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Determining Your KPI Meaning in Healthcare Settings

by Kent Smack on June 28, 2019

healthcare KPI

Your key performance indicators in healthcare take the organizational metrics you’ve identified as key to strategic objectives (e.g., readmission rates, wait time, patient satisfaction, ER costs, etc.), and track their progress over time towards goals you’ve set for each indicator.

Since you’ve already decided which metrics are “key” and begun charting their progress, the next step is to determine what they mean for your strategic goals.  There are a few considerations to keep at top-of-mind as you begin this assessment:

  • KPIs will mean different things to each healthcare organization (even from one mid-sized suburban hospital in the northeast to another), and they will need to change as your company, regulations, and the market change.  The two most significant influences on KPI selection/benchmarks will always be business model and stage of growth.  Naturally, small private practices and large public hospitals will draw entirely separate meanings from similar metrics.
  • To get clear meaning from KPIs, you can’t track too many.  It can be useful to limit the number to one KPI that’s important to the overall organization, and several more within each department.  It’s critical that all sub-KPIs align with the primary one. An easily digestible, streamlined dashboard on your KPI software is most likely to help you.  
  • Also, don’t forget that “supporting metrics” are separate from KPIs.  These are measurements that add useful context to show whether you’re effectively addressing a KPI, but are not KPIs themselves.  It’s easy to get tied up in hashing out the meanings of every metric you’ve tracked—don’t get lost in the details. Focus on the key performance indicators.

Risk Management and the Strategy Execution System

The IPA Test

Now review each KPI you’ve selected to see if it passes the “IPA” test. In order to have useful meaning, they must have these three traits:

  • Important (Is it central to your objective?  Does this KPI really matter?)
  • Potential Improvement (Is there a realistic room to grow?)
  • Authority (Have you got the power or means to make those improvements?)

If a KPI passes this test, it will have significance.  Sometimes, a healthcare KPI can be meaningful even if it’s missing one of these qualities, but that’s case-by-case.  For example, fatalities due to medical error might be zero for the quarter (hard to improve), but still undeniably essential to your dashboard.


It’s often said that strategic goals should be SMART (Specific, Measurable, Achievable, Realistic, Time-bound).  To help your KPIs to exceed this expectation—make them SMARTER.  By adding the steps “Evaluate” and “Reevaluate,” you will ensure that they stay meaningful and relevant as business changes.  

A hospital might surpass the targeted operating margin for this year, but you need to assess whether this was due to a goal that was not ambitious enough or traceable to some other influence (in the short or long term). Often, it is necessary to continuously track, evaluate, and reevaluate a KPI before you can truly determine its meaning.

For example, if you’re tracking “Average Length of Hospital Stay,” you may need to gather many measurements before you can separate the overall data into useful groupings (tonsil removal would skew the overall average low, whereas open heart surgery raises it significantly).  As you amass data, evaluate how to parcel it, and re-evaluate its progress trends, you will eventually get to a point where you can set achievable targets for improving your hospital KPI for stay durations (by procedure/reason).

Update Frequently

A KPI cannot be meaningful if you set it and forget it.  Expanding to 3 additional locations in more urban settings will inevitably affect the meaning prior benchmarks you’ve set.

Regularly update your KPIs to reflect changes in strategic direction and organizational shape.  Significant changes will require observations to see how they’ve affected baselines. Follow up by revising the relevant KPIs (or scrapping KPIs that are obsolete).

KPIs that are carefully vetted, given realistic baselines/targets, and evaluated or updated frequently will match their measurements to their intentions.  In other words, the numbers will meaningfully show progress or shortfalls concerning strategic objectives and organizational goals.

Risk Management and the Strategy Execution System

Topics: Healthcare KPI reporting KPI Development

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