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SESSION 125Mercy-Online: A BalancedScorecard

COPYRIGHT © 2001 BY THE HEALTHCARE INFORMATION AND MANAGEMENT SYSTEMS SOCIETY. 1

Nina D. MivilleDirector Management SystemsMercy HospitalMiami, FL

Cesar I. CalderaSenior Management AnalystMercy HospitalMiami, FL

Proceedings• • •

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Presentation Handouts Case Study

INTRODUCTION

The healthcare industry is undergoing several changes that are creating many challenges for hospitalboard members, administrators, and leading staff. Some of the changes in the healthcare sector thatare affecting hospitals include: the Balance Budget Act of 1997, the AHERF bankruptcy, the upcom-ing introduction of the Medicare Prospective Payment System, the proliferation of Managed Careinstitutions, the upcoming JCAHO outcomes performance standards, and increase on patient qualityservice expectations and awareness. These events are directly or indirectly reducing profit margin andcash flow. Due to the Balance Budget Act of 1997, the federal government will cut Medicare andMedicaid spending by $70.1 billion by the year 2002 (Lewin Report, 2000, AHA statistics). At MercyHospital, this represents $38 million dollars in lost Medicare and Medicaid Reimbursement. Theindustry has been roiled by sudden losses and for some institutions it has been an outright financialcrises. And while some institutions are not in a crisis today, the enduring effect of Medicare price cutsare likely to make crisis more commonplace in years to come (Healthcare Advisory Board, 1999,CEO Summary).

Mercy Hospital in Miami, member of the American Hospital Association, is a nonprofit organizationfounded in 1950. Throughout the years, Mercy Hospital has managed to stay competitive in a fieldwhere quality of service is the driving force. Mercy Hospital is a comprehensive healthcare systemwith a 512-bed acute care facility. Mercy Hospital offers medical treatment in 8 clinical inpatientdepartments and more than 20 outpatient programs. Specialized programs provided at MercyHospital include cardiac surgery, neurosurgery, lithotripsy, oncology services, psychiatry, gynecol-ogy, obstetrics, dialysis, cardiovascular services, rehabilitative services, home care service pain man-agement center, and a diabetes treatment center.

Since healthcare has been in a period of transition, volatility, and extreme competition, MercyHospital was facing a year where it had lost money in its two previous fiscal years and pressures fromCHE Corporate Headquarters. At that point, Senior Management knew that it needed to make drasticand immediate changes throughout the organization, in order to be able to accomplish a turnaround,they needed fast and accurate information on various statistics. The cry was “I need a button on thePC where I can click and get all the information needed to make immediate decisions.” SeniorManagement at Mercy Hospital realized that in order to stay competitive and become cost effective,they needed to change the way business decisions were made on a daily basis.

At that time, the Management Systems department was asked to work on a comprehensive project toachieve and meet the need of Senior Management. As with most organizations, there were hundreds ofreports available, on paper, with the necessary information, but it was cumbersome and slow to use.Thus we were charged with devising a method of providing vital information on a daily basis in orderto make immediate business decision. With that in mind, Management Systems began the develop-ment of an Intranet site, click of a button technology, which would have a Balanced Scorecard.

DETERMING PERFORMANCE MEASURES

The Balanced Scorecard methodology provides executive management with a comprehensive frame-work that translates a company’s strategic objectives into a coherent set of performance measures(Kaplan and Norton, 1993). The Balanced Scorecard links vision, strategic goals, and key perform-ance measurements throughout an organization. If the organization can identify key corporate per-formance indicators and permeate them to divisional, departmental, and individual levels it can betterposition itself to manage key success factors. This will enable administrators to better lead the organ-ization towards achieving its strategic plans.

At Mercy Hospital, we conducted a high-level business needs assessment to determine the approachand the indicators that would be included in the Balanced Scorecard. Before we could develop theIntranet site, we needed to determine what would encompass that Intranet site. The first piece ofinformation was to get a copy of the Hospital’s Strategic Plan, CHE’s Strategic Plan and the ISStrategic Plan. With these plans, we were able to determine that there would be four areas of focus onthe Balanced Scorecard: Internal, Financial, Customer, and Innovation and Learning.

After that, we attended several Senior Management meetings and reviewed current state of affairsregarding strategic tactical plans being pursued. We gathered and analyzed currently utilized finan-cial and non-financial measures from Finance and Management Systems. (Note that the collection,compilation, and use of measures was disorganized and scattered throughout the organization.) Fromall of this information, we put together a proposal for Senior Management of our findings. It was ofaggregate data/information currently available throughout the organization. We brainstormed withthe Sr. Management team the selection of key indicators for monitoring the organization’s perform-ance. From that meeting, we left with the specific measures that would become the BalancedScorecard.

