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The Revolution in Hospital Management

Article  in  Journal of healthcare management / American College of Healthcare Executives · May 2005

DOI: 10.1097/00115514-200505000-00007 · Source: PubMed

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The Revolution in Hospital
Management
John R. Griffith, FACHE, Andrew Pattullo Collegiate Professor, Department of Health
Management and Policy, The University of Michigan, Ann Arbor, and Kenneth R.
White, Ph.D., FACHE, associate professor and director, Graduate Program in Health
Administration, Virginia Commonwealth University, Richmond

................................................................................................
E X E C U T I V E S U M M A R Y
Five healthcare systems that have either won the Malcolm Baldrige National Qual-
ity Award in Health Care or been documented in extensive case studies share a
common model of management: they all emphasize a broadly accepted mission;
measured performance; continuous quality improvement; and responsiveness to
the needs of patients, physicians, employees, and community stakeholders. This
approach produces results that are substantially and uniformly better than average,
across a wide variety of acute care settings. As customers, courts, and accrediting
and payment agencies recognize this management approach, we argue that it will
become the standard for all hospitals to achieve.
This article examines documented cases of excellent hospitals, using the reports
of three winners of the Baldrige National Quality Award in Health Care and pub-
lished studies of other institutions with exceptional records.

For more information on the content of this article, please contact Professor
Griffith at jrg@umich.edu. To purchase an electronic reprint of this article, go to
www.ache.org/pubs/jhmsub.cfm, scroll down to the bottom of the page, and click
on the purchase link.

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 The Revolution in Hospital Management

E xcellent organizations demonstrate

long-term results that satisfy most
or all of their stakeholders. This
performance expectations, . . . focus
on patients and other customers
and stakeholders, empowerment,
article examines documented cases innovation, and learning . . . .also . . .
of excellent hospitals, using the reports governance and . . . public and
of the three winners of the Malcolm community responsibilities” (Baldrige
Baldrige National Quality Award in Health Care Criteria 2004).
Health Care and published studies The Baldrige expects leaders
of other institutions with exceptional to establish universal two-way
records (see Table 1). These reports communication practices and to use
show that the organizations share them to deploy organizational values
many management practices. and performance expectations. Leading
While these are certainly not hospitals now do the following:
the only excellent institutions, their
achievements have been successfully 1. Use mission, vision, and values
applied in a wide variety of settings, statements as central referents to
generating results that are substantially describe the organization to its
superior to those of typical hospitals. publics, attract compassionate
Their approach has now been workers, focus ongoing dialog, and
tested in over 100 diverse American test propositions for change. SSM
communities, suggesting that it is Health Care (SSMHC 2002) has
an appropriate model for most U.S. a “Passport” for every employee
hospitals and healthcare systems. that states its mission, vision, and
The Malcolm Baldrige Health Care values. St. Luke’s Hospital’s (SLH
Criteria for Performance Excellence 2003) “Very Important Principles”
(2004) provide a template that shows card lists its strategic goals. Catholic
how this management approach has Health Initiatives (CHI) keeps
been built into day-to-day actions that its values—“Reverence, Integrity,
produce excellence in quality, cost, Compassion, and Excellence”—
financial stability, and physician and constantly in the mind of its
worker satisfaction. The Baldrige criteria associates by including them on
in general are deliberately designed badges, posters, and other printed
to cover a broad range of businesses media (Griffith and White 2003).
and strategies and organized in seven 2. Use several hundred measures
sections that emphasize leadership, and benchmarks to provide
strategy, patient relations, worker each responsibility center with
relations, information management, multidimensional measures
operations, and results. of performance (Griffith and
White 2002; Simmons 2000).
LEADERSHIP Baptist Hospital, Inc. (BHI 2003)
Leadership is “how senior leaders aggregates more than 75 measures
address values, directions, and to 14 for governance reporting. SLH

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 Journal of Healthcare Management 50:3 May/June 2005

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TA B L E 1
Characteristics of Systems and Hospitals Studied

Hospital or Scope of
Healthcare System Documentation Size Service Locations

Baptist Hospital, Baldrige $158 million Tertiary and Pensacola,

Inc. National revenue; 492- referral care Florida
Quality Award bed urban
Application, hospital
2003

Catholic Health Case study; $6 billion Ranges from 64 communities

Initiatives Thinking Forward revenue; 47 “critical access” in 19 states
book “market-based hospitals to
organizations” tertiary centers;
of one or more includes long-
hospitals term and
palliative care

