis. We also know the specific healthcare financial metrics. This is why we are the right people to help you out with your hospital’s financial performance analysis.
Patient Drug Cost Per Stay
Often, hospital managers overlook this modern healthcare metric. Drugs with a high price tag are part of the standard of care. In the absence of this awareness, your staff may administer something the patient cannot afford or something their insurance doesn’t cover. If the hospital is unable to collect a payment, it may experience a higher write-down than expected. This is why it is important to know the patient drug cost per stay.
One way to keep track of this metric is to develop a policy that requires the staff to review a patient’s insurance coverage before administering any drugs. This will help ensure that the hospital only provides patients with drugs they can afford and that their insurance will cover.
Another way to keep track of this metric is to have a system in place that tracks the cost of all drugs administered to patients. This information can then be used to develop a budget for each patient’s stay.
Here is how you can calculate it:
Patient Drug Cost Per Stay = Total Patient Drug Cost / Total Stay Time in a Day
By tracking the patient drug cost per stay, hospital managers can make sure that their patients are getting the care they need without incurring too much debt.
Average Treatment Charge
This metric shows how much an average hospital charges for treatment. This indicator is the best way to judge the effectiveness and efficiency of your facility’s treatments. You can categorize this metric by treatment type or even by category. If you want to reduce hospital costs, average treatment charges are a great measure to track.
Comparing your hospital’s average treatment charges to other facilities can help you benchmark your performance. If you find that your charges are significantly higher than the average, it may be time to reevaluate your pricing strategy.
And here is how you can calculate the average treatment charge:
Average Treatment Charge = Total Treatment Charges / Total Number of Patients
By tracking this metric, hospital managers can make sure they are providing their patients with high-quality care at a reasonable price.
Insurance Claim Processing Time
This metric measures the amount of time it takes for an insurance company to process a claim. This is important because if claims are taking too long to process, it can lead to cash flow problems for the hospital.
One way to track this metric is to keep a log of all claims that patients submit. You can then use this information to calculate the average processing time for each insurance company.
If you find that claims are taking too long to process, you can reach out to the insurance companies and ask them to speed up the process.
By tracking this metric, hospital managers can make sure their patients’ claims are being processed in a timely manner.
Claims Denial Rate
This metric measures the percentage of claims that insurance companies deny. Occasionally, the insurance company will not pay. There may be many reasons why these insurance companies choose to deny the claims. For example, the patient may not have met their deductible, or the service may not be covered by their insurance.
The claims denial rate is important to track because it can help you identify problems with your billing process. If you find that a high percentage of your claims are being denied, it may be time to review your billing procedures.
We recommend institutions look for claims denial rates below 5%. If your denial rate is higher than this, it may be time to hire a professional financial analyst.
Average Cost per Discharge
We have seen that many healthcare facilities ignore this financial metric. Do you track the average cost per patient discharged in your care facility? Using this healthcare financial metric, hospitals can learn which areas of care overspend.
Additionally, it reveals which services generate the most revenue. Hospitals can track this metric to understand long-term spending by care area. Once they know which areas cost the most, they can develop strategies to reduce spending.
This metric is essential for any hospital that wants to be financially responsible and understand where its money is going. Without this information, it is difficult to make informed decisions about where to cut costs and how to increase revenue.
Operating Cash Flow
Operating cash flow is the net amount of cash that a hospital generates from its operating activities. This metric is important because it shows how much cash your hospital has available to pay for its day-to-day expenses. For example, operating cash flow can be used to pay for salaries, rent, and utilities.
This metric is important to track because it can help you identify financial problems before they become too severe. If your hospital’s operating cash flow is negative, it may be time to take out a loan or sell some assets.
Operating cash flow is a good metric to use when evaluating the financial health of your hospital.
Here is how you can calculate your hospital’s operating cash flow:
Operating Cash Flow = EBIT + Depreciation – Taxes – Change in Working Capital
Many medical facilities receive payment directly from the patient, their insurance company, or through government contracts. A care facility’s managers use this performance metric to measure the efficiency with which their receivables (money) are collected.
This metric is calculated by dividing the total receivables by the number of days in a period. For example, if your hospital has $100,000 in receivables and it takes 30 days to collect a payment, your AR turnover would be $100,000/30 = $3333.
You can use this information to set goals for your hospital’s accounts receivable department. For example, you may want to increase the AR turnover to $5000 per day. By tracking this metric, you can make sure your hospital is collecting payments in a timely manner.
AR Turnover = Net Credit Sales / Average AR
Net Profit Margin
For a hospital or any other healthcare facility, the net proﬁt margin is the percentage of total revenue that remains after paying its all expenses. This metric is important to track because it shows how much proﬁt your hospital is making.
You can calculate your hospital’s net proﬁt margin by subtracting its total expenses from its total revenue. Then, divide the result by the total revenue.
For example, if your hospital has $100,000 in revenue and $80,000 in expenses, its net proﬁt margin would be $100,000 – $80,000 / $100,000 = 0.20 or 20%.
This metric is a good way to measure the financial health of your hospital. If your hospital’s net proﬁt margin is low, it may be time to cut costs or increase revenue.
You can use this metric to compare your hospital’s proﬁtability to other hospitals. For example, if your hospital has a net proﬁt margin of 20% and the average hospital has a net proﬁt margin of 15%, you are doing better than most hospitals.