2001 HIMSS Proceedings: Volume 4 Session 125 /

The organization’s Balanced Scorecard system was developed with these key performance indicatorsas its originating performance measures. With these measures we identified the source of each keyperformance indicator. We flowcharted and documented the actual flow of data. Figure 1 is an exam-ple of the flowcharts that were created. We then documented the definition of data elements, infor-mation, and formulas used in converting the data to accurate and comprehensive information formonitoring and decision-making.

DESCRIPTION OF SPECIFIC PERFORMANCE MEASURES

In this section, we will describe the various performance measures and their overall uses to the hos-pital administrators.

Internal PerformanceThis portion of the Balanced Scorecard has the internal measures that are used to make daily deci-sions by Senior Management, Departmental Directors and Managers. These measures were dividedinto two sections: Census Statistics and Productivity Measures.

Census Statistics- Under the category of Census Statistics, we included several measurements thatindicate the major volume indicators of the hospital (See Figure 2). These types of statistics directlyimpact the amount of resources, both labor and supplies, that are needed to support that volume. Theintent of creating these types of indicators is to allow Senior Management to see the volumes withinthe hospital and make quick decisions in regards to staffing and supplies. It is also a barometer ofwhat the day will be like at Mercy.

Productivity Measures- Under the category of Productivity Measures, we included several meas-urements that combine FTE usage along with the departments major volume indicator (See Figure 3).These types of statistics directly show whether we are using the hospital’s resources judiciously. Forexample, the BI-weekly Labor Tracking report helps managers and directors see how well they aremaking staffing decisions. The Productivity report helps managers and directors see how well theyare making staffing decisions on a volume-adjusted basis. The Daily FTE Usage report will helpmanagers and directors determine if their staffing decisions from the day before were appropriate andhow can I adjust for today or tomorrow. In addition, these reports are intended to help managers,directors and vice-presidents make decisions regarding their labor resources. In the past, they wouldhave to wait until the end of the month to determine if they were on target and make appropriatechanges. In many cases, these decisions were delayed for two months. With the balance scorecardsystem, managers and directors are able to make decisions daily and take corrective action on theirlabor resources. Not only does this system make decision making easier and quicker, it has automatedthe reporting of various data, specifically units of service, for Financial Services.


Figure 1: Bi-weekly Productivity Management System Structure

Financial MeasuresThis portion of the Balanced Scorecard has the financial measures that are used to make daily, mid-month and monthly decisions by Senior Management and Financial Services. These measures weredivided into three sections: Daily Financial Indicators, Mid-month / BI-Weekly Financial Indicators,and Monthly Financial Indicators. This area of the Balanced Scorecard is intended to aid FinancialServices in distributing and making available the various financial reports that they produce and dis-tribute. The ability to have it available online reduces the time spent on distribution to others and italso allows individuals to use the information in an automated fashion.

Daily Financial Indicators-

• Net IP & OP Revenue: Daily and Month-to-Date–This shows a rolling 30 days of the net Inpatientand Outpatient revenue on a daily basis versus the budget. In addition, we are showing the month-to date information.

• Revenue by Payor- This shows the daily revenue by payor mix categories. The categories that areused at Mercy are Medicare, Medicare Managed Care, Managed Care, Medicaid, and Other.

Mid-month / BI-Weekly Financial Indicators-

• Mid-Month Financial Report (CHE)–This shows an income statement for the month based on thefirst 15 days of performance. This is used as an early warning report before month-end.


Figure 2: Census Statistics

Figure 3: Productivity Measures

• Revenue by Payor Mix–This shows the mid-month revenue by payor mix categories. The cate-gories that are used at Mercy are Medicare, Medicare Managed Care, Managed Care, Medicaid,and Other

• AR Days–This shows the AR days at mid-month.

Monthly Financial Indicators-

• Flash Report–This report shows key statistics as they performed for the month. The statisticsinclude Discharges, Patient Days, ER Visits, Express Care Visits, Inpatient Surgery Cases,Outpatient Surgery Cases, Gross Patient Revenue (inpatient and outpatient) and the FTE count.

• Income Statement–YTD

• Financial Statements (Mercy Hospital and Affiliates)–This shows the monthly financials state-ments on a consolidate basis and by entity. It includes the Income Statement, Cash Flow, andBalance Sheet.

• CHE–Mercy Hospital Key Statistics Indicator Trend Report–This shows a rolling 12 months ofstatistics to indicate trends. The statistics included are in Figure 4.