Intermountain IHC annual $3 billion Ranges from 27 communities

Health Care reports; Harvard revenue; 20 rural clinics to in Utah and
Business School hospitals and Intermountain Idaho
Case 9-603-066 clinic facilities Medical
Center, a
tertiary medical
teaching center

SSM Health Baldrige $2 billion Acute, 7 markets

Care National revenue; 21 long-term, in Missouri,
Quality Award general and rehabilitative, Illinois,
Application, specialty and palliative Wisconsin,
2002 hospitals with care and Oklahoma
clinic facilities

St. Luke’s Baldrige $308 million Tertiary and Kansas City,

Hospital National revenue; 482- referral care Missouri
Quality Award bed suburban
Application, hospital
2003
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 The Revolution in Hospital Management

(2003) aggregates 86 broadly used workers and lower-level managers.

measures to a color-coded scorecard A culture is created that requires
of 27 for senior leadership. senior management to listen to and
3. Report promptly and often publicly. respond to frontline concerns (BHI
Important performance measures 2003; SLH 2003; SSMHC 2002;
are reported daily, biweekly, and Griffith and White 2003).
monthly so that all managers and 5. Attract and retain effective team
most employees know exactly members. Leading organizations
where they stand. Both BHI (2003) monitor satisfaction, turnover, and
and SLH (2003) stress 90-day safety routinely for physicians and
action plans. BHI claims, “The employees. All have formal and
agility inherent in 90-day review . . . informal listening activities such
gives BHI an advantage in its as forums and walking rounds.
highly competitive environment.” SLH has an “administrator on
SSMHC (2002) reports 49 measures call” 24 hours a day/7 days a week
monthly and 14 more quarterly. and an “open door policy.” The
At SSMHC “ . . . specific goals and “service value chain” concept—
objectives . . . are posted in [each] satisfied workers produce satisfied
department. Posters provide a customers and improved overall
visual line of sight connection from performance—has been widely
SSMHC’s mission to department accepted (Heskett, Sasser, and
goals.” Schlesinger 1997). BHI pioneered
4. Use the measurement system to the service value application to
shape two-way communication. hospitals, and along with SSMHC,
Performance improvement teams has won national awards for
(PITs) identify, test, and implement employment practices. CHI is
process changes that drive next implementing the concept at
year’s goals. A hospital may several sites, pursuing a “Spirit”
have a dozen or more teams model that focuses employee
redesigning processes. PITs are education on a new topic each
facilitated and supervised by a month (Griffith and White 2003).
senior management group (BHI SSMHC (2002) is implementing an
2003; SLH 2003; SSMHC 2002; accountability-based professional
Griffith and White 2003). SLH practice model “to give nurses and
(2003) claims its performance other employees greater decision-
management process “produces a making authority.” As of 2004,
set of specific, measurable behaviors all hospitals have implemented
that exemplify the core values for the model in nursing, and many
each and every SLH employee.” have implemented it in all clinical
The values, the scorecard, and services (Friedman 2004).
continuous quality improvement 6. Use financial incentives to reward
(CQI) converge to empower goal achievement, supplementing

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Journal of Healthcare Management 50:3 May/June 2005

the recognition and celebration [and] practices good citizenship.”

included in CQI and the service Leading hospitals and systems
value chain. BHI and SLH use have identified and measured their
a merit increase program with community contribution (Catholic
individual objectives and a detailed Health Association 2001) and made
review. CHI offers substantial cash their information public (see each
incentives for managers. At least organization’s web sites). SLH has
one CHI site provides performance- established a joint venture in cancer
based awards for all workers. care with its largest competitor,
Intermountain Health Care (IHC) HCA. In Portland, Oregon, four
allows its managers to earn bonuses healthcare organizations have
that meet national pay standards linked with state and county health
(Griffith and White 2003). departments to establish a collaborative
network (Griffith 1998). BHI (2003)
The Baldrige asks how senior collaborates with a competitor to run
leaders create “an environment . . . clinics.
that fosters legal and ethical behavior” The Baldrige is also concerned
(Baldrige Health Care Criteria 2004). about how the hospital “contributes
BHI (2003) leaders are required to to the health of its community.” The
attest that they “have no knowledge of best hospitals have established effective
violations of Baptist’s high standards.” processes for contributing to promote
CHI and SSMHC use an audit system healthy behavior and to prevent illness.
that makes the internal auditor They have promoted alternatives to
accountable to an outside agency. acute care, such as chronic disease
CHI supplements the audit with management and palliative care
quarterly certification of reports by its (Griffith and White 2003). The
local CEOs and CFOs. It has a similarly American Hospital Association’s
sophisticated compliance process, “Healthy Communities” movement
designed as much to create effective has taken hold as a priority in winning
relationships as to prevent violations hospitals. SSMHC (2002) launched a
of the law (Griffith and White 2003). systemwide “Healthy Communities”
SSMHC uses the model compliance initiative in 1995, and it also has a
plan proposed by the Office of the committee to foster environmental
Inspector General as a foundation awareness at each local site. In
but “goes beyond compliance . . . to Kearney, Nebraska, CHI established
ensure that SSMHC values are reflected an award-winning collaboration
in all work processes . . . .KPMG has with local industry, government, and
identified SSMHC’s corporate review religious organizations. The model has
process as a best practice nationwide” increased in popularity and gained
(SSMHC 2002). commitment while sharing the cost of
The Baldrige application asks the program with other organizations
how the organization “addresses (Griffith and White 2003). BHI (2003)
its responsibilities to the public sponsors a Partnership for Healthy

