Scorecards Ease Business Balancing, Essay Example

“In 1996, Duke Children’s Hospital was in crisis, and financial pressures were mounting.  A decrease in Medicaid allowances and an increase in patients with capitated reimbursements were driving revenues down.  Expenses were rising as cost per case for children’s services ballooned from $10,500 in fiscal year (FY) 93 to $14,889 in FY96.  This caused a dramatic reduction in the net margin from –$2 million in FY93 to –$11 million in FY96.  Programs were slated to be eliminated, and services were targeted for reduction.  Staff productivity had fallen from the 80^th   to the 70^th percentile range.  In addition, patient and staff satisfaction was at an all time low” (Meliones, Ballard, Liekweg, & Burton, 2010, p.21).

“The course of Duke Children’s Hospital has been transformed dramatically.  Costs were Reduced by nearly $30 million in FY2000.  Net margin has increased by $15 million, and staff satisfaction is at a record high.  In addition, Duke Children’s Hospital received the “Best Practice” award from the North American Balanced Scorecard Summit for excellence in business process.  How were these accomplishments achieved?  By becoming a strategy-focused organization that aligned administrators and clinicians around a single integrated platform: the balanced scorecard” (Meliones et al., 2010, p.21).

“How did medicine become so “challenged?” It started with a shift in the drivers of health care.  Previously the only real driver was clinical quality—health care was all about quality clinical outcomes, quality clinical outcomes, and quality clinical outcomes” (Meliones et al., 2010, p.21).

“Physicians and other clinical staff were the key players in the players in the health care process.  As revenues decreased and expenses increased, there was a shift—financial performance became the dominant force” (Meliones et al., 2010, p.22). “Since medicine is the most passionate service-based industy, clinical outcomes cannot be separated from financial performance.  There is, however, an obvious paradox in this philosophy.  No matter how effective the chief executive officer (CEO) and chief operating (COO) are, they can control only a portion of the components that drive the organization’s financial performance.  The rest is largely dependent upon clinical business processes.

Physicians determine when the patient leaves the hospital and, therefore, the patient’s length of stay.  In addition, they prescribe medicines, tests, and procedures that significantly impact cost and accept referrals that increase revenue.  Nurses are also important group to enfranchise because they are the main drivers of quality, and they represent a significant component of an organization’s labor costs” (Meliones, et al., 2010, p.22). “The paradox is that while clinicians can dramatically affect financial performance, they  are primarily motivated by the need to provide quality clinical care.  To improve financial performance, administrators and clinicians must develop an alliance.  This forced alliance can cause a gap between hospital adminstrators and clinicians.  This gap can be viewed as either a conflict or an opportunity.  Administrators and clinicians must bridge the gap with a performance management approach that communicates the value proposition to all stakeholders.  This approach will link clinicians and administrators to a strategic vision and promote strategic control of the organization.  To achieve these goals, administrators and clinicians must apply sound fundamental business principles while using clinical insight.  They must develop an intelligent performance management system that aligns administrators and clinicians into a single platform.  This platform must support an integrated matrix that fosters the ability to communicate mission-critical information rapidly throughout the organization.  The organization must learn how to identify the key drivers of their performance and implement initiatives to optimize them.  This approach will provide health care organizations with the business and quality intelligence needed to successfully compete in the turbulent marketplace” (Meliones, et al., 2010, p.22-23).

“In health care, there is a tremendous amount of data but very little useful information to make intelligent decisions.  One reason is that there are several independent sources of data that are not linked, which makes it difficult to get the true picture of the organization’s performance.  Integrating these data is essential.  Delivering information to key stakeholders so that they can learn and make intelligent decisions is an essential step in creating knowledgeable stakeholders.  While  sharing information is a great opportunity to educate and empower staff, it also has risks.  The information must be presented in a manner that fosters improvement, not finger pointing.  All stakeholders, especially physicians, should be given information that is accurate, clear,  appropriate for their level, and site specific to their individual performance” (Meliones, et al., 2010, p.23).

“Companies often rely on a single telltale measurement to determine success: profits. That may appeal to investors and Wall Street mavens, but it does not always indicate that a company is using its resources to reach its full potential.  In fact, even extremely successful companies could most likely turn more profit — and do so with the same resources they already have in place. To reach that goal, several Fortune 500 and other companies are using balanced scorecard technology” (Sullivan, 2001, p.32).

“A balanced scorecard is a software application for measuring the success of enterprise departments, such as human resources and IT, to make sure they are performing optimally and working toward the company’s ultimate goal of profitability rather than just looking at the bottom line. Scorecards enable organizations to measure the performance of processes such as business planning and simulation, performance management, and stakeholder communication” (Sullivan, 2001, p.32).

References

Meliones, J. N., Ballard, R., Liekweg, R., & Burton, W. (2001). No Mission….No Margin: It’s That Simple. Journal of Health Care Finance. 27(3),  p.21-29. Retrieved April 28, 2010, from Business Source Complete database.

Sullivan, T. (2001). Scorecards ease business balancing act. InfoWorld. 23(2), p.32. Retrieved April 29, 2010, from Business Source Complete database.