Best Practices Conference April 10-11, 2002 Cambridge, MA Balanced Scorecard Collaborative, Inc. • 55 Old Bedford Road • Lincoln, MA 01773 • Tel: 781.259.3737 • Fax: 781.259.3389 • bscol.com Mobilizing Strategic Change Mobilizing Strategic Change Using the Balanced Scorecard Using the Balanced Scorecard (videotaped presentation) (videotaped presentation) Mary A. Johnson Mary A. Johnson Chief Operating Officer Chief Operating Officer St. Mary St. Mary’ s / Duluth Clinic Health System s / Duluth Clinic Health System
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Best Practices Conference
April 10-11, 2002 Cambridge, MA
Balanced Scorecard Collaborative, Inc. • 55 Old Bedford Road • Lincoln, MA 01773 • Tel: 781.259.3737 • Fax: 781.259.3389 • bscol.com
Mobilizing Strategic ChangeMobilizing Strategic ChangeUsing the Balanced ScorecardUsing the Balanced Scorecard(videotaped presentation)(videotaped presentation)
Mary A. JohnsonMary A. JohnsonChief Operating OfficerChief Operating OfficerSt. MarySt. Mary’’s / Duluth Clinic Health Systems / Duluth Clinic Health System
2
Today’s Presentation• SMDC overview
• Pre-BSC Strategic Planning
• Beginnings, evolution of BSC process andresults
• A new era of accountability
• Judge the results
3
Health System Overview• St. Mary’s Medical Center- 380 beds• Miller Dwan Medical Center - 166 beds• St. Mary’s Hospital of Superior - 55 beds• Pine Medical Center- 30 acute beds, 86 skilled nursing
beds• More than 6,000 employees• 352 employed physicians representing 40 medical
specialties• 25 community clinics throughout northern Minnesota,
Wisconsin, and Upper Michigan
44
5
Strategic Planning Before BSC
As a newly merged organization, weengaged a well-respected, national strategicplanning firm to help develop our firststrategic plan.
6
Resulted In...
• A very “comprehensive” plan -- 350+ initiatives!
• Contained no real accountability for implementation.
• An essentially political process. Anyone who had an“agenda” got their item in the plan.
7
Consequently...
• The Board of Directors remained unfocusedand confused about their role.
• Management and employees had no clue aboutthe strategic direction of the organization.
• Gradual decline of margin in a 2% worldbecause the organization had no strategicfocus.
8
Other factors at play:
• Changes in the external healthcareenvironment, such as the Balanced BudgetAct.
• Coupled with the instability of a newly mergedorganization.
9
How we discovered the BSC
• CEO read Harvard Business Review article
• Executive team embarks on first BSC
10
1st Year Progress… and Pitfalls
• Progress– Began tracking organizational performance on more
than a financial basis.
• Pitfalls– Functioned primarily as a new kind of “dashboard
report”.– Rather than a new way of running the organization, was
simply one more thing to do every month.– No connectivity of the measures to drive organizational
success.
11
FY1999 CORPORATE LEVEL BALANCED SCORECARD
Financial Customer Operational People TechnicalIndica-
torTar-get
FY99Final
Indica-tor
Target Stat-us
Indica-tor
Target Stat-us
Indica-tor
Target Stat-us
Indica-tor
Target Stat-us
AdjustedDischarges
23,890 23,592 PatientSatis-
faction
Choose keyfocus areas
forimprove-
ment
C ArrangingCare
Determine outpatientphone model,conduct pilots
C CulturalDevelop-
ment
Completecommuni-
cationsstrategy
C QualityImprove-
ment
Implementsystem-widegovernance
structure
C
Encounters 912,188 892,243 EmployerSatis-
faction
Completesurvey
develop-ment in CY
1999
CY Determine outpatientmodel for
registration &scheduling
C Completephysician
survey
C Completeexternal quality
report in CY1999
CY
Cost perAdjustedDischarge
6,964 7,535 HEDISIndicators
Selectindicators
fordevelop-
ment plan
M ProvidingCare
Determine model forpatient delivery
system for clinicaldivisions
C Completeemployee
survey
C Meet or exceedstandards for
SMDCaccreditation
C
Cost perEncounter
215 252 Com-munityService
Completereporting
process andinventory
C Complete systemstrategy for
ambulatory surgery
C Completeplan to
maintainCatholic-
ity
C Informa-tion
Technol-ogy
Complete ITstrategic planin CY 1999
CY
OperatingMargin
2.0 1.3 Commun-ity Aware-
ness
Completesurvey inCY 1999
CY Docu-menting
andTracking
Care
Complete plan fordecentralized coding
and charge entry
C EmployeeRelationsStrategy
Accom-plish “pay
equity”
C Complete Y2Kcompliance by
12/99
CY
ExcessMargin
3.8 3.3 MarketShare
Completebaseline
C Innova-tion andProgramDevelop-
ment
Complete feasibilitystudy for a women’s
health center
C Synchro-nize
employeebenefits
C MedicalEducation
& Research
Completereport of
funded grantsand
publications
C
Days Cashon Hand
103.6 108.6 Complete plan for ageriatrics program
C FacilitiesPlanning
CompletePerkins & Will
plan
M
Days inAccounts
Receivable
77.7 82.8
Return onInvestment
3.4 2.9
“C” = task completed; “CY” = Calendar Year 1999 task; “M” = task modifiedFinance section: Target met; Target not met
We were trying to work with a performancemeasurement tool in advance of crafting afocused business strategy.