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 The Revolution in Hospital Management

Communities and “Get Healthy facts and the appropriate strategic

Pensacola” program . . . . [E]nrollees responses.
can earn prizes or discounts arranged 4. Set goals based on systematic
with local businesses . . . .” analysis of benchmark and market
data as well as local history.
S T R AT E G I C P L A N N I N G 5. Use task forces or PITs to change
According to the 2004 Baldrige performance. PITs have broad
Health Care Criteria, strategic participation, clear charges and
planning is “how your organization deadlines. The plans they develop
develops strategic objectives and have explicit timetables and
action plans. . . . how your chosen performance expectations.
strategic objectives and action plans
6. Empower member units by
are deployed and how progress is
delegating authority.
measured.”
7. Build plan achievement targets into
The Baldrige application expects
managers’ goals and incentives.
the components of continuous
improvement—goals, empowerment,
SLH has evolved a particularly
analysis, and revision—to be imbedded
comprehensive strategic process. As
in the culture. Change is the rule.
shown in Figure 1, it is based on three
The strategic process is about
dimensions of “roll out” (SLH 2003):
how alternatives are selected and
implemented through a plan with
• From strategic (Level 1) concerns
explicit goals and timetables.
through several levels of accountabil-
Leading institutions do the
ity (Levels II through IV)
following:
• From long-term to short-term (90
day) action plans.
1. Begin an annual cycle with a review
of mission, vision, and values, • From strategic goals to process
both to keep these current and to improvement to individual
reinforce them as core criteria to development plans.
guide their strategy.
Measures, goals, and process
2. Undertake a rigorous, multifaceted improvement plans are articulated
environment review of threats at each step of each dimension. The
or opportunities presented by strategy role out itself is improved
the market, technology, critical by feedback from each of the three
caregivers, competitors, and dimensions.
regulation. They explicitly integrate Figure 2 shows the 90-day tracking
financial needs and resources. mechanism at the senior management
Support from system corporate level. At SLH, it is in color: blue,
offices has helped many hospitals. green, yellow, and red for four levels
3. Use retreats to build consensus of goal achievement. Managers can
around the implications of the “drill down” for run charts, goals, and

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 ••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••

FIGURE 1
SLH Leadership for Performance Excellence Model

VISION P
I R
M I
MISSION V P N
E O C
R R I
CORE VALUES Y T
A P
N L
STRATEGY T E
S

Strategic Focus Areas Strategic Planning

BALANCED SCORECARD PERSPECTIVES
Commitment to Excellence
Level I Processes Customer Growth & Clinical & Assessment Model
Finance People
Satisfaction Development Administrative
Quality
Manage Financial Leadership
Performance Strategic Planning
S
Manage Customers B
C Level II,

176
A Patient/Customer Focus
Manage Growth
O
L
R III, IV Measurement and
and Development A E Knowledge Management
N

please fax your request to 312.424.0014.

Manage Clinical Process C C Scorecards Process
A Staff Focus
and Administrative E
R Improvement
Quality D Process Management
D
P
Manage People Plans Results Focus
Journal of Healthcare Management 50:3 May/June 2005

M
P

90-Day Action Plans Individual

Development
Plans
Performance Knowledge
Improvement Sharing
& Innovation

the permission of Health Administration Press. For permission,

Source: St. Luke’s Hospital, Kansas City, Missouri.

