Simplifying the balanced scorecard for a better picture of performance

How one facility consolidated its approach

When the Hudson River Psychiatric Center (HRPC) in Poughkeepsie, NY, decided to develop a new service delivery model that would respond to the changing health care environment and provide vision for the future, it embarked on a major overhaul to assess the work of the organization. One of the outcomes was a balanced scorecard, neatly consolidated for greater efficiency and linked to the organization’s strategic plans.

Jean Wolfersteig, MSPS, director for quality management and facility administration, and Susan Dunham, MPA, director of risk management and standards compliance for the HRPC, helped organize its scorecard. "We were pretty happy with how on-target we were," Dunham says. "We find it very helpful to have these measurements linked to our goals and objectives."

Being able to measure performance is the key to an organization’s strategy. With the balanced scorecard, organizations can identify the primary areas to measure, whether they are customer relations, financial perspectives, technology, research, quality services, or a host of other areas that affect a health care organization.

The concept was developed for business and industry in 1992 by Robert. S. Kaplan and David P. Norton in their book, Translating Strategy into Action: The Balanced Scorecard (Harvard Business School Press). Health care has been slow in jumping on the bandwagon, but that has been changing in recent years as consultants and quality experts look at how a commerce-designed vehicle for performance improvement can translate to hospital management.

    At HRPC, the organization began with a series of project activities that included:

  • assessment of HRPC’s readiness for managed behavioral care;
  • comparison of the Joint Commission on Accreditation for Healthcare Organizations (JCAHO) Hospital Standards and existing clinical indicators to assure that critical areas were addressed;
  • development of a strategic plan that enhances the organization’s readiness for managed care while meeting JCAHO standards;
  • development of operation plans to support the strategic plan;
  • development of the balanced scorecard following Kaplan and Norton’s framework;
  • use of the balanced scorecard’s results in the selection and prioritizing of performance improvement activities.

The managers in charge of the readiness assessment developed a list of needs and a rating system that included these terms:

  • minimally prepared;
  • beginning;
  • moderately prepared;
  • well along;
  • prepared.

The managers found they could rate most areas "well along" or "moderately prepared." However, two functions were rated as "beginning." For those, they developed specific needs such as goals and objectives for daily activities, performance appraisal programs, measures of satisfaction, utilization, quality and cost, and development of an automated medical record system.

The CEO, James Regan, PhD, guided development of the strategic plan that emphasized, among other things, staff training, reorganization of inpatient services, performance measurement, stakeholder awareness, and reduction of patient restraints.

"Dr. Regan’s support has been crucial," says Dunham. "He was very involved and supportive."

Then came the balanced scorecard. According to Dunham, the hospital developed all new performance indicators, including process improvement, customer satisfaction, and clinical outcome measures, among others. (See Patrice Spath’s "Quality-Co$t Connection," p. 116.) "We really tried to come up with something not too overwhelming," says Dunham. But even with that directive, "it became obvious that our scorecard was too big. It had 18 indicators for satisfaction, including a lot of nondynamic indicators — they were measured only once a year — and there was a total of 44 indicators. It made us realize there is just so much we can attend to."

Ultimately, the scorecard was pared down to 20 indicators organized into four areas, labeled financial, customer, innovation and learning, and internal business. Each area has specific measurements. (See box, at left.)

Carolyn St. Charles, RN, MBA, president of St. Charles Consulting Group in Issaquah, WA, says that "the process of design and implementation in health care scorecards requires exquisite attention to communication with multiple stakeholders. It also requires ensuring their commitment and support from the beginning if the effort is to be successful."

Wolfersteig and Dunham say they tried to be very sensitive to stakeholders. Four of their outcome indicators involved stakeholder satisfaction with services.

A section for commentary is part of the scorecard. "In analyzing the data, some areas jump
out at us as needing additional attention," says Dunham. "When that happens, we organize focus groups, do research, and initiate performance improvement activities. Basically, we’re trying to enhance a safe and therapeutic environment while respecting our stakeholders and fostering growth and healing that will reflect progress in our care."

St. Charles emphasizes that the scorecard should be unique to the setting "in order to ensure a successful development and implementation."

Dunham notes that the HRPC scorecard is programmed for change as new factors influence the center’s performance. "A lot is changing with the scorecard as a result of the exterior environment. Just three years ago, we were focusing on product lines. We thought we should carve out a specific market niche. But the marketplace has changed a lot in the last three years. The adult population here has been transformed. Sixteen years ago, 67% of our patients were over 65. Today we have less than 30 people in that age group." This is in a 200-bed psychiatric center. "We’re dealing with younger people, more substance abuse concerns, and more forensic cases. That’s what constitutes our market niche today."

Is the balanced scorecard working the way HRPC planned? After six quarters, the scorecard showed a 10% rate of overall improvement. The financial perspective area showed a 13% rise; the customer perspective area gained 5%; the internal business area rose by 15%; and the innovation and learning area improved by 9%.

When Wolfersteig and Dunham co-wrote the article "Performance improvement: A multidimensional model," (International Journal for Quality in Health Care 1998; 10:4) they began getting inquiries about their scorecard. They also did poster presentations at performance improvements conferences in Melbourne, Australia, and Chicago, which resulted in even more inquiries.

"We’ve had requests from 70 or 80 hospitals
for information on our scorecard," says Dunham. "There’s tremendous interest from Australia, the Orient — 15 different countries in all."

Wolfersteig and Dunham conclude, "The scorecard has proven to be an effective tool in focusing the organization on achieving goals and objectives. The outcomes from the performance improvement activities linked to the scorecard represented significant improvements and, in some cases, cost savings.