13
The Organization was Ready fora New Approach
• Old “healthcare strategy formulation” didn’t workand we needed to look outside the healthcareindustry.
• The Senior Team attended a Balanced ScorecardCollaborative conference, then spent time studyingand discussing the principles.
• Decision was made to take a different approach tostrategy development.
• Engage the BSC Collaborative to work with us tocreate a strategy map.
14
The New Strategy Design Process;Building the Strategy Map
• We began to view ourselves as a business andidentified our high margin, market opportunities,which shaped the financial dimension of ourstrategy map.
• This increased margin opportunity would thenallow us to reinvest in the non-growth areas of theorganization.
• This intentional growth strategy would help us bemore honest internally about where theorganization needed to grow.
15
Customer Dimension
Value propositions provided clarity
Payers
OperationalExcellence
Specialty CarePatientsReferringProviders
ProductLeadership
Primary CarePatients
CustomerIntimacy
16
Cause and Effect Relationships
Provided thejumping off point forunderstanding thestrategic drivers thatdeliver on customervalue and achievesuccessful financialperformance.
Specialty Care PatientsWho Value
Leading Edge Technologyand Expertise
AlignResearchPriorities
Develop LeadingPrograms/Techniques
Continually DevelopClinical Excellence
ImplementManaged Growth
17
INTERNALTo satisfy our customers, atwhich operational processesmust we excel?
Clearly communicate expectationsand accountabilities aligned with
strategic priorities
Instill a Climate for Change Implement Technology
FINANCIALTo financially sustain our Mission,on what must we focus? Implement Managed
Growth
Vision:SMDC is a values-driven, integrated organization which will be recognized for excellence in
customer service, quality patient care, financial strength, andsupport of community health
Build a Strong Financial Base to Sustain ourMission and Achieve our Vision
CUSTOMERTo achieve our Vision,how should we appear toour customers?
Specialty Care Patients / ReferringPhysiciansPrimary Care Patients Payers
FY 2002 Strategy Map
Easy Access
Deliver Cost Efficient Care
Develop state of the arttechniques and programs
Align research priorities withtargeted growth areas
Implement regional economic modelSupply standardization & expense reductionFormulary Expansion & Drug Cost reductionComplete full development & implementation of perpetual inventory systemDevelop & implement anesthesia care delivery model
¤ Provider Patient Satisfaction (Semi-Annual)Primary Care Patients
¤ Primary Care Market Share (Acute/Ambulatory) (Annual)
Payers ¤ % BC/BS member satisfaction ¤ Establish baseline
Implement Quality Plans to improve overall patient satisfactionDefine SMDC value to the market and implement marketing plan
¤ Satisfaction with lobby wait times ¤ 29.3% excellent rating¤ % of providers that meet appointment access standard ¤ 70%¤ Telephone access ¤ 47% of clinics meet standard
Provide Outstanding CustomerService
¤ % clinics with open access ¤ 50%
Develop & implement Duluth campus way finding planContinue implementation of open accessDevelop & implement Duluth campus facilities refurbishing plan
¤ % clinical depts with Quality Plans ¤ 100%
¤ % of patients on approved clinical pathways ¤ 70%Continually Develop Clinical
Excellence¤ # of research grants & % in targeted growth areas ¤ 60%
Develop & implement new clinical pathways recommended by the IQCImplement Primary Care Committee initiativesDevelop & implement patient safety program
Continue implementation of volume and schedule management systemImplement diversion avoidance planImplement hospital medicine serviceImplement a consistent model of care for patients in critical care unitsDevelop & implement HIPAA compliance program
¤ % of employees who can identify the organizations focusareas (Quarterly) ¤ 90%
Climate for Change andCommitment ¤ Employee/physician satisfaction
¤ Performance to Values In Action Plan¤ Establish baseline¤ 100% on track
Continue development of BSC across all departmentsOrganization wide program regarding commitment & pride…Values In ActionImplement Roots of Our Caring ProgramImplement Employee & Physician Satisfaction surveyCreate improved support structure for physicians and other providers
Technology ¤ Performance to EPIC plan ¤ 100% on trackImplement Phase I of EPIC for practice management suiteCost benefit analysis of time & attendance software; prepare forimplementation
Le
arn
ing
& G
row
th
Skill & CompetencyDevelopment
¤ % growth areas strategic staffing positions filled (Quarterly)¤ Performance to Quality Education and Accountability Plan
(Quarterly)
¤ 100%¤ 100% on track
