The healthcare industry is unique in many ways, and one of the most important aspects of healthcare is the cost of care. Understanding how much it costs to provide care to patients is essential for healthcare organisations to remain financially sustainable while providing high-quality care to patients.
One key performance indicator (KPI) that healthcare companies use to measure cost is the average cost per discharge KPI. In this article, we will explore what it is, how it is calculated, and why it matters in healthcare. Whether you are a healthcare provider, administrator, or simply interested in learning more about healthcare metrics, this article will provide valuable insights into this important aspect of healthcare cost management.
"Clinical and financial performance are intertwined in healthcare. The Average cost per discharge KPI allows healthcare organisations to monitor and manage their costs effectively while providing high-quality patient care."
- Dr. Eric Topol, Cardiologist and Digital Medicine Researcher.
The average cost per discharge is a key performance indicator (KPI) used in healthcare to measure the average cost of providing care to each patient discharged from a healthcare facility, such as a hospital or clinic. This KPI considers all the costs associated with a patient's care, including direct costs such as medications, procedures, and room and board, as well as indirect costs such as administrative and overhead expenses.
To calculate the Average cost per discharge, divide the total costs for a specific period by the number of patients discharged during that same period. This KPI can help healthcare providers understand the cost of care for their patients and identify opportunities for cost reduction or process improvement.
By tracking over time, medical practices can monitor the effectiveness of cost-saving initiatives and identify trends that may require further investigation or action.
Overall, the average cost per discharge is an important KPI for healthcare organisations to monitor in order to ensure that they are providing high-quality care to patients in a cost-effective manner.
Tracking the average cost per discharge is important for healthcare organisations to ensure financial sustainability, maintain high-quality care, improve processes, and benchmark against industry standards.
Financial sustainability
Healthcare companies need to control their costs in order to remain financially sustainable. By tracking the average cost per discharge, the clinic can identify areas where costs can be reduced without compromising patient care.
Quality of care
The cost of care can have a direct impact on the quality of care that patients receive. By monitoring the average cost per discharge, healthcare organisations can ensure that they are providing high-quality care in a cost-effective manner.
Process improvement
Tracking the Average cost per discharge can help identify opportunities for process improvement. For example, if the cost of a particular procedure is consistently higher than expected, the medical practice can investigate ways to streamline the process and reduce costs.
When measuring the average cost per discharge, there are several limitations that should be considered:
To calculate the average cost per discharge KPI, follow these steps:
Determine the total cost of providing care, this includes all costs associated with providing care, such as labor, supplies, and equipment.
Then determine the number of discharges, which includes the total number of patients who are discharged from the hospital during a given period.
For example, if the total cost of care for a hospital during a given period is $10 million and the number of discharges during the same period is 2,500, the average cost per discharge would be calculated as:
$10,000,000 ÷ 2,500 = $4,000
Therefore, the average cost per discharge for this clinic during this period would be $4,000.
It's important to note that there may be variations in how the cost of care is calculated and what is included in the calculation, so it's essential to ensure that the calculation method is consistent across different periods or divisions.
The benchmark for the average cost per discharge KPI can vary depending on several factors, such as the size and type of the healthcare provider, patient demographics, and regional healthcare costs. Generally, it’s best aim to keep their average cost per discharge as low as possible without compromising the quality of care.
One way to establish a benchmark is to compare the average cost per discharge with historical data from previous periods. This can help identify trends and areas where costs have increased or decreased, allowing the practice to focus on areas where costs can be reduced.
It's essential to consider these common errors when measuring the average cost per discharge KPI to ensure accurate and reliable data that can be used to drive improvements in cost efficiency and patient care. Here are the most common errors to consider when measuring the average cost per discharge KPI:
By implementing these strategies, healthcare practices can improve their average cost per discharge KPI and achieve better cost efficiency while maintaining or improving the quality of care provided to patients.
Reduce length of stay
Shortening the length of stay can help reduce the costs associated with providing care. This can be achieved by improving patient flow, reducing readmissions, and implementing care coordination initiatives.
Increase efficiency
Increasing efficiency can help reduce costs while maintaining or improving the quality of care. This can be achieved by streamlining processes, reducing waste, and using technology to automate routine tasks.
Implement cost reduction initiatives
Implementing cost reduction initiatives can help reduce expenses and improve the organisation's financial performance. This can include reducing supply costs, optimising staffing levels, and negotiating better contracts with vendors.
Improve care coordination
Improving care coordination can help reduce costs by preventing unnecessary tests, treatments, and readmissions. This can be achieved by implementing care teams, using electronic health records, and improving communication between healthcare providers.
Focus on preventive care
Focusing on preventive care can help reduce the costs associated with treating chronic conditions and prevent costly hospitalisations. This can be achieved by promoting healthy lifestyles, providing education and resources to patients, and offering regular check-ups and screenings.
These KPIs can be used in combination with the average cost per discharge KPI to provide a more comprehensive view of cost efficiency and financial performance in healthcare organisations.
What does the average cost per discharge KPI mean?
The average cost per discharge KPI is the average cost incurred by a healthcare facility for each patient discharged. It is calculated by dividing the total cost of providing care by the number of patients discharged.
Why is the average cost per discharge KPI important?
The average cost per discharge KPI is important as it provides insights into the cost efficiency and financial performance of a healthcare organisation. By tracking this KPI, organisations can identify areas of improvement and implement strategies to reduce costs while maintaining or improving the quality of care.
What factors affect the average cost per discharge KPI?
The factors that affect the average cost per discharge KPI can include staffing levels, supply costs, length of stay, readmission rates, and the complexity of care provided. By identifying the factors that impact this KPI, healthcare organisations can implement strategies to reduce costs and improve financial performance.
What is a good benchmark for my average cost per discharge KPI?
The benchmark for average cost per discharge KPI can vary depending on the type of healthcare facility, the location, and the patient population served. However, a common benchmark is to compare the organisation's average cost per discharge KPI to the industry average or to similar organisations to identify areas for improvement.
How can healthcare organisations improve their average cost per discharge KPI?
Healthcare organisations can improve their average cost per discharge KPI by implementing strategies such as reducing length of stay, increasing efficiency, implementing cost reduction initiatives, improving care coordination, and focusing on preventive care. By reducing costs while maintaining or improving the quality of care, organisations can improve their financial performance and provide better value to patients.