Healthcare Facility KPIs for Monitoring Internal Processes
In addition to the healthcare financial metrics we’ve discussed, there are a few other important KPIs that healthcare facilities use to monitor their internal processes. Staff and internal processes are the foundation of healthcare’s internal KPIs. An organization’s success relies heavily on staff management. This is due to the fact that the KPIs revolve around safety and training.
The more prepared and equipped staff are, the better they can manage patients. Here are a few examples of KPIs that help healthcare facilities monitor their internal processes:
Patient Safety Index
The patient safety index is a measure of how often hospital staff make errors when caring for patients. This metric is important to track because it can help you visualize the effectiveness of your staff. You can further break down these errors into categories, such as medication errors, falls, and infections.
Additionally, you can calculate the patient safety index by dividing the number of adverse events by the number of patients treated. For example, if your hospital had 100 adverse events and treated 1000 patients, your patient safety index would be 100/1000 = 0.01
This metric is a good way to compare the safety of your hospital to other hospitals. If your patient safety index is lower than the average, you are doing better than most hospitals.
You can use this metric to set goals for your hospital. For example, you may want to reduce the number of adverse events by 50% over the next year.
Hospital-Acquired Infections (HAIs)
Hospital-acquired infections are infections that patients develop while they are in the hospital. These infections can be deadly and are often preventable.
There are many ways to measure HAIs, but one of the most common is the infection rate per 1000 patient days. This metric is important to track because it shows how often patients develop infections while they are in the hospital. Consider it a measure of the hospital’s cleanliness.
You can calculate the infection rate per 1000 patient days by dividing the number of infections by the number of patient days and multiplying the result by 1000. For example, if your hospital had 100 infections and 10000 patient-days, your infection rate would be 100/10000 = 0.01 x 1000 = 0.01
This metric is a good way to compare the cleanliness of your hospital to other hospitals. If your infection rate is lower than the average, you are doing better than most hospitals.
Training per Department
Training is an important part of healthcare. It ensures that staff are prepared to handle the various situations they may encounter. You can measure training per department by dividing the number of training hours per department by the number of employees in that department. For example, if your hospital’s ICU has 20 employees and each employee attends 40 hours of training per year, your training rate would be 20/40 = 0.50
This metric is a good way to compare the training of your hospital’s departments to other departments. If your training rate is higher than the average, you are doing better than most departments.
You can go the extra mile and create a reward system for departments that have a high training rate. This will encourage other departments to improve their training rates.
Patient Satisfaction Score
The patient satisfaction score is a measure of how satisfied patients are with the care they receive at your hospital. To measure this score, you can survey patients after they are discharged.
You can ask patients to rate their satisfaction on a scale of 0 to 100. You can then calculate the average patient satisfaction score by adding up all the scores and dividing by the number of patients surveyed. For example, if you surveyed 100 patients and their scores ranged from 60 to 100, your average patient satisfaction score would be 80.
This metric is important to track because it shows how well your hospital is meeting the needs of patients. If your patient satisfaction score is high, it means that patients are happy with the care they are receiving.
You can use this score to set goals for your hospital. For example, you may want to increase the average patient satisfaction score by 20 points over the next year.
These were just a few of the many healthcare internal processes KPIs you can track. By tracking these metrics, you can get a better understanding of how your hospital is performing. Within the healthcare industry, internal processes play a very important role since they can determine the life or death of a patient. However, many believe that public healthcare is far more important since it affects the whole population.
Public Healthcare Metrics
While internal processes are important, they should not be the only thing you focus on. You should also track public healthcare metrics and KPIs. These metrics will give you a better understanding of how your hospital is impacting the community.
There are many different public healthcare metrics and KPIs you can track, but here are a few of the most important ones:
Number of Patients Treated
The number of patients treated is a measure of how many people your hospital has helped. This metric is important because it shows how your hospital is making a difference in the community.
You can track the number of patients treated by department or by type of treatment. For example, you may want to know how many cancer patients were treated at your hospital last year.
You can also compare the number of patients treated to the number of staff members. This will give you a good idea of how your hospital is using its resources.
Childhood Immunization Rate
The childhood immunization rate is a measure of how many children in the community are vaccinated. This metric is important because it shows how well your hospital is protecting the community from disease.
You can track the childhood immunization rate by department or by type of vaccine. For example, you may want to know how many children were vaccinated against influenza at your hospital last year.
You can also compare the childhood immunization rate to the national average. This will give you a good idea of how your hospital is doing compared to other hospitals.
Maternal Mortality Rate
The maternal mortality rate is a measure of how many women die during pregnancy or childbirth. This metric is important because it shows how well your hospital is protecting expectant mothers.
You can track the maternal mortality rate by department or by type of delivery. For example, you may want to know how many women died during childbirth at your hospital last year.
You can also compare the maternal mortality rate to the national average. This will give you a good idea of how your hospital is doing compared to other hospitals.
By tracking these public healthcare metrics, you can get a better understanding of how your hospital is impacting the community. These metrics are important because they show how well your hospital is protecting the community from disease and improving the health of mothers and children.
We hope this article was helpful in giving you an insight into the world of healthcare finance. These are some of the most important healthcare financial metrics and KPIs to focus on if you want to have a clear idea of how your hospital is performing. And if you need any help with the financial analysis, our experts at Oak Business Consultants will be more than happy to help you out.