Key Operating Indicators
| West Central Hospital--Key Operating Indicators | ||||||
| Category | Measure | FY 2007 | FY 2008 | FY 2009 | Hospital's CCG Top Quartile for FY09 | Current Ranking within own CCG |
| Quality Outcomes | Inpatient Mortality | 2.2 | 2.3 | 2.2 | 1.8 | b |
| Number of hospital-acquired Pressure Ulcers per 1,000 Inpatient Discharges | 0.4 | 0.5 | 0.7 | 0.3 | b | |
| Central Line-associated Blood Stream Infections per 1,000 Catheter Days in Adult ICU Patients | 1.6 | 2.3 | 1.5 | 1.3 | b | |
| Inpatient Acute Care Falls per 1,000 Patient Days | 2.67 | 2.81 | 2.8 | 2.3 | b | |
| Percent of Core Measure Indicators Achieving 90% or Higher | 93 | 95 | 90 | 98 | b | |
| % of patients transferred to hospital during a Home Care episode | 23% | 23% | 28% | 21% | b | |
| Patient Satisfaction | Overall Rating of the Hospital | 63.0% | 59.0% | 60.0% | 60.0% | b |
| Likelihood to Recommend the Hospital | 67.0% | 71.0% | 75.0% | 64.0% | b | |
| Communication with Nurses | 75.0% | 72.0% | 71.0% | 71.0% | b | |
| Communication with Doctors | 80.0% | 78.0% | 79.0% | 78.0% | b | |
| Liquidity | Current Ratio | 1.05 | 0.96 | 0.81 | 1.44 | 2% |
| Net Days in Patient Accounts Receivable | 39.72 | 44.94 | 36.85 | 41.98 | 5% | |
| Gross Days in Patient Accounts Receivable | 45.11 | 48.4 | 40.81 | 42.46 | 22% | |
| Profitability | Operating Margin Percent | 2.88 | 5.14 | 4.28 | 1.19 | 59% |
| Return On Total Assets % | 8.58 | 12.76 | 8.4 | 0.24 | 80% | |
| Net Profit (Loss) per Adjusted Discharge | 262.4 | 463.45 | 395.28 | -7.89 | 69% | |
| Capacity, Utilization, and Other Statistical Data | CMI Weighted Adjusted Discharges | 47,377 | 52,917 | 53,614 | 32,307 | b |
| CMI Weighted Adjusted Patient Days | 179,056 | 191,762 | 190,225 | 147,951 | 75% | |
| Average Length of Stay - Total | 3.78 | 3.62 | 3.55 | 4.30 | b | |
| Hospital CMI Adjusted Total Length Of Stay | 4.33 | 4.27 | 4.18 | 5.5 | 0% | |
| Hospital CMI | 1.15 | 1.18 | 1.18 | 1.26 | 14% | |
| Worked Hours | Total Worked Hours per CMI Weighted Adjusted Patient Day | 25.2 | 23.9 | 24.1 | 17.4 | 91% |
| Total Worked Hours per CMI Weighted Adjusted Discharge | 95.2 | 86.5 | 85.4 | 82.8 | 38% | |
| Expenses per Adjusted Discharge Ratios | Total Expense, Area Wage Index Adjusted, per CMI Weighted Adjusted Discharge | $7,135 | $6,698 | $6,954 | $6,578 | 33% |
| Total Labor Expense, Area Wage Index Adjusted, per CMI Weighted Adjusted Discharge | $3,489 | $3,255 | $3,322 | $3,021 | 48% | |
| Total Non-Labor Expense per CMI Weighted Adjusted Discharge | $3,646 | $3,443 | $3,632 | $3,572 | 27% | |
| Total Supply Expense per CMI Weighted Adjusted Discharge | $1,399 | $1,283 | $1,363 | $1,146 | 53% | |
| Expenses per Adjusted Patient Day Ratios | Total Expense, Area Wage Index Adjusted, per CMI Weighted Adjusted Patient Day | $1,888 | $1,848 | $1,960 | $1,445 | 84% |
| Total Labor Expense, AWI Adjusted, per CMI Weighted Adjusted Patient day | $923 | $898 | $936 | $651 | 97% | |
| Total Non-Labor Expense per CMI Weighted Adjusted Patient Day | $965 | $950 | $1,024 | $775 | 69% | |
| Total Supply Expense per CMI Weighted Adjusted Patient Day | $370 | $354 | $384 | $254 | 94% | |
| Expenses as % of Total Operating Expenses | Total Labor Expense as % of Total Operating Expense | 52.6% | 52.6% | 51.9% | 45.1% | 68% |
| Total Non Labor Expense as % of Total Operating Expense | 47.4% | 47.4% | 48.1% | 47.3% | 32% | |
| Total Supply Expense as % of Total Operating Expense | 18.2% | 17.7% | 18.1% | 14.7% | 64% | |
| Expenses as % of Total Operating Revenue | Total Labor Expense as % of Net Operating Revenue | 51.1% | 49.9% | 49.7% | 43.1% | 67% |
| Total Non Labor Expense as % of Net Operating Revenue | 46.0% | 44.9% | 46.1% | 45.4% | 30% | |
| Total Supply Expense as % of Net Operating Revenue | 17.7% | 16.7% | 17.3% | 14.4% | 57% | |
| b = Unable to compute Hospital's ranking to its Compare Group. | ||||||
| CCG = Custom Compare Group (Note: "Hospital's CCG Top Quartile" data is based on a peer group of hospitals with several similar organizational and operational characteristics to those listed above) |
Liquidity is the measure of the ability of an organization to meet short term and immediate obligations or assets that can be quickly turned into this (Business Dictionary, 2016). The numerator and denominator in a liquid ratio consist of assets in the numerator and liabilities in the denominator. In the balanced scorecard for West Central Hospital, the first ratio they notate is the current ratio. This ratio is done to document the liquidity of current assets and liabilities with this done by dividing the current assets by the current liabilities. The second ratio in this section is net days in patient accounts receivable. This information provides the total money owed to the hospital by the patients minus the money owed that will likely never be paid. It shows how well the hospital is at collecting the money owed to them. The last information posted in the liquidity section is the gross days in patient accounts receivable. This information provides the total money owed to the hospital by the patients. The lower the number of days in both ratios; the quicker the account is paid.
