February 9, 2005
Every day, healthcare financial managers and their staff members are responsible for tracking hundreds of projects, initiatives, regulations, clinical outcomes, policies, and procedures. Although this tracking is without question valuable, having so much data can cause managers to lose focus and fail to keep their strategic thinking aligned with their organization's long-term goals. In HFMA's April 2004 issue of Executive Insights, Matt J. Nelson, principal with Financial Resource Group in Dallas, outlines the key principles of how to develop dashboards to make effective use of this wealth of performance information. The following excerpt can help you get started.
Developing Measures that Work
A few well-chosen measurements (or key performance indicators) displayed in the format of an executive dashboard can be a powerful tool to keep everyone focused on a healthcare organization's key issues and strategies. Measures are graphically displayed in an "at-a-glance" format that facilitates easy review and helps identify areas that are doing well and areas that need improvement. Indicators can include such items as financial viability; clinical outcomes; patient safety; quality of care; marketing and development; internal business procedures; and employee, patient, and physician satisfaction.
Measurement drives improvement by providing a means of accountability to all areas of the organization. Several key factors should be considered in developing measures that work:
- Measures must extend throughout the whole organization.
- Measures must tie into the overall strategic plan of the organization.
- There must be consensus on which measures to use and how to use them.
- Measures should be based on both internal and external factors.
- Measures should empower employees, not stifle them.
- Review of the measures should be systematic, both for management and the board of directors.
The measures should encompass each entity in a healthcare system, including acute care hospitals, psychiatric units, nursing homes, home health agencies, outpatient clinics and surgery centers, and specialty hospitals/units. If there are multiple governing boards, each board should have its own metrics to measure, and the overall system should have its unique measurements.
The measures also should be linked to the overall strategic plan for the organization. By linking the measures to the strategic planning process, you are establishing a culture of accountability, which will enable the organization to focus more on the planning process and increase the likelihood of a better outcome.
Defining Measures
Finding a common definition for each measurement that is valid throughout the organization can be a challenge. Leadership should build a consensus on consistent and standard measures, ensuring that all participants have a clear understanding about how the measurements would be used.
Many dashboards only include internal data, such as operating margin, days cash on hand, and patient satisfaction scores. But a healthcare organization also requires measures of its external environment, such as market trends, nursing and physician shortages in the community, and community health status.
Devising a Dashboard
The key to developing the dashboard is to keep it concise and easy to use. The report can be a combination of line and bar graphs, run charts, instrument gauges, and spider diagrams. A well-drawn dashboard would follow some basic guidelines:
- The organization's major critical success factors should be included. Comments should be used where necessary to assist the reader in understanding and interpreting the information.
- Measures should be compared to both targets and benchmarks.
- The focus should be on looking at and explaining variances from both targets and benchmarks.
- Trend analysis should be used when necessary so the reader can visually see long-term patterns and not just short-term results.
- Clear definitions should be published and the measures should accurately reflect the definitions.
- Trend lines should be forecast where appropriate using linear regression tools.
Dashboards are one tool that management can use to communicate strategy and results in a systematic way. With the presentation of critical information in an easy-to-use format, a healthcare organization can focus on the key critical success factors and their associated strategies to make sustainable, long-term improvements in operations. Dashboards can be used to hold both management and staff accountable in meeting and beating benchmarks and targets and to instill a culture of responsibility and accountability for results.
SOURCE:
"Dashboards: Guiding the Way to Improved Hospital Performance," April 2004 Executive Insights.
Additional Resources
- HFMA Executive Roundtable: Financial Indicators: How Do You Measure Success?
- Back to Basics: A Self-Help Approach to Achieving Financial Success
- Key Hospital Financial Statistics and Ratio Medians 2004 (Available to HFMA members only. Not a member? Join now!)
- Revenue Cycle Self-Assessment Tools with key performance indicators (Available to HFMA members only. Not a member? Join now!)
- hfm Toolbox: Receivables Asset Behavior Dashboard (Available to HFMA members only. Not a member? Join now!)
- hfm Toolbox: Key Revenue Cycle Metrics (Available to HFMA members only. Not a member? Join now!)
- Achieving Breakthrough Performance: Tools and Techniques to Improve Healthcare Cost and Performance, HFMA Spring Seminar (March 14-17, San Francisco)
- Turning Data into Useful Information: How to Effectively Collect, Analyze and Report Financial and Clinical Data to Enhance Decision-Making in Health Care, HFMA Spring Seminar (April 13-14, Alexandria, VA; May 18-19, Minneapolis)
- Six Sigma in Healthcare Finance: A Simulation Session, HFMA Spring Seminar (April 12, Alexandria, VA)
If you have questions or comments about HFMA Wants You to Know, contact editor Laura Noble.
HFMA Wants You to Know ISSN: 1540-0697. Volume IV, Issue 3. Copyright 2005, Healthcare Financial Management Association. All rights reserved.