The Design of the Balanced Scorecard and Application to Medicare

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The Design of the Balanced Scorecard and Application to Medicare Executive Summary:

The balanced scorecard provides a conceptual framework for organization looking to assess their performance. The balanced scorecard moves beyond a financial approach to assessing and organization’s performance. It incorporates financial and non-financial objective that can be measured in quantitative and qualitative terms. For public sectors organizations lacking profit motivations, the questions are 1) can the balanced scorecard be modified and 2) if modified, is the balanced scorecard still a valuable performance assessment tool. Objectives from The Centers for Medicare and Medicaid Services Strategic Action Plan were categorized in the key perspectives of the balances scorecard. The balanced scorecard can be modified, but system must be available to provide real-time feedback. This is critical to successful utilization of the balanced scorecard. With Congress raining on agency programs (and hence budgets), strategic performance measurements concepts such as BSC could go a long way to help agencies assess how well they are allocating resources in support of their mission. When effectively implemented the BSC helps organizations design a strategic plan that focuses on the priorities leading to their success and longevity. In 1993, Congress enacted the Government Performance and Results Act (“GPRA”). This law was “enacted to improve stewardship in the Federal Government, linking resources and management decisions with program performance” ( GPRA moved further in holding government accountable. It mandated that federal government agencies establish performance plans with explicit goals and objectives. Additionally, GPRA requires that federal agencies assess their performance relative to their goals and objectives and report on their progress annually. The strategic plans submitted under GPRA are designed to show the linkages between the federal agencies’ budgets and their missions.

The Centers for Medicare and Medicaid Services (“CMS”) is an operational component of the United States Department of Health and Human Services (“DHHS”). As such, its strategic plan is encompassed within the plan developed by DHHS ( Although the CMS’ GPRA is not reported separately from DHHS, the agency has developed its own more detailed and individualized plans known as the Strategic Action Plan (“SAP”). ( The DHHS strategic plan cascades down to CMS. With this, the CMS determines their priorities and the standard against which the agency’s management and employees are evaluated. The core of SAP is the CMS’ mission and vision.

With Congress looking for federal agencies to align and assess their goals with their budgets, federal agencies are beginning to utilize tools to this end. One such strategic management tool and methodology available is the Balanced Scorecard (“BSC”). Drs. Robert Kaplan and David Norton developed the BSC. The BSC was developed as a way for organizations to integrate financial and non-financial metrics and assess them with quantitative and qualitative outcomes. Prior to development of the BSC, historically performance was determined by financial performance metrics such as cash flow. Since financial metrics were at the core of determining an organization’s performance, metrics were determined and assessed by the finance and accounting departments. Kaplan and Norton (2005) stated that the “scorecard puts strategy and vision, not control, at the center. It establishes goals but assumes that people will adopt whatever behaviors and take whatever actions are necessary to arrive at those goals. The measures are designed to pull people toward the overall vision.” With vision at the center of the BSC, performance management moves from a...
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