The data in the balanced scorecard for the hospital is showing negative information concerning the liquidity. In FY 2007, the ratio was above 1 which means that the hospital would be able to pay their debts. In FY 2008 and 2009 the current ratio is below 1. This shows that the hospital had a difficult time paying their debts. The higher the current ratio the easier to pay debts. The other interesting information is that in the first quarter of FY 2009 the current ratio of their peer group was 1.44 showing that the average assets outweighed the debts, giving us the information that other hospitals were able to manage their liquidity in a positive way and that something needs to change so they can be equal to their peers. As far as the patient accounts receivable, both net and gross, they show similar information. In FY 2008, there was an increase in the number of days but in FY 2009 they were able to figure out how to fix the problem and had the lowest numbers for the data provided. The hospital is already using the best system to monitor liquidity by using balance sheets. This gives you all of the information required to monitor their assets and liabilities. Using the information provided from internal sources gives them the ability see where they need to improve, especially when it comes to receivables.
To improve the liquidity of the hospital they need to increase their assets and reduce their liabilities. This means they need to figure out how to bring in more revenue and reduce their debts. Reducing the days in accounts receivable will assist in this process. The faster the debt is received the quicker it is removed from the liabilities and in turn increasing the current ratio. Another aspect that can improve their liquidity is reducing the amount of bad debt that they have calculated in net days in patient accounts receivable. Reducing this number will reduce the days that the accounts are sitting open. This will also assure that the hospital is receiving revenue from more patients.
The worked hours section of the scorecard provides information on how many hours the staff worked compared to their peer group. The first ratio is the total worked hours per case mix index (CMI) weighted adjusted patient day and reflects the number of hours worked by the nurses and the different types of patients that they treated and the skill level needed to take care of the patients. The ratio for this is calculated in steps. It first must get the total worked hours. Then you will divide that by the CMI weighted adjusted patient day, which is located in the statistical section. The second ratio is the total worked hours per CMI weight adjusted discharges. This provides us the time spent taking care of patients compared to the amount of patients that are discharged each day. This also takes the different type of patients that are seen and the staffing used to discharge them. This is found by taking the worked hours and dividing it by the CMI weighted adjusted discharges, which is also found in the statistical data section.
The worked hours section of the scorecard is showing that the staff in the hospital are working more hours than their peers. When it comes to patient days they are working approximately six hours more than their peers regardless of year reviewed. In FY 2008, the hospital was able to reduce their worked hours to patient days ratio by two hours but in FY 2009 in went back up one hour. The hospital is ranked 91% within their peer group for this area and it shows that they are near the bottom in this section. When it comes to the discharges the hospital had been reducing the number of hours to be competitive with their peers. In FY 2008, the staff were working about 13 more hours than their peers but by FY 2009 they were within three hours of their peers. This put them in the 38th percentile, which means they are doing well in this area. A database or data source for worked hours would be the staffing schedules and the patient discharge data. These two areas of information compiled into one Access database would make the compilation a lot easier. Microsoft Access allows the management of information with an easy to use interface. This would allow the information to be automatically pulled from other areas as needed to get the information needed.
