Montefiore Medical Center Balanced Scorecard Strategy

Reasons for Developing a New Strategy

Designing the new strategy involved several meetings among Montefiore Medical Center's employees to assist in the development of a balanced scorecard and initiating institution-level measures. The firm developed the new strategy to represent the cause-and-effect linkages among the environment, strategy, and operating plan that could deliver the required financial results. The new system ensured that financials comprised 10 percent of the measures on the balanced scorecard. Montefiore additionally developed the new strategy to measure patient satisfaction, cost, healthcare quality, and the cycle times of clinical and administrative processes. The institution recognized that strategic measures were essential in positioning Montefiore for future innovation while encouraging organizational growth. The GRIP strategy was initiated by the medical provider to help increase market penetration while attracting potential clients from surrounding areas.

Additionally, Montefiore developed the new strategy in part because reporting and conducting financial procedures through a single individual posed significant risk to the medical firm. Under the new strategy, reporting was to be conducted by care center leaders, who would carry out their own financial forecasts using the revenues and expenses assigned to them by the executive director of business services. This represented a departure from previous financial practices, which required the executive director of business services to outline financial forecasts for the entire medical center — with revenues measured only at the medical center level and expenses at the patient unit level. Under the old model, all hospital healthcare center admissions had to be reported by admitting category, since it was impossible to share admissions across care centers.

Moreover, the new strategy was developed to ensure the medical center's revenues were entirely based on contact with individual patients, with costs estimated by evaluating the services offered. In line with this approach, top management was to conduct transfer pricing for revenues, since the flow of patients from one healthcare unit to another could be tracked more easily. However, a major challenge with this strategy was determining how the medical center could support the cardiology unit while ensuring a steady inflow of patients. To address this, care center leaders trained their staff to create local scorecards. Training was deemed necessary because the scorecard would be of little use if employees could not understand how to use it.

Montefiore also initiated the new strategy — including the balanced scorecard — in order to help the hospital measure the average life of its equipment. A market survey the hospital conducted highlighted that installation of state-of-the-art medical equipment, coupled with creativity and innovation, is a vital factor influencing physician referrals and hospital choice. Therefore, the development of the new strategy was expected to foster workplace creativity and increase patient referrals once implemented. The degree to which annual revenues from newly established ventures and the number of physician referrals increased following implementation would serve as key indicators of whether the strategy was effective in expanding the hospital's market penetration, client base, and new service lines.

Strategic Decisions Made by Montefiore Medical Center

Following the initiation of the strategy and meetings for its implementation, the hospital's care centers developed their individual value maps and measures, all aligned to the institution-level strategy. As an example, for the surgery care center, the project team initiated weekly meetings to refine its measures. The team unveiled value maps that highlighted ways to produce enough margin to keep the care center functional. The map was designed to help centers identify key drivers — including improved access, service delivery to patient groupings, and physician and patient satisfaction — that were vital to the hospital. This process helped the center assign measures to financial drivers and supported the development of data proxies.

Before the strategy was initiated, the hospital had focused primarily on cost reduction targets. With the new measures in place, the medical center became capable of investing in growth opportunities. The strategic direction also provided a common language across different care centers and clarified the need to collaborate among different partners and disciplines.

For development and implementation of the new strategy, the hospital's department heads first learned the balanced scorecard, then educated their staff, and eventually developed their own scorecards. Each department was required to hold weekly meetings in which staff discussed major issues, developed objectives, and created measures to monitor progress against those objectives. All departmental heads subsequently held meetings to debate one another's scorecards — an exercise that proved beneficial for individual departments and the hospital as a whole. This collaborative approach was intended to ensure that employees from different departments and units worked together to advance the hospital's overall success rather than the success of individual departments alone.

The strategies initiated by the hospital were designed to bring about balanced performance measures across all seven departments, each with different measures but all linked to the GRIP strategy. Strategies employed by any department are reviewed monthly to assist in determining salary raises based on performance against targets, with bonuses awarded for excellent performance. Physicians, however, were not part of the strategic design process, as they preferred to react to the measures rather than help create them.

On the contrary, the scorecard did not sit well with some departments. According to Dr. Ravikumar, his scorecard idea was ignored by his faculty, as most individuals viewed the scorecard as jeopardizing their jobs, while others viewed it as an exam — and, much like students, refused it out of fear of failure. Similarly, Dr. Brown, Director of Cardiology, who was only indirectly involved in developing the scorecard for his unit, was largely unaware of his own input in the process. He argued that instruments such as scorecards imply the possibility of improvement, and thus threaten people's egos rather than their sense of autonomy. Dr. Semczuk, meanwhile, argued that the scorecard helps integrate managers with department chairpersons, though differences between performance models for clinical care and academic medicine remain a persistent challenge.