Most progressive healthcare organizations are applying KPIs (or a quantifiable measurement of performance over time for a specific purpose) to highlight aspects of their financial, employee, productivity, and customer performance, such as, average treatment cost, claim denial rate, bed occupancy rate, etc., to create a culture of success. It should be clear that without KPIs (key performance indicators) your healthcare organization is flying blind! Yes, we could also make the same statement about supply chain management in most hospitals, systems, and IDNs.
Without Key Performance Indicators (KPIs) You Are Flying Blind
This same KPI success methodology employed by your healthcare organization can be applied to supply chain management to avoid blind spots. For you see, with KPIs you are measuring success versus setting targets, objectives, or even comparing yourself to peer healthcare organizations for even greater success; success being defined as how many times your processes were defect free for a given time period. For example, one supply KPI could be how many vendor invoices had been returned from A/P for price or quantity verification or clarification (number of invoices processed/returned for verification or clarification). The goal would be to reduce the number of invoices that are returned to supply chain for verification or clarification by X percent. The circle is completed by continuously monitoring your KPIs to ensure that they are within acceptable limits in all of your supply chain operations.
Get the Most Out of Your KPIs
To get the most out of your KPI measurements, you need to have more than one metric (we call this triangulation) to ensure that the KPI you select is as reliable, consistent, and precise as possible for the intended purpose. For instance, we are working with a client’s laboratory manager to determine the appropriate KPI for their hospital blood utilization management. After a number of iterations, we decided jointly on patient days/blood cost as their hospital’s best blood utilization management KPI. Here are three metrics that we use to decide on this appropriate measurement:
1. Baseline: First off, we measured where the hospital was now to determine where they should be in the future. This calculated to be $9.31 per patient day year-over-year.
2. Historical: Using this same metric, we determined that their three-year average was $9.50 per adjusted patient day.
3. Peer: We determined that their peer cost was $11.57 per patient day.
With the above information, it was easy to determine that this client’s blood utilization KPI was within acceptable limits. Now, it was their supply chain’s job to monitor this KPI to ensure that it stays in control over the long term. And don’t forget to congratulate your users who have contributed to the success of your blood utilization program. It can work wonders on keeping your customers engaged in your KPI process.
Be Proactive with KPIs
If our client’s blood utilization KPI was not in control, they would need to dig deeper with activity-based blood utilization management reports to look for changes in their blood order patterns by doctor, offer lower cost alternatives, or change processes to lower cost and improve quality to meet or exceed their own historical or peer metrics. Just as important, you need to learn from their best practices for their cohort peer group. Since most hospitals belong to a system or IDN, this information shouldn’t be hard to obtain. This generally is the key to lowering your own costs by learning from your peers who have gone down this road before you. Lastly, continue to monitor, evaluate, and plan to get better in all aspects of your supply chain operations. It’s much simpler than being told to do so by your boss!
P.S. If you are interested in getting better than just good, let’s talk about our ValueKPI™ pilot programs (pharmacy, reference lab, blood, and supplies). Just email [email protected] for details.
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