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••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••
 The Revolution in Hospital Management

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FIGURE 2
SLH Hospital Scorecard Sample Template

SCORING CRITERIA
Target Stretch Goal Moderate Risk
Qtr Raw
Key Measure
Year
10 9 8 7 6 5 4 3 2 1 Score
Total Margin 6
4
FINANCIAL

Operating Margin

Operating Cash Flow 5

Days Cash on Hand 7
Cost per CMI
6
Adjusted Discharge
Would Recommend
7
(IP;OP;ED)
CUSTOMER SATISFACTION

Overall Satisfaction
8
(IP;OP;ED)
Longer Than
Expected Wait Time 7
(IP;OP;ED)
Responsiveness to
4
Complaints
Outcome of Care 9
IP Active Admitting
9
Physician Ratio
OP Admitting
5
Physician Counts
**Community IP
GROWTH & DEVELOPMENT

6
Market Share
Eligible IP Market
5
Share - Draw Zips
Eligible IP Profitable
Market Share - Draw 3
Zips
IP PCP Referral -
6
Ratio - Draw Zips
OP Referral Counts
10
Draw Zips
***IP Clinical Care
8
Index
CLINICAL & ADMINISTRATIVE QUALITY

***OP Clinical Care

7
Index
***Patient Safety
6
Index
***Operational Index 7
***Maryland Quality
8
Indicator Index
***Infection Control
5
Index

***Medical Staff
8
Clinical Indicator Index

Net Days in Accounts

6
Receivable (IP/OP)

Human Capital Value

4
Added
Retention 10
PEOPLE

Diversity 7
Job Coverage Ratio 8
**Competency 10
**Employee
7
Satisfaction
** Indicates annual measure. ***Detail in Appendix B Overall Score 7
Exceeding Goal 1 Qtr 2 Qtr 3 Qtr 4 Qtr Goal 7
Goal Overall Score 7 7 Stretch 10
Moderate
Risk For performance to be scored greater than Level 1, the performance value must meet or exceed the scoring criteria within a Level.

Source: St. Luke’s Hospital, Kansas City, Missouri.

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Journal of Healthcare Management 50:3 May/June 2005

benchmarks. Similar reports go to the 1. Refine a comprehensive system of

“Level” managers of Figure 1. “listening and learning tools” using
The processes for strategy are not focus groups, community need
substantially different from those surveys, patient and other customer
used at IHC and Henry Ford Health satisfaction surveys, reports from
System a decade ago (Griffith, Sahney, PITs, meetings with physicians, and
and Mohr 1995). The difference, as industry market research. BHI is
IHC executives noted at the time, “obsessed” with patient care and
is implementation. Focused on the customer satisfaction, surveying
results, leaders implement the process every inpatient and one of eight
with both vigilance and rigor. Vigilance outpatients. Scores are near the
allows them to spot opportunities and 99th percentile in the nationwide
threats faster. A network of informed data (BHI 2003).
and committed agents uncovers SLH creates a “patient path,”
new ideas. A rich background to a patient-friendly format of the
evaluate them develops quickly. Rigor care plan that explains timing
protects them from the usual causes and purpose. All employees are
of bureaucratic delay. Denial, special empowered and expected to resolve
interests, and paralysis by analysis complaints. Each patient is assigned
simply are not acceptable in leading to a patient advocate (PA) who
institutions. The loop is closed by the visits patients on their first, fifth,
short-term plans. and tenth day, and more frequently
if needed. Many of the PAs are
F O C U S O N PAT I E N T S , O T H E R bilingual and serve as translators
CUSTOMERS, AND MARKETS (SLH 2003).
This criterion is about “how your 2. Assess opportunities for improving
organization determines requirements, service and clinical quality. Through
expectations, and preferences of environmental scanning, one of
patients . . . and markets. . . . builds SSMHC hospitals discovered an
relationships . . . and determines the opportunity to satisfy an increased
key factors that lead to . . . satisfaction, demand for heart services as a
loyalty, . . . retention, and . . . service result of the dissolution of a
expansion” (Baldrige Health Care physician group. The hospital then
Criteria 2004). opened the first heart hospital in its
The Baldrige application expects community, for which the hospital
solid and expanding relationships with received an “Innovator of the Year”
patients, families, physicians, other Award (SSMHC 2002).
healthcare providers, students, insurers, 3. Analyze performance to identify
employers, patient advocacy groups, the what contributes to patient loyalty.
community, and government agencies. The SSMHC planning staff provides
The leaders systematically do the monthly reports to each entity that
following: identify trends and opportunities