• Key Financial Indicators (Profit Margin, Bad Debt, Current Ratio, etc.)–This portion of theBalanced Scorecard is still being defined and will be finalized in the next phase of the deployment

• Key Expense Indicators (Expenses/Adj. Discharge, Overtime %, etc.)–This portion of theBalanced Scorecard is still being defined and will be finalized in the next phase of the deployment

Customer (Quality)This portion of the Balanced Scorecard has the customer/quality service performance measures thatare used to enhance our Quality Improvement efforts throughout the organization. These measureswere divided into three sections: Quality Control, The Gallup Organization, and Mercy HospitalInternal Surveys. Listed below are some of the information that is included in this section of thescorecard, but this area is still under development.

Quality Control-

• Pain Management Monitoring–This shows an interactive control chart for the Pain Managementprogram at Mercy Hospital.

• Medication and IV errors–This shows an interactive control chart for the Medication and IV errors.

The Gallup Organization-

• ER Satisfaction Results

• Inpatient Satisfaction Results

• Outpatient Satisfaction Results


Figure 4: CIO Key Statistics Indicators

Mercy Hospital Internal Surveys-

• Express Care Satisfaction Results

• Patient Registration Satisfaction Results

• Information systems Help Desk Satisfaction Results

Innovation and GrowthThis portion of the Balanced Scorecard has the innovation, education, and growth initiatives of thehospital. This area is still being defined and will be finalized in the next phase of the deployment.

PROCESS IN DEVELOPING SCORECARD

Once all of the measures were defined, we were able to begin working on the actual BalancedScorecard. One of the key constraints was that we would have to develop with existing technology atthe hospital; for example, no new software purchases. This really was a defining factor. In addition, itneeded to be easy to use and available at the desktop. With these constraints, the most efficient andeffective method to disseminate the information was via the organizations Intranet. The BalancedScorecard system was designed using Microsoft Access 2000, Microsoft Front Page 2000, andMicrosoft Office Web Components (ActiveX Data Objects) and published to a Microsoft’s InternetInformation Server.

There would be two components to the web-site. One area would be the actual Balanced Scorecard,which would have security access for those who needed to use the information for their specificwork. Executive Management would have access to the entire site while Directors and Managerswould only have access to their department’s specific data. The second area of the web-site, MercyOnline, would be information available to all individuals who had a network sign-on at Mercy.Information on this area of the site includes the telephone directory, policy manual, current censusinformation, and general information for the entire hospital community.

In addition, we needed to decide on the look and feel of the web-site. We decided that there would bean initial screen for the Balanced Scorecard, with four buttons to navigate the four main measurementareas (See Figure 5). When you clicked on any of those buttons, it would take you to the listing/linksof the specific measures for that category. (See Figures 6–19). The Mercy Online portion of the sys-tem would have a main screen (See Figure 20) with buttons/links to the other information. An exam-ple of one of them is in Figure 21. This basic layout with graphics provided a clean crisp look thatwas easy to use.


Figure 5


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Figure 20

Figure 21

Developing the Census Statistics and Daily Financial Indicators The flowcharts (Figure 1) that were developed to document the flow of data served as the blueprintsto design and develop the Balanced Scorecard system. These flowcharts and matrices helped us iden-tify and document the business and data requirements such as data source and refreshing frequency.The Balanced Scorecard system encompasses an umbrella of metrics ranging from financial meas-ures to customer satisfaction ratings. These metrics or key performance indicators are formulatedfrom data residing in different computer systems. Therefore, a relational database using MicrosoftAccess 2000 was developed to serve as the central repository of data elements required to formulatethe Balanced Scorecard metrics.

Gathering the data elements was accomplished by either having process owners perform data entryvia the Intranet or uploading data from other computer systems within Mercy Hospital. Data entrywas only done for which data was not currently being collected by electronic means. User-friendlyinterfaces customized to each process owner’s business needs were developed for them to performthe required data entry. The effort required by process owners is estimated at 5 minutes per day toenter the data via the Intranet.

The process for uploading data from the other computer systems varied based on the methods bywhich data was made available. The data elements for Census statistics (i.e., Daily CensusPerformance, Payor Mix, ALOS) and daily financial indicators (i.e., net IP & OP Revenue, Revenueby Payor) originate from the Patient Management system, HBOC. These statistics are updated daily.

Reports from the mainframe system containing relevant census and revenue information are generatedat midnight. These reports are made available in a comma delimited text file and electronically trans-ferred to the web server where the Microsoft Access database resides. The Census by Nursing Unit sta-tistic is currently updated every half-hour and the data originates from the clinical system, Cerner. Therelational database automatically uploads the census and revenue text files to its respective tables.Queries are then executed to prepare or formulate the respective key performance indicators.

Users access the Balanced Scorecard database via the Intranet site. ActiveX Data Objects and SQLprovide users with a dynamic interactive Balanced Scorecard site. Users can drill down throughmeasures to find root causes of any deviance from the predetermined targets.