The hospital has been making great strides in improving their worked hours ratios. They should continue the work they are already doing to become even with their peers. The case study completed by Six Sigma at the Providence Alaska Medical Center (PAMC) in 2003 took six sigma principles to improve staff scheduling and hours per patient day (HPPD). PAMC needed to figure out how to reduce their spending on staff and still meet the needs of their patients. The important take away from this article is when you are trying to improve an area is to take information from the existing hospital systems, the charge nurses, and an outside source to assure that all areas are accounted for. You must also get buy-in from the staff to make the necessary changes and work with them to make improvements that all can agree on.
Profitability is a vital metric in which health care organizations can utilize to gauge their success. While other metrics such as satisfaction and quality improvement may more critically validate the effectiveness of care, profitability remains a primary concern for many stakeholders. The balanced scorecard for West Central Hospital illustrates a few important facets of its profitability statistics. The Operating Margin Percent is a ratio of the net patient revenue and total operating expense (Langabeer & Helton, 2016). In this case, the numerator (net patient revenue) serves as the output and the denominator (total operating expense) becomes the input. In this fashion, a higher operating margin percent ratio signifies better profitability. West Central Hospital boasted operating margin percentages of 2.88 in 2007, 5.14 in 2008, and 4.28 in 2009. The collected data from these three years exemplifies an inconsistent organization in terms of increased profitability. After an improved year of operating margin in 2008, 2009 saw another decline. Despite this observed inconsistency, the hospital stacks up favorably in juxtaposition to its custom compare group. This group of peers mustered an operating margin percent of merely 1.19. Therefore, West Central Hospital is beating the competition in this important profitability margin. While operating margin percent is crucial to determining profitability, it is not the sole metric available. This metric considers concrete and immediate transactions but fails to appreciate long-term investments that could be capitalized in the future. The return on total assets figures attempts to rectify that shortcoming of operating margin. Operating margins can be improved in a couple different ways; increasing output (revenue) or decreasing input (expenses). Small steps taken throughout the financial year can have massive cumulative effects on the operating expense. For example, surgical departments have discovered they can significantly decrease surgery cancellations by fulfilling all preoperative tests prior to scheduling surgery (especially avoiding same day admissions for testing) (Silvay, Goldberg, Gutsche, & Augoustides, 2016). Steps such as these will improve the organization’s operating margins.
Another metric worth careful monitoring is patient satisfaction. Patient satisfaction provides an overarching view of the patient experience, expectations, results, and determines if return visits or references to family and friends will be made (Roberts, 2016). All of these indications directly affect the hospital’s success. The balanced scorecard of West Central Hospital highlights one particular metric worth further discussion; the likelihood to recommend the hospital. This particular statistic is found by dividing the number of satisfied patients (the numerator) by the total number of patients (denominator). In 2007, 67% of patients would purportedly recommend the facility. That percentage was bettered in 2008 to 71% and continued to increase in 2009 to 75%. Each of these numbers compare favorably to the custom compare group’s statistic of 64%. This data speaks volumes as to how patients interpret their experience and the quality of care they receive. While profitability numbers do not lie and efficiency can be calculated, the human aspect of health care can be lost without consideration of the patient’s perception of care. Hospitals could lose business despite excellent quality of care due to cold medical interactions and poor service. Other patient satisfaction questionnaires could be of use that focuses on specific aspects of their medical journey, but recommending the hospital to another gives an all-encompassing impression of the state of the hospital in general. This metric can be improved upon by adding services geared towards the humanitarian side of health care such as offering psychologic care in dealing with illness and improved patient flow such as additional scheduling options with the patients’ personal life in mind.
Profitability and patient satisfaction are not mutually exclusive and in fact can work synergistically. Over a 6 year period from 2007 to 2012, observations were collected from 3,767 hospitals diagraming patient satisfaction and comparing it to each hospital’s operating margin, net revenue, and net income (Richter, 2016). This study not only found a connection with satisfaction to profitability, but in fact found an even stronger association of poor satisfaction with revenue loss (Richter, 2016). These findings should justify some added input in the form of money spent towards improving patient satisfaction in return for higher output by way of repeated visits and newly referred visits.
References:
Langabeer II, J. R., & Helton, J. (2016). Healthcare Operations Management: A Systems
Perspective. Burlington, MA: Jones & Bartlett Learning.
Ozcan, Y. A. (2012). Quantitative Methods Health Care Management (Second Edition). San
Francisco: Jossey-Bass.
Richter, JP. (2016). Patient experience and hospital profitability: Is there a link? Health Care
Management Review, 4 (5).
Roberts, LW. (2016). Five ways to improve patient satisfaction scores. Medical Economics, 93
(5), 52.
Silvay, G., Goldberg, A., Gutsche, JT., & Augoustides, JG. (2016). Same day admission for
elective cardiac surgery: how to improve outcome with satisfaction and decrease
expenses. Journal of Anesthesia, 30 (3), 444-8.
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