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Balance Scorecard of a Hospital

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Please see details of the assignment as follows: Questions to be answered after the reading.

Marge Oliphant, the administrator of the South Tifton Hospital, a 150-bed rural hospital, decided to implement the BSC in her hospital. Her approach was to do a pilot test in the materials management department, a nonpatient care area. The manager, Vernon Clance, was a good choice because he had already submitted reports on inventory levels. Clance approached his department by breaking down the scorecard into its customary four areas:
Learning and Growth, Business Processes, Customer Measures, and Financial Measures.

With his staff, Clance arrived at these measures:
Learning and growth
- Staff turnover
- Job satisfaction
- Staff loyalty
- Education (dollars spent)

Business Processes
- Inventory turnover
- Fill rate
- Accuracy rate
- Responsiveness
- Supplier fill rates
- Productivity (deliveries/labor hour)

Customer Measures
- Customer (hospital units) satisfaction

Financial Measures
- Inventory on hand
- Salary expenses
- $/purchase order

Oliphant was impressed with the measurement selection. Clance used job satisfaction and customer satisfaction measurements that he found in a book. Basically, they measured, on a scale from 1 to 5, how happy a person was with the present position, pay, facilities, and so on. The materials management customers were the
individual units that received supplies on a daily business. They were surveyed on the responsiveness and accuracy of the supplies they received. Clance did detect a 93% fill rate (the percentage of orders successfully filled) in the first month, and that became the target of improvement for the next month.

Oliphant then turned to a patient care unit, the intensive-care unit (ICU). This was a 12-bed unit, not as frenetically paced as the emergency room, although the
patients were in serious condition. Bob Tallent was the unit manager, a business school graduate in charge of the administrative details of the unit. Bob relished the
opportunity to come up with an organized measurement scheme and, with the assistance of the staff, devised these measurements:

Learning and growth
- Nursing turnover
- Staff turnover
- Training and education dollars
- Job satisfaction
- Staff loyalty

Clinical and business processes
- Medical errors
- Clerical errors
- In-processing
- Out-processing
- Billing speed
- Responsiveness
- Productivity index

The Balanced Scorecard Approach to Operations

- Patient satisfaction
- Family satisfaction
- Physician satisfaction

- Revenue per patient
- Cost per patient
- Salary expenses

After 2 months in the ICU and 4 months in materials management, Oliphant extended the trial to Accounts Receivable. The program was intended to go hospital-wide at the end of the year.

Discussion Questions
1. Do these areas give an accurate description of what is important in materials management
and the ICU?

2. What issues in each area would be important to Accounts Receivable?

3. If the hospital administrator wanted a global scorecard, what would that look like?

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Solution Preview

The areas chosen by Olivant to study accurately describe the importance of key factors in each of the units, materials management and ICU. The materials management unit represents the supply side of the organization. The ICU unit represents the demand side of the organization. Clance's method of evaluating the materials management unit measures the most important aspects of the unit, in terms of function within the organization and the level in which it may support the hospital. Fill rates measure how well the unit supports processes within other units in the hospital. Employee satisfaction is an indicator of employee performance, which may directly affect fill rates and accuracy. Customer satisfaction is an indicator of how well the materials management supports the needs of the organization as well. The financial measurement indicates the level of efficiency in which the unit operates. This may be an indicator of how much training may be needed or how successful training of employees in the unit is, in developing skills to meet the needs of the organization. It may also indicate whether relationships with current suppliers support the goals of the organization.

The ...

Solution Summary

The expert examines balance scorecards of a hospital. The opportunity of organized measurement schemes are determined.

See Also This Related BrainMass Solution

Duke Children's Hospital Implementing the Balanced Scorecard

The internal business process perspective of the balanced scorecard turns attention to the aspects of the organization's operations that are within the possibility of direct control by its managers and employees. Here is a useful brief summary of the approach:

Niven, P. (N.D.) Internal Process perspective. EPM Review. Retrieved May 17, 2010, from http://www.epmreview.com/Resources/Articles/InternalProcess-Perspective.html

Analysis of business processes is closely bound up with the assessment of quality; in fact, most of the literature in this area is dominated by the vocabulary of the quality analysts. The Chartered Quality Institute offers a good overview of product and service quality concerns, and how they affect customer loyalty and satisfaction (note the intersection of the Business Process and Customer Perspectives). Here is a useful summary of this approach that meshes nicely with the internal business process perspective; although it does not explicitly mention the balanced scorecard, you should have no trouble applying its recommendations to your case analysis here:

CQI (2008) Introduction to Quality. The Chartered Quality Institute. Retrieved May 17, 2010, from http://www.thecqi.org/resources/d2-1.shtml

Our example in this case is Duke Childrens Hospital in Raleigh-Durham NC. Here's how this process has been described:

The authors describe their experience in developing a strategy-focused organization using the balanced scorecard methodology. They achieved this at Duke Children's Hospital by aligning the clinicians and administrators around a single integrated platform that linked improving business processes with achieving quality clinical outcomes. By organizing in this manner, they reduced cost by $30 million and increased net margin by $15 million while improving outcomes and staff satisfaction. This article describes a methodology to achieve strategic control of the organization, increase the knowledge of key stakeholders, and transform the organization to optimize the organization's performance.

The article from which this summary is taken can be found here:

Meliones, Jon N.; Ballard, Richard; Liekweg, Richard; & Burton, William (2001, April). No mission (<-->) no margin: It's that simple. Journal of Health Care. 27(3): 21-30. Retrieved May 17, 2010, from http://proquest.umi.com/pqdweb?vinst=PROD&fmt=6&startpage=-1&clientid=29440&vname=PQD&RQT=309&did=69282123&scaling=FULL&vtype=PQD&rqt=309&TS=1226871645&clientId=29440

For this solution carefully review this article, and then (in 3-4 pages) prepare an analysis of how Duke Children's Hospital implemented the balanced scorecard and its apparent effects.

Introduction: What process did Duke Children's Hospital follow in creating a balanced scorecard? Why did the hospital decide to use the balanced scorecard to evaluate its stakeholder relationships and its business processes? What was the reaction of the staff?

Analysis: In the balanced scorecard Duke University Children's Hospital developed, on what internal business process did the hospital focus? What measures were used? What changes were made in that business process?

Conclusion: Describe how the changes in its business processes affected both employees and customers (patients); this involves considering multiple perspectives, both those of participants and those of stakeholders.

Evaluation: Did Duke Children's Hospital do a good job in designing and using its balanced scorecard? Agree or disagree with the issue, then defend your position. Use your readings to help you decide whether the implementation was done well or poorly.

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