Developing the Productivity SystemAs part of the BI-weekly and daily productivity performance system being deployed among all CHEhospitals, Management Systems at Mercy Hospital internally designed, developed, and implementeda “Productivity Management System”. This system will facilitate the collection, calculation, storage,and dissemination of units of service, man-hours, expenses, targets, and respective productivity per-formance measures. The data that needs to be periodically collected comes from various sources:

• Unit of service: derived from Medical records, Medipac reports, Cerner reports, and departmentreports

• Man-hours: derived from GEAC system (BI-weekly) and TRM (Daily)

• Salary Expenses: derived from GEAC System

• Targets: derived from Premier, Management Systems, and Finance.

The “Productivity Management System” consists of multiple modules for the collection, calculation,storage, and dissemination of performance data. The “Unit of Service Data Entry” module includesdata entry screens deployed over Mercy Hospital’s Intranet that can be accessed by individualdepartments currently responsible for collecting and reporting respective unit of service volumes.

DEPLOYMENT AND USE

The actual deployment of the program was fairly simple. The user had to have access to the Internetcurrently or we needed to get them access. Then Information Systems developed a NAL object thatwould actually deploy an icon to the user’s desktop. When the user clicked on the icon for the firsttime, the software/access component would be installed on their desktop. Installation typically took 5minutes. Once this was completed, we conducted one-on-one training with Senior Management innavigating the Balanced Scorecard Intranet site. With this type of deployment, we were able to dis-tribute the program at the click of a button (Senior Management’s wish) and provide the informationwith minimal training.

The initial use of the site was sporadic. We found that Senior Management was not used to looking attheir PC for the daily information to make decisions. In addition to deploying the software, weneeded to get them to change their daily practice of managing. Constant monitoring and providingfeedback to the Management Team accomplished this. In addition, we stopped providing the


information on paper so that they would have to use the Balanced Scorecard. This was actually themost effective way of changing habit.

CONCLUSIONS

As a result of the deployment of the Balanced Scorecard, we have seen the following results at MercyHospital:

• The Balanced Scorecard system infrastructure had to be developed in-house with existing avail-able resources including hardware, software, and manpower. Consequently, we were very creativein the use of existing resources.

• There was a consensus among Senior Management on the Key Performance Measures that wouldbe used to monitor and manage. This provided direction and focus throughout the organization asto what information needed to be compiled. Consequently, Directors and Managers have a betterunderstanding of the Key Performance Measures and goals the hospital is pursuing; therefore,they have better direction as to which operating processes they must focus on.

• Senior Management has realized the benefits of being a measured-managed organization. Theorganization has transitioned from evaluating month-end financials and non-financial measures tomonitoring bi-monthly, weekly, and daily performance measures providing the organization withmore timely information of critical success factors thereby allowing them to make decision andgive directives base on actual performance as opposed to past performance.

• Financial performance at Mercy Hospital has improved significantly over the past six months.There have been at least three positive bottom-line months.

• The accessibility of the Balanced Scorecard system via the intranet in a friendly graphical userinterface (internet browser) had a positive impact on users due to the visibility of information dis-played and increase comprehension of information. As a result, increased interest, acceptance,and usability of the system has created the means through which the Balanced Scorecard will bedeployed to other levels of the organization to monitor their respective performance measures.

Despite the many successes of the project and the use of the Balanced Scorecard, there still remainssome unfinished business. These include the following:

• Reevaluate the Key Performance indicators for the Hospital’s Balanced Scorecard to ensure thatthey remain aligned with the Hospital’s strategic and tactical plans.

• Complete the radar diagram for the Balanced Scorecard. (Figure 22)


Figure 22

• Cascade the Balanced Scorecard to the divisional and departmental interdependencies amongstthe Balanced Scorecard’s performance measures. Must maintain vertical and horizontal alignmentand link between performance measures.

• Deploy the Balanced Scorecard at the divisional and departmental levels with the appropriatesecurity.

BIBLIOGRAPHY

The Lewin Group, 2000, “The Impact of the Medicare Balanced Budget Refinement Act on MedicarePayments to Hospital,” http://www.aha.org/bba/lewinreport.html, (February 1, 2000).

Healthcare Advisory Board, 1999, CEO Summary.

Kaplan, R. and Norton, D., 1993, “Putting the Balanced Scorecard to Work,” Harvard BusinessReview, 93505, 134-147.

AUTHOR BIOGRAPHIES

Nina D. Miville–She is the Director, Management Systems, at Mercy Hospital and an AdjunctProfessor at FIU with 16 years of experience. Areas of expertise: Operational/Financial/Systemsanalysis, Project Management, and Reengineering initiatives.

Cesar I. Caldera–He is a Senior Systems Analyst at Mercy Hospital with 5 years of experience.Areas of expertise include operational analysis, systems analysis and programming, and qualityimprovement initiatives.


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