Montefiore Medical Center Strategy & Balanced Scorecard

The objective of this study is to answer the question of what were the underlying reasons for the development of a new strategy at Montefiore Medical Center (MMC). It will also address how the strategic direction chosen by MMC can be described and what factors likely influenced that direction. This study compares and contrasts the old and new organizational structures, and — with reference to the notions of synergy and responsiveness — analyzes the advantages and disadvantages of each. It explains the meaning of the term causal ambiguity, examines the Heart Center Value Map in Exhibit 4 to identify which relationships appear more or less problematic, and compares the activity-system view recently proposed by Michael Porter with the resource-based view (RBV), considering which appears more appropriate to the performance management process at MMC.

In 1996, the newly appointed vice president of operations for the Acute Care Division of Montefiore Medical Center faced many challenges. The Center had resulted from the merger of a large urban teaching hospital and a small university hospital, and carried a large budget deficit. This facility provided care to 1.2 million residents in the Bronx. Approximately 65% of recipients of medical care at the Center were either Hispanic or African-American, comprising the largest group of Medicare patients at any institution in the United States. The area served by the Center was characterized by poor housing conditions, low rates of employment, high rates of addiction, widespread disease, and deep poverty.

Montefiore also operated a Home for Chronic Invalids that provided care for patients other facilities could not help, including those with tuberculosis, syphilis, opium addiction, chronic kidney disease, and arthritis. Separate from this institution, the Albert Einstein College of Medicine — sponsored by Yeshiva University — came under Montefiore's operation in 1963. While both institutions remained legally separate, they were functionally joined. The two were separated by a large stretch of urban streets, yet together they formed one of the country's largest and most respected medical centers.

Management and financial problems plagued Montefiore through the mid- to late-1980s. The newly board-appointed president, Spencer Foreman, envisioned Montefiore's mission as "patient care, teaching, community service, and research," while the majority of faculty held that the institution's priorities were in a different order, with teaching and research coming before patient care. Foreman brought in Robert Conaty as executive vice president of operations, charged with establishing effective physician relationships and aligning the physician community with the new vision and strategy of Montefiore. Conaty was also responsible for managing clinical operations across the continuum of care in a financially sustainable manner.

Conaty worked with Montefiore's 24 academic chairpersons, who oversaw 800 full-time medical center faculty and 750 residents. Conaty reported that the chairpersons were making decisions that benefited their individual clinical departments while simultaneously producing negative effects on operations as a whole. Financial problems resurfaced in the mid-1990s, and a new executive was promoted to lead the hospital's operations and finance functions with a mandate to find lasting solutions.

The hospital was reorganized into two sectors: (1) operations and (2) corporate services (Harvard Business School, 2001). Functions including purchasing and information services were standardized, and 150 management positions were eliminated through the merging of administrative departments and the removal of layers of management, resulting in annual savings of $15 million. However, fewer people remained to accomplish the same amount of work, stress increased, and personnel turnover grew. It was at this point that a strategic management team comprising all levels of management was formed, with the task of developing a new business strategy. The reason for formulating a new strategy was therefore one of necessity — a need to focus on high-quality, cost-effective patient care, rather than on cost reduction alone.

The strategic management team at MMC chose two strategies that were both high-level and easy to understand:

(1) Be "all things to some people": develop a population-based approach focused on providing a full spectrum of healthcare services to specific populations, including children, women, and seniors.

(2) Be "some things to all people": develop specialty centers — such as cancer and cardiology — to attract patients from outside the Bronx, and maternal/child services to attract patients from lower Westchester County (Harvard Business School, 2001).

These two strategic choices became known as GRIP, representing: (1) Grow volume and market share; (2) Rebalance academic and clinical staff; (3) Infrastructure — upgrade facilities, information systems, and technology; and (4) Performance — set targets and achieve them (Harvard Business School, 2001).

The objective of this new strategy was to find a balance between providing population-based healthcare and developing centers of excellence in five areas: (1) cardiovascular, (2) cancer, (3) children's health, (4) women's health, and (5) HIV (Harvard Business School, 2001).

According to the case report, a full-service delivery system across the continuum of care — one that was cost-effective and competent in managed care — was required for population-based healthcare. To be designated as a center of excellence, MMC required "high-reputation, high-quality, specialty services for targeted patient segments that could attract a large customer base for Montefiore's hospital and its medical school faculty" (Harvard Business School, 2001).

There is a remarkable difference between the old and new organizational structures of the hospital. Specifically, Montefiore had for many years operated with separate functional organizations for nursing, clinical care, and general operations. Physicians were required to seek assistance and support from as many as three to five separate centralized groups.

