Balance scorecards, a strategic planning and management system originally used by large corporations in the 90s, has become very popular in healthcare in the past two decades. Many early implementations in hospitals and health systems required complex linking, monitoring, and manual keying of numerous data sources (often over 50) in order to maintain adequate scorecards capable of driving improvement. Fortunately, with the necessary implementation of EHRs and evolving regulation for their meaningful use, hospitals and health systems have become more readily able to obtain and track consistent performance metrics throughout all levels of their organization.
Traditionally, balanced scorecards are broken down into 4 main perspectives: Customer, Finance, Internal Business Process, and Learning / Growth / Innovation. While deciding on the handful of perspectives for an organization to focus on is often more difficult in healthcare vs. other sectors, variations of all perspectives can, and should be taken to best fit the organizational strategy and goals, no matter what industry. It is vital that the Key Performance Indicators (KPIs) be limited in quantity and measurable at all levels of the organization. While Customer and Finance are universally necessary perspectives, variations and interpretations of Internal Business Process and Learning/Growth/Innovation specific to healthcare should aim to include some aspect of: Clinical Quality and Patient Safety and Employee and Workforce Management.
In the traditional delivery of healthcare, hospitals and health systems were able to judge their financial success based on a fee-for-service model which reimbursed hospitals and physicians based on the quantity of care provided. Healthcare leaders have realized this form of compensation does not always equate to the highest quality of care. Reform is being driven to reduce the fundamental contradiction of interest which occurs when providers’ and hospitals are compensated by the number of patients they’ve seen, not the quality of care they’ve provided. While the changes being made aren’t perfect (and seem to be changing day-to-day) there is no question that the traditional form of re-imbursement is not sustainable for the health systems or the greater economy. Healthcare leaders and administrators will need to re-balance their business focus in order to continue serving their communities.
Because reimbursement and financial implications will become more focused on quality over quantity, organizations will need to have a better understanding of the total picture of organizational health. For example, bundled payments will put more risk on the hospital and require them to understand and control the relationships between gained efficiencies (reduced procedural cost) and quality measures (readmissions). Since they will be responsible for the entire care path for these procedures, organizational leaders and physicians must work together to determine which paths produce the best outcomes with the least variation in both cost and quality.
It is important to note that when working towards better outcomes with lower costs, hospitals and health systems should not put their primary focus on just lowering the average cost of a procedure or raising the average quality score, but instead should first aim to minimize the variation in those measures. It is much easier to control the outcomes of a process, or care path, when its variation is minimal and each variable is understood. With this in mind, healthcare organizations must initially focus on making their outcome/cost distributions “skinnier” or more predictable, before they attempt to “shift” the curves to be centered on their end goal. Process owners can’t fully understand what drives the outcomes/cost if approached the other way around. Unfortunately, this is an overwhelmingly common mistake as many scorecard metrics are based on the average performance of an organization, and little attention is given to their variation. In addition to the importance of identifying metrics that ensure financial stability through reimbursement, healthcare organizations must use tools like scorecards to retain future market share.
Healthcare has historically been an industry where customers do not “shop around”, but as public visibility to the cost and quality of care becomes a greater focus, healthcare organizations must have clear visibility to organizational metrics in order to react and drive immediate change to prevent publication of harmful quality and cost outcome performance by outside organizations like Leapfrog, NCQA, CMS, and AHRQ. If healthcare administrators fail to stay ahead of the game with visible organizational metrics, they will lose future customers who take the time to educate themselves on their options.