The purpose of this paper is to provide an overview of the usefulness of the Balanced Scorecard in improving a hospital's management and delivery of health care at reduced cost without loss of quality. This paper describes an approach to designing and implementing a balanced scorecard system for measuring performance and productivity in a hospital setting. Specific measures of performance criteria are suggested as well as interpreted. Guidelines for measuring productivity are also suggested and interpreted. How these measures may be used by a hospital to improve its administration of health care while reducing costs and maintaining quality are described. This paper is a useful resource for hospital managers looking to improve their performance and productivity. The balanced scorecard is a management tool that is widely used in the manufacturing industry. This paper fulfills a need by healthcare providers to obtain information on implementing a balanced scorecard system that specifically addresses issues unique to hospitals. This paper also addresses how to measure productivity within a balanced scorecard system.
Keywords:Hospital Performance, Balanced Scorecard, Hospital Productivity
Performance measurement and productivity in health care are important issues to individuals and at a national level. Medical costs continue to rise and consume an increasing proportion of GNP worldwide. Cost pressures are producing dramatic changes in the health care environment. The government continues to search for ways to control spiraling costs, principally through caps on reimbursement rates, and at the same time the public seeks coverage for more services. Competition among health care providers is intense as alternative delivery systems grow and compete with public health facilities forcing all health care organizations to lower their costs, downsize, or close facilities (Gumbus et al. 2003). Increasingly health care providers are cutting services to, or refusing to treat, Medicare and Medicaid patients because of inadequate reimbursement rates. One result of cost pressures faced by individuals, employers, insurance companies, and the government is to shift health care provider performance priorities in several areas. Previously, a primary objective of health care provider organizations was to attract more patients (a revenue focused strategy). Now, they are concerned with reducing costs to meet patient demand. In the past, hospitals wanted simply to attract leading doctors trained in the latest procedures and technologies (a high-cost strategy). Now, the emphasis is on improved service quality to meet the demands of payers and regulators. Historically, hospitals wished to bill more care to more patients (another revenue enhancing strategy). Now, they seek to balance cost versus patient outcomes resulting in shorter stays, less expensive treatments, and fewer tests. Traditionally, hospitals allowed doctors free reign in treatment plans, which increased demand for hospital services (and costs). Now, hospitals seek to attract patients from managed-care plans and balance the goal of maintaining physician loyalty with limits (i.e., lower costs) on the use of the latest, and more expensive, medical technologies. Finally, hospitals encouraged only limited innovation in delivery of core services and administration. Now, high rates of innovation in both areas are necessary to achieve cost effective and efficient health care. Key to achieving cost controls in health care is adopting new approaches to performance and performance measurement (Adler et al. 2003). Hospitals have been slow to develop and implement formal performance and productivity measurement systems (Voelker et al. 2001). The primary problems that have inhibited hospitals from making greater progress in this area are culture, organization, and managerial practices that are...