Following the reorganization and decentralization of the Acute Care Division into three support centers and five clinical care centers, all units were focused on the needs of specific patient populations. The resulting structure was as follows:

Clinical Care Centers: Medicine and Cancer; Heart; Surgical Care; Women and Children; Sub-acute Services. Support Centers: Clinical; Business (Harvard Business School, 2001).

Since these changes, the Heart Care Center provides all cardiac-related services. Each clinical care center — previously a multi-disciplinary unit — now brings nurses, physicians, and management personnel under a single organizational heading. A three-person executive team composed of a manager, a physician, and a nurse leads each care center, which exercises control over most services received by both inpatient and ambulatory patients, and purchases any services it cannot provide from other institutions.

It was believed that the care center structure would provide a framework for market share expansion and capacity development. The broader clinical focus, however, was Conaty's primary objective. As he stated, "Care centers provide a vehicle to get physicians from different specialties to work together on patient issues. Left on their own, they might focus on their specialty and live within their own clinical academic world" (Harvard Business School, 2001). The vice president for clinical services in the new Women's and Children's Care Center, Peter Semczuk, agreed with this assessment.

The care center organization also changed lines of authority. Previously, physicians had approached Conaty or Foreman directly for resources. Under the new structure, physicians first worked with care center executives and then partnered with them to make resource requests — a "new power-sharing arrangement" (Harvard Business School, 2001). The initial result was that there was not complete physician buy-in to the new organizational structure.

Montefiore's performance measurement system had been relying almost entirely on financial metrics, a system considered inadequate for motivating and measuring care performance. The new structure left support centers responsible for outcomes across multiple dimensions, including service quality, work environment, employee performance, revenues, and costs (Harvard Business School, 2001).

The Balanced Scorecard was introduced to the hospital's leadership through an executive program at Harvard Business School attended in 1998. This strategy implementation tool had clear potential for application at Montefiore as a "mission-driven nonprofit academic medical center" (Harvard Business School, 2001). The Balanced Scorecard would assist in defending against "sub-optimization" — meaning it would prevent one care center from taking actions that negatively impacted another. Its approach to measurement was balanced and served to increase effectiveness through "real-time decision making," enabling the center to make rapid market adjustments. Foreman and Conaty approved use of the tool.

Development of the national-level scorecard followed a three-step process: (1) education and consensus building; (2) design; and (3) implementation (Harvard Business School, 2001). It took approximately six months to overcome the initial resistance to the scorecard system. Features of the scorecard included measures of patient satisfaction as well as cost, quality, and cycle times for both clinical and administrative processes. The new strategy was communicated to organizational employees through meetings that informed staff on how to acquire and report the data being measured. The SAP system was instituted at Montefiore and a new clinical information system — PHAMIS — was installed. These systems were configured to streamline data acquisition and measure reporting. Financial procedures and reporting practices were also updated. Each of Montefiore's institutions developed its own state and city-level scorecards, as well as value maps and measures all aligned with the overall strategy. Importantly, the Balanced Scorecard did not introduce entirely new measures; rather, it brought all existing measures together and aligned them within a unified strategic framework.

Causal ambiguity is defined as "the uncertainty that stems from a basic ambiguity concerning the nature of the causal connections between actions and results" (Ambrosini and Billsberry, 2008). Stated otherwise, "the factors responsible for firm performance may be difficult to identify because of causal ambiguity" (Ambrosini and Billsberry, 2008). Causal ambiguity is described as "central to the resource-based view of the firm argument because it can act as an isolating mechanism protecting critical resources from imitation. However, it can also prevent a firm from learning from its own experience and from improving its performance over time" (Ambrosini and Billsberry, 2008). The implication is that the "net effect on the sustainability of competitive advantage in the presence of causal ambiguity is unclear and hence that causal ambiguity represents a mixed blessing for strategic management scholars" (Ambrosini and Billsberry, 2008). It also presents a mixed blessing for "managers who need to both protect their valuable resources from competitive imitation and nurture them to exploit or replicate them within their firm" (Ambrosini and Billsberry, 2008).

Regarding the problematic relationships that can be identified in the Heart Center Value Map: the number of cases is positioned as central to the framework. However, quality of care in service to patients should form the primary focus of any value map. While it may appear that a high number of cases supports fellowships and teaching opportunities, this is only true if those cases are overwhelmingly represented by satisfied patients who have received quality care. Quality care is, in fact, the foremost factor in ensuring that Montefiore achieves the highest possible case volume. If a large proportion of cases are represented by patients dissatisfied with the services received, the result will be a negative impact on future case counts. Therefore, the focus should be on providing quality care to patients, and the desired case volume will follow naturally from patient satisfaction.