Balanced scorecard application in the health care industry: a case study

Balanced scorecards became a popular strategic performance measurement and management tool in the 1990s by Robert Kaplan and David Norton. Mainline companies accepted balanced scorecards quickly, but health care organizations were slow to adopt them for use. A number of problems face the health care industry, including cost structure, payor limitations and constraints, and performance and quality issues that require changes in how health care organizations, both profit and nonprofit, manage operations. This article discusses balanced scorecards generally from theoretical and technical views, and why they should be used by health care organizations. The authors argue that balanced scorecards are particularly applicable to hospitals, clinics, and other health care companies. Finally, the authors perform a case study of the development, implementation, and use of balance scorecards by a regional Midwestern health care system. The positive and negative aspects of the subject's balanced scorecard are discussed. Leaders in today's health care industry are under great pressure to meet their financial goals. The industry is faced with financial pressures from consumers, insurers, and governments. Inflation in the industry is much higher than it is within the overall economy. Employers can no longer bear the burden of rising group health insurance costs for its employees. Too many large companies have used bankruptcy law as a shield to reduce or shift some of their legal obligations to provide health insurance coverage to present or retired employees. Stakeholders of health care providers are demanding greater control over costs. As the segment of un- or underinsured within the United States becomes larger as a percentage of the population, voters are seriously beginning to demand some form of national health insurance, which will drastically change the health care industry.