Assessing the Performance of Freestanding Hospitals
Michael J. McCue and Mark L. Diana
Freestanding hospitals are becoming less common as more hospitals are joining or establishing relationships with multihospital systems. These associations are driven by factors, such as unrelenting competition in local markets, aging physical plants, increasing labor costs, and higher physician fees, that place a high demand on financial assets. Despite these factors, many freestanding hospitals continue to do well financially, showing increases in total profit margins and total cash flow margins. This article examines which market, management, financial, and mission factors are associated with freestanding hospitals with consistently positive cash flows, relative to those without consistently positive cash flows.
The study sample consisted of freestanding, nonfederal, short-term, acute care general hospitals with more than 50 beds and three years of annual cash flow data. Data were taken from the annual surveys of the American Hospital Association, the cost reports of the Centers for Medicare and Medicaid Services, and the Area Resource File of the Health Resources and Services Administration. The data were analyzed using logistic regression to identify those factors associated with a consistently positive cash flow.
Freestanding hospitals with positive cash flows were found to have a greater market share and to be located in markets with a higher number of physicians and fewer acute care beds; to have fewer unoccupied beds, higher net revenues, greater liquidity, and less debt on hand; and to treat fewer Medicare patients than those without a positive cash flow. The findings suggest that these hospitals are located in resource-rich environments and that they have strong management teams.
Competing Values in Healthcare: Balancing the (Un)Balanced Scorecard
Angela M. Wicks and Lynda St. Clair
Facing a complex environment driven by two decades of dramatic change, healthcare organizations are adopting new strategic frameworks such as the Balanced Scorecard (BSC) to evaluate performance (Kaplan and Norton 1992). The BSC was not originally developed as a performance management tool, however. Rather, it was designed as a tool to communicate strategy and, as such, provides little guidance when actual outcomes fall short of desired outcomes. In addition, although the BSC is an improvement over exclusively financial measures, it has three conceptual limitations that are especially problematic for evaluating healthcare organizations: (1) it underemphasizes the employee perspective, (2) it is founded on a control-based management philosophy, and (3) it emphasizes making trade-offs. To address these limitations, we propose using the Competing Values Framework (CVF), a theoretically grounded, comprehensive approach to understanding and improving organizational and managerial performance by focusing on four action imperatives: competing, controlling, collaborating, and creating. The CVF pays particular attention to the employee perspective, is consistent with a commitment-based management philosophy, and emphasizes transcending apparent paradoxes to identify win-win solutions. Rather than focusing on customer satisfaction or employee satisfaction, the CVF looks for ways to satisfy customers and employees while still addressing financial constraints and growth opportunities. The CVF also can be used to assess both the culture of the organization and the competencies of individual managers, thereby providing a clear link between strategy and implementation.
The Informed Decisions Toolbox: Tools for Knowledge Transfer and Performance Improvement
Thomas G. Rundall, Peter F. Martelli, Laura Arroyo, Rodney McCurdy, Ilana Graetz, Esther B. Neuwirth, Pam Curtis, Julie Schmittdiel, Mark Gibson, and John Hsu
In recent years, spurred by developments in evidence-informed medicine, a movement to strengthen evidence-informed managerial decision making in healthcare organizations has emerged in the United States and in other countries. The drivers of this movement include demands by payers and consumer groups for improved quality of care, increased operational efficiency, and greater accountability from healthcare organizations. But numerous barriers to managers’ use of evidence in decision making exist, including time pressures, perceived threats to autonomy, preference for colloquial knowledge based on individual experiences, difficulty accessing the relevant evidence base, reliance on external consultants (and others) to determine the quality of the information, and lack of resources.
To help managers overcome these barriers, we developed the Informed Decisions Toolbox. It provides tools to help managers efficiently perform the six key steps in the evidence-informed approach to decision making: (1) framing the management question, (2) finding sources of information, (3) assessing the accuracy of the information, (4) assessing the applicability of the information, (5) assessing the actionability of the evidence, and (6) determining if the information is adequate. To build an organizational environment conducive to evidence-informed decision making, we suggest four leadership-driven strategies: (1) recognize and respond to the growing demand for accountability as a strategic issue, (2) establish organizational structures and processes for knowledge transfer, (3) build a questioning organizational culture, and (4) build organizational research capabilities.
With organizational support, managers who use the tools presented in the Informed Decisions Toolbox will be able to take control of the decision-making process, will be less reliant on colloquial evidence and consultants, and will be better able to improve the performance of their organizations.