Performance Management Program:Healthcare Industry and its challenges

We see a compelling need for all business entities from sole enterprises to large corporate bodies to have a tight hold on their performance in order to maximize profitability and achieve social goals. The traditional performance measures that we come across often in corporate annual reports like profit or loss, return on investment, current ratio are all measurements of quantitative aspects of a business entity. However, these measurements do not reflect the more intricate and important qualitative aspects of an organization such as overall quality of services provided, which is what mainly concern the customers who come to them for obtaining products and services. This is especially true for healthcare services. Reporting numerically on qualitative aspects of businesses is still not well established in practice, and there is a general dearth of universally accepted yardsticks of measurements for quantifying and expressing most types of qualitative factors, numerically. In this article, we will focus on the need for performance measurement, sample performance indicators and cultural challenges in establishing the system in an organization.


Why Performance Measurement?


‘When you can measure what you are speaking about and express it in numbers, you know something about it,’ – Lord William Thomson Kelvin (1824 – 1907; scientific thinker considered second only to Sir Isaac Newton; originator of many theories in physics, thermodynamics, electronics and mathematics.)  

The benefits of performance measurement are many and far-reaching. They may vary from one business to another; and also according to scales of operations. However, we can identify some concepts that broadly cover all types of businesses, bringing about vast benefits to healthcare business too, among others:


o    Performance measurement facilitates monitoring actual performance quantitatively and qualitatively while being focused on one’s goals. Thus, it effectively necessitates a need for devising programs of strategic planning for the achievement of set goals while bringing about further improvements. In an environment of effective and efficient performance measurement, management can allocate more resources with confidence for the achievement of goals.

o    Provides a reliable feedback on progress made towards the accomplishment of objectives enabling an organization to make prompt reviews and launch timely investigations with a view to making necessary adjustments for plugging-in the gaps and shortfalls.

o    Helps resolve mission critical activities and bring about improvements in management techniques for upgrading its products and services.

o    Improves communications and rapport all round including between management and employees, and among all stakeholders from suppliers to customers.


Quality of service implies provision of high quality services at the lowest possible price within the shortest possible time. Medical Services, whether run by individual doctors, groups of medical practitioners, or by entrepreneurs as hospitals, nursing homes and various types of medical institutions, need to be constantly improving their services for retaining and expanding their customer base. Performance measurement provides an effective tool for intelligent and rational decision-making. It entails maintaining appropriate data for identifying progress made while ensuring the processes are in statistical control, evaluating customer satisfaction quantitatively and qualitatively, and tracking against the set goals.


Performance Measurement Statistics:


Performance measurements should ideally be tied to strategic and tactical goals with special emphasis on envisaged quality improvement projects. Let’s focus on healthcare Industry.

A medical institution may give special attention to gathering accurate and meaningful data on the areas mentioned below with a view to analyze the data and thereby making rational decisions instead of acting on gut feeling and intuition alone. The data collected in respect of the items listed below would reveal the organization’s strengths besides constraints, bottlenecks, vulnerable and inefficient areas. It also provides a steady and reliable stream of information for pragmatic decision making in plugging in the weak points.


(i)           Optimizing Total Long Term Customer Satisfaction by Serving More Patients: Study the statistics of total number of patients served (differentiating between outpatient services and the in-patients) and revenue per patient derived from the different categories. Though maintaining certain types of patient services may cost you more per patient, in healthcare businesses, you cannot think of closing down the uneconomical lines and continuing with only the most economical lines, like you would do in any other commercial business activity such as a manufacturing firm or even the hospitality trade. In healthcare, there is an overwhelming social responsibility not to drop any types of patients, but try to keep them all and serve them to the best of your ability. This challenge should be taken as an opportunity to look at the resources and activities that need to be streamlined in order to cater to as many patients of different types while keeping your costs down. Some temporary sacrifices you have to make in the present context would be amply compensated for in later years as you continue to get rated high as a top quality, high integrity service organization in the healthcare business.  Look into Activity based Costing concepts – the cost per patient or department will shed light on the hidden costs.

(ii)         Keep detailed statistics of repeat visits by patients.

(iii)       The cost effectiveness of encouraging patients to book consultations and admissions through a website provided with all relevant facilities as against the traditional methods of calling over personally at the institution, or booking appointments over the phone necessitating the deployment of more customer care personnel.

(iv)       Bed or room occupancy ratio (where relevant).

(v)         Number of visiting/resident doctors, surgeons, consultants, nurses, attendants etc.

(vi)       Time lag in serving Outpatients and in patients and the trends. Cleveland Clinic uses the bar codes attached to the Physician gather this kind of data.

(vii)     Waiting time between initial appointment – say for a surgery or a regular check up, time taken for a nurse to attend to the patient and the actual date on which you are able to get admittance.


(viii)   Average period of hospitalization per patient (also related to occupancy ratio for In-Patients).

(ix)       Availability of latest of modern facilities for all patients including reliable high tech electronic equipment for routine use as well as for use in operating theatres.

(x)         Capacity utilization of high cost equipment like ECG machines, scanners, X-Ray machines and fully equipped operating theaters to explore the possibility of leasing out excess capacity to earn additional revenue.

(xi)       Allocate the direct and indirect expenses before generating the profitability reports.