Revise nursing structure and delivery modelImplement strategic staffing & recruitment plansImplement quality education and accountability modelDevelop information management department
* Case mix adjusted
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Cascading the scorecardmethodology throughout
the organization
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OPERATIONAL PROCESSES
PRODUCT LEADERSHIP AND OPERATIONAL EXCELLENCE
*1Surgery Growth Area - Strategy Map
Manage Our Growth
Vision:SMDC is a values-driven, integrated organization which will be recognized for excellence in
customer service, quality patient care, financial strength, andsupport of community health
Maximize Operating Margins
InternalPerspective
Learning andGrowth
Customer
Perspective
A MOTIVATED AND PREPARED WORKFORCE
Provide state ofthe art technology
and facilities
Deliver high quality,timely care
Increasegeneral surgery
in targetedgrowth areas
Develop furtherspecialization
The right people withthe right skills
Implement Technologyto provide state of the
art services andefficient care delivery
Achieve OperationalExcellence
Implement nextgeneration
surgicaltechniques
Design state ofthe art facilitiesDefine general
surgery growthopportunities
Provide full continuumof care
Sustain superiorposition in trauma
care
Develop outreach& communication
processes
Coordinate &integrateservices
Financial
Perspective
Improve careacross
continuum Developsurgical
critical care
Redesignoperations forefficiency andeffectiveness
Build positiverelationships with
primary & referringMDs
*1 Trauma & Surgical Care, Vascular, General Surgery
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OPERATIONAL PROCESSES
TECHNOLOGY LEADERSHIP AND OPERATIONAL EXCELLENCE
Radiology – Strategy Map
Target GrowthOpportunities
Vision:SMDC is a values-driven, integrated organization which will be recognized for excellence in
customer service, quality patient care, financial strength, andsupport of community health
Maximize Operating Margins
InternalPerspective
Learning andGrowth
Customer
Perspective
A MOTIVATED AND PREPARED WORKFORCE
1 Imaging
Deliver Fast HighQuality Service
Improve CurrentThroughput
AchieveAccreditation for all
SpecializedTechnologies
Invest in Learning forProfessional andTechnical Staff
Align research priorities withtargeted growth areas
Develop state of the arttechniques and programs
= DC Deer River Focused Objectives
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SMDC Deer River FY02Balanced Scorecard
Objective Measure Full Year Target
Build a Strong Financial Base Contribution Margin Improve margin >/= 10% over FY01
Salary Costs/Encounter Salary Costs =/< $35 per Enc.
Supply Costs/Encounter Supply Cost =/< $8 per Enc. FY02
End
Cu
sto
me
r Excellent Service Customer Satisfaction with Telephone Access
40%
% of Providers on Open Access
70%
Telephone Access No trunk line busy mins.
Strive for Operational Excellence Encounter Targets Met 100%
Clinical Practice Management % Diabetic Flow Sheet
Utilized
60%
Instill a Climate for Change and
Commitment
Team Meetings 14
Skill & Competency Development % Employees completing
Annual Competency Requirements
50%
Implement Technology % Employees / Providers Participating in IT Initiatives
90%
Fin
an
cia
lIn
tern
al
Le
arn
ing
& G
row
th
Deliver Cost Efficient Care
Provide Outstanding Customer Service
Initiatives
Recruitment of an MD/Provider. Initiate services at Remer 5 days / week. Evaluate new or growth service lines and outer ring revenue
resources. Explore opportunities for radiology revenue sharing.
Advanced Access Initiative
ACD Initiatives
Volume Management Initiative
Clinical Pathway Initiative
Create & follow meeting schedule. Keep staff appraised of new
developments, practice management data & new operational models through meetings, informal comm. & memos.
Develop and Implement Competency Plan
Thin Client InitiativeEpic Preparation
Scheduling Initiative
Supply Initiative
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Relationship of the Map toAnnual Initiatives
• Annually, at budget time, we revisit thestrategy map to reaffirm strategic objectivesor make minor changes– review measures to assure they are truly
informing us of performance
– set targets for next fiscal year
– develop initiatives to deliver the targets
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A New Era Of Accountability
• Monthly executive leadership StrategicOperating Review meetings:– review monthly performance indicators– discuss measures that are not meeting target and
course correction plans– majority of the meeting spent discussing strategic
issues within the context of our strategy map
• VP-level bi-weekly initiative progressmeetings
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A New Era Of Accountability
• Line management and employees– Organizational performance, strategic direction