Hospital department efficiency: assessing productive, support and administrative areas
Comparing the ICU with the laundry by the same criterion makes no sense. Each group of departments needs its own yardstick.
Assessing department efficiency in a hospital requires different yardsticks for different departments. A productive department, which generates revenue, is assessed by the result it delivers. A support or administrative department, which does not generate revenue, is assessed by the cost and productivity of the service it provides. Mixing the yardsticks leads to wrong conclusions and cuts in the wrong place.
The three groups
| Group | Examples | Main question |
|---|---|---|
| Productive | Wards, ICU, surgical center, emergency, imaging, laboratory | How much revenue, margin and result does the department generate for what it costs? |
| Support | Nutrition, laundry, housekeeping, pharmacy, sterilization, maintenance | How much does each unit of service cost and how is it evolving? |
| Administrative | Billing, finance, HR, IT, purchasing | How much does it cost relative to hospital revenue and the volume it processes? |
Criteria for productive departments
- Department revenue and its variance against last year.
- Contribution margin: revenue minus the department's variable costs.
- Direct result: margin minus the department's own fixed costs.
- Cost per unit of output (per patient-day, per surgery, per test).
- Variance against budget.
Criteria for support and administrative departments
- Total cost and its variance against budget.
- Cost per unit of service: per meal, per kilo of linen, per m² cleaned, per account billed.
- Share of hospital revenue, over time.
- Productivity: volume processed per person or per hour.
The traffic light
A practical presentation is to give each criterion a target and a traffic light (green, amber, red), and an efficiency score per department for the period. Departments with the most criteria in red go on the agenda. The caveat is not to turn the traffic light into a punitive ranking: the goal is to find where to act.
From assessment to action
- Controllership presents the departments with the worst assessment for the period and the trend.
- Each department manager explains the causes, separating volume, price and efficiency. See budget vs. actual.
- The board defines actions and targets for the coming months.
- Follow-up is monthly, on the same dashboard.
How BI helps
BI calculates the criteria automatically from accounting, cost and volume data and keeps the history. In Clic Health, the Productive Efficiency and Support / Admin Efficiency dashboards assess both groups, alongside consumption by department and budget variance. See costs by department and hospital controllership.
Related questions
Can a support department have a revenue target?
Usually not, because it does not bill. But it can have targets for cost per unit of service and for the quality of service it provides to productive departments.
How do I compare departments of different sizes?
By cost per unit of output and by percentages (margin on revenue, cost on revenue), not by absolute values.
How often should department efficiency be assessed?
Monthly, with the trend over the last 12 months. Single-month assessments are heavily influenced by one-off events.
Written by the team behind Clic Health: accountants, controllers and developers with more than 20 years of work in hospital management.