Interpretation of data and possibilities of making erroneous conclusions:

The same data could be interpreted differently in different industries; and healthcare industry is no different. Passengers would shun flying with an airline having a bad record of fatal airline accidents per one million flight miles or passenger miles as the case may be. However, a hospital having a comparatively high number of patient deaths does not necessarily depict an overall poor quality of service of the hospital or apathy for human life on the part of its doctors and the other staff. On the contrary, it could portray a very high level of confidence the public has in the particular institution, which encourages them to admit even the most hopeless cases of terminally ill patients for further observation and treatment with the hope of securing an outside chance of a miraculous recovery.


Conversely, achieving a high room occupancy rate is one of the major objectives of star-class hotels. Should a medical institution also strive to make it one of their premier goals? From a  myopic view,  of short-term financial gain, the answer is obviously yes; but ‘Blue Ocean strategy’ educates us to prioritize customer needs and aspirations for long-term gains. What the patients aspire is to get healed as far and as quickly as possible and leave the hospital at the earliest. As such, a high bed or room occupancy rate, instead of something to be happy about in the long run, could be an indicator of possible reduction of patients for in-house treatment in time to come. The actual reasons for the high occupancy rate should be thoroughly investigated and if it’s found to be a clear sign of genuine growth and popularity of the institution, and not due to any reasons of inefficiency, the institution may plan to provide more space and facilities for taking in more patients for in-house treatment.


Cultural Challenges Affecting Performance Measurement Systems

In the forgoing paragraphs, we were discussing the collection of data for performance measurement and its management. It all pre-supposes the existence of a well-organized system of meaningful and unambiguous data collection along with good leadership and a high standard of working culture. However many well intended projects very often fail to materialize due to various reasons, of which the most common are –


  •   Too many issues at envisioning stage eclipsing the bigger picture of the absolute necessity to establishing some workable measurement system without undue delay.
  •   Management being often more focused on short-term benefits like operational and financial measures rather than the long-term benefits like those accruing from improvements to quality of products and services, enhancing customer satisfaction and employee contentment while cultivating and depicting a sense of public and social responsibility.
  •   Being pre-occupied with and more focused on past performances and consequently losing sight of the more critical picture of what lies ahead and what needs to be done for future growth. This is comparable to a driver who keeps his eyes more on the rear view mirror, at the cost of losing sight of what is in front.
  •  Being focused on improving a particular feature, completely oblivious to its possible harmful effects: For example, you could plan to “improve” your medical consultancy services by doubling up the daily appointments granted to patients. This is something that may be easily achieved in the short-term, while how the patients had been thereby exposed to high levels of insecurity and grave threats to their well-being by depriving them of adequate time for a proper and complete examination and consultation would surface only later with dwindling customers (patients) and irreversible damage to the integrity and good name of the organization. In some business management circles, this paradox is referred to as “Data Tunnel Vision”.
  •  Taking the “Easy Way Out” by setting goals too low: Administrators would try to get out of the problem the easy way by setting very easy-to-achieve targets when various problems crop up causing long delays in formulating and running a sound system of proper performance evaluation.
  •  Setting Unachievable Targets: Conversely, a very ambitious management team might set very high standards and impossible targets to pressurize and stretch the employees to super human efforts and unrealistic levels of endurance for achievement of goals. The ultimate result would be one of demoralization of the employees culminating in the entire program being scrapped as a total failure.
  •  Internal Resistance to Proposed New Changes: This is a natural trait among many human beings, and a reaction that can be expected very often.
  •  Negative Thinking: People who had seen many pervious highly ambitious projects failing to get off the ground believe the same fate would befall any new ones too. Further, there are also the inherently pessimistic employees who contribute with prophecies of doom.
  • Witch Hunting:  Some managers create projects with the ulterior motive of nabbing rebellious and “errant” workers who do not necessarily tow their line. Such purely punitive oriented projects are detrimental to the long-term interests of any organization.
  •  Some administrators indulging in internal politics for personal reasons close the doors on some sections of employees of the organization from participating in the improvement and development processes. Such highly selfish personal glory-seeking managers never make good team leaders or even worthwhile team members. They are a drag on any organization’s march to growth.
  • Lack of a proper understanding of the real purpose behind a performance measurement system:  It should be for the collection of data to facilitate rational decision making on complex issues rather than for the sake of merely collecting data. Knowing that you have high blood pressure is only a piece of factual knowledge; but what really matters is what steps you would take to correct that anomaly.
  • Continuing to make decisions based on intuition and past experiences despite the existence of very relevant and updated accurate data to act on.
  • Trying to compare teams and/or individuals with incomparable duties (instead of with stated goals) with a view to building up fierce internal competition could be counter productive and destroy the employee morale, commitment, team spirit and loyalty.

In conclusion, when establishing a program of performance measurement within any type of business entity for carrying it towards a sustainable and accelerated growth, it is the qualitative factors involved that should receive the attention and top priority along with its financial and operational aspects. Being aware of the possible pitfalls and roadblocks that stand in the way of setting up the correct processes and matrices for collection of appropriate data, their management and correct interpretation on the way to achieving total success would help minimize the possibilities of failure and forge ahead towards high customer satisfaction.


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