HDG #010: OKRs, KPIs, metrics + measures: what’s the diff?

Read time: 5 minutes

Greetings, Gurus! If you’re a fan of this newsletter, chances are you deal regularly with measures, metrics, KPIs, and OKRs (or strategy) in your life. Maybe you’re responsible for choosing them. Maybe you’re responsible for calculating and reporting them. Or maybe you’re responsible for improving or managing them. No matter, this newsletter is for you—today we’re talking about the differences between them.

While this sounded like an easy topic at first, it turned out to be maddening—as most things in healthcare, depending on what/who we’re talking about, these terms can mean very different things.

From most granular to highest-level:

Measures

At its simplest, literally a measurement of something—typically in units like quantity, distances, durations, temperatures, or weight. Or as Klipfolio described it, “a fundamental or unit-specific term. A measure is a number that can be used in calculations, like sum, count, or average.”

Examples: Total spend in dollars. Number of admissions. Number of enrolled members. Number of denied claims. Miles per hour. Number of awesome subscribers to your awesome newsletter.

So on and so forth.

But wait…

Healthcare had to complicate this one by calling a lot of quality, payment, and performance indicators “measures,” e.g. CMS Quality Measures. They’re actually a combination of measures and metrics, and some could probably even argue CMS is regarding them like KPIs (in the sense of what CMS thinks is “key” to evaluating providers, anyway). Read on.

Metrics

A metric is derived from one or more measures, and is a quantifiable measurement used to track and assess the performance of a specific process.

The latter is the key differentiator here: metrics measure specific business processes.

So yes, a metric could probably technically be simply a measure if it describes a process. But more commonly (and effectively) a metric is a calculation that utilizes a few measures to put the numbers into meaningful context.

Examples:

• PMPM = total spend in dollars/number of months that members enrolled in a health plan were active

• Readmission rate = # of hospital readmissions / # of hospital initial admissions [over whichever period of interest] x 100

• Newsletter open rate = # of emails opened / # of emails sent to awesome newsletter subscribers x 100

For me, the context is the most important part because it tells me how something is doing, and tracking it over time tells me how that is improving/declining/changing. Consider the PMPM example above. If I just tracked the measure of total spend over time, I might see it go up or down, but that doesn’t tell me if that’s good or bad. It also doesn’t paint the full picture of performance because even though total spend may have increased, the number of enrolled members that a health plan is receiving a premium payment for may have also increased, which could offset the increase in spend. The solution? A metric that combines these 2 measures to tell us something informative: PMPM tells us how much, on average, was spent PER member PER month, normalizing for these factors and telling us if healthcare spend is truly on the rise or if it’s actually holding steady when adjusted for enrolled membership. From this, we can tell a story.

Key Performance Indicators (KPIs)

As the name suggests, KPIs are not just performance indicators, but they are KEY indicators of how you will know if your business/program/project is successful (or on track to be successful)—they represent a goal that you are working towards, and are generally comprised of a handful of metrics per goal.

That is a subtle difference: KPIs show you how well you’re performing towards your goals, as indicated by certain associated metrics. Not all metrics will be KPIs, but most all KPIs will be metrics. And they’ll be the really important ones that help you determine whether you are making progress (and if you aren’t, what actions to focus on). This article is a great resource for explaining KPIs further, with examples of good and bad KPIs.

Example

Goal: increase annual recurring revenue (sales) to $10M by end of year

Sales KPIs to support it: increase inbound leads by 50% by Q3; this tells you where to focus your action if your not on track to meet your sales goal—for instance, if inbound leads are lagging, you can increase your social presence or networking events to net more and move the metric.

You might have noticed that all of this assumes—or rather, is predicated on—your organization having a clear strategy based on data, thoughtful and measurable goals, and a corresponding action plan that outlines which actions translate into which metrics that can be monitored to influence success (a.k.a. which levers you can pull). More on HOW to define good and strategic KPIs here.

And no, I’m not selling Klipfolio—they eat, sleep, dream about performance management and have a lot of content that I think you’ll find easy to relate to and digest, which is not easy when talking about topics like this.

Objectives and Key Results (OKRs)

Finally, at the highest level, we have OKRs. I have not seen a lot of this in healthcare (by this name), but it is worth a mention because of the parallels. The OKR method is more of a framework to define your primary Objective (strategy) and Key Results that you expect to come from that strategy (often tracked as KPIs).

ClearPoint Strategy has a very good article about the differences between KPIs and OKRs (apples and oranges), though there may be some overlap depending on how you use them. I highly recommend it.

The TLDR version is that “KPIs are used to evaluate performance over time, link to strategic objective, direct where to focus resources when performance is not tracking where it should be, and be measured against targets.” OKRs, on the other hand, “are built on big-picture goals and targets that are focused on the outcome you want to achieve rather than the measurement/tracking of it. OKR is a strategic framework, whereas KPIs are measurements that exist within a framework.”

Still confused? Simply put, Measure What Matters describes it like this: “OKRs are KPIs ‘with soul.’ KPIs are metrics, while OKRs are a systemic goal-setting method.“ They have a great article and even more actionable learning resources here.

Actionable Idea of the Week:

Caveat: as with anything, semantics matters… like when we add “performance” before “measures” it gets interchangeably be used with measures, metrics, or KPIs more like a descriptor (take our CMS example). We are also seeing “Performance Measures” pop up in things like Medicaid managed care contracts and value-based arrangements.

I challenge you to think about what measures, metrics, KPIs and/or OKRs you are working towards in your role or at your company. If you don’t have them, think about what they should/could be. If you do, examine them through the lens of this newsletter—are they actionable? Are they meaningful? Do they actually track performance towards a strategy? How do you know if you’re successful or not?

As you design new programs/initiatives/project/strategies, I challenge you to put your goals first: what needle are we ultimately trying to move with this? By how much? What metrics will help us know along the way if we’re doing it? What areas do we need to focus on if we aren’t achieving results?

More on performance analytics specific to healthcare in future editions. For now, aspiring towards using similar language is a great start!

. . .

See you next week!

-Stefany

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