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 The Revolution in Hospital Management

in patient loyalty. For example, analysis. BHI (2003) maintains

classes about particular diseases or a customer loyalty team that
conditions, support groups, and focuses on making things right
e-health information empower when responding to complaints.
patients to proactively manage Complaints are addressed within
their disease/condition and 24 hours at SLH (2003), and
therefore build loyalty (SSMHC SSMHC (2002) uses a software
2002). management program for tracking
4. Meet requirements of physician complaints developed by one of its
partners and build physician hospitals.
loyalty. SSMHC (2002) hospitals 7. Celebrate extra effort for the cus-
have physician liaisons and other tomer, and “recover” from ser-
staff members who focus on vice errors. All of the Baldrige
physician relations, recruitment, winners describe service recovery
and retention. BHI and SLH (2003) processes that focus on listening to
survey physicians annually and the customer and recommending
hold periodic interviews and focus problem solutions. Employees at
groups. BHI (2003) implemented BHI (2003) are empowered with
a “Physician Action Line,” which spending guidelines for resolution
allows members of the medical of problems that involve lost items,
staff to give BHI leaders feedback. delays, or complaints concerning
When BHI leaders found out that physicians. Extra effort by employ-
a common physician irritant was ees is explicitly rewarded with writ-
not being able to locate nurses ten acknowledgment, celebration,
quickly, they issued wireless phones and gifts. CHI’s “Complaints as
to nurses. BHI also trains physician a Gift” program emphasizes that
office staffs and assists with office complaints are an opportunity to
patient satisfaction surveys. make things better (Griffith and
5. Treat employers as important White 2003). Dominican Hospital
customers. BHI surveys community (DH 2003) tracks compliments
employer groups to assess for communication to employees,
satisfaction, attitude, and needs. physicians, and key stakeholders
In focus groups with employers, and celebrates results with individ-
BHI (2003) discovered a desire ual employees.
to encourage healthy lifestyle 8. Search outside the healthcare in-
and responded with an incentive- dustry to learn about maintaining
based healthy lifestyle program for customer loyalty and building cus-
workers. tomer relationships. BHI’s (2003)
6. React immediately to customer Standards Team, a subcommittee of
complaints with a standardized the Culture Team, actively pursues
process of response, tracking, best practices in leading nonhealth-
follow-up resolution, and pattern care organizations.

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Journal of Healthcare Management 50:3 May/June 2005

M E A S U R E M E N T, A N A LY S I S , and market analysts plus VHA,

AND KNOWLEDGE Maryland Quality Indicators,
MANAGEMENT and the Missouri PRO. SLH
This criterion is defined as “how your and BHI are signed up for the
organization selects, gathers, analyzes, Centers for Medicaid and Medicare
manages, and improves its data, Services’ “7th Scope of Work”
information, and knowledge assets” initiative that goes beyond the Joint
(Baldrige Health Care Criteria 2004). Commission’s “Key Measures” (SLH
The Baldrige scores knowledge 2003; BHI 2003). SSMHC (2002),
as a resource that is slightly more which believes “external visits are
important than the human resource. key to the benchmarking process,”
The points are equally divided has a guide book on its intranet
between “measurement and analysis that describes sources and uses of
of organizational performance” benchmarks.
and “information and knowledge
3. Provide internal consultants to
management.”
help PITs analyze the relationships
“Measurement and analysis”
between measures, identify trends,
require definitions, input, verification,
and prepare forecasts. Improvement
standardization, archiving, and analysis
proposals are expected to provide
of large volumes of data from multiple
quantitative forecasts of all
sources. The management challenge
relevant measures, and accepted
is to develop, maintain, and use these
proposals are expected to achieve
data to improve performance. The
the forecasts. IHC’s Institute for
leading institutions follow these steps:
Healthcare Delivery Research has
1. Build medical-records coding been central to several significant
and data, billing, materials process changes (Bohmer,
management, cost accounting, Edmondson, and Feldman 2003).
satisfaction surveys, and human 4. Use a formal structure to improve
resources data so effectively and the data processing resource and
reliably that they are taken as a the selection and definition of
given. CHI and SSMHC use their measures. SSMHC (2002) and BHI
internal audit function to ensure (2003) use an information council,
the accuracy of critical nonfinancial including senior management
measures (Griffith and White 2003; and representation from users
SSMHC 2002). and information specialists. Ad
2. Benchmark and compare to hoc information management
best practice. No goal is set teams develop and evaluate
without benchmarking. SLH specific measurement and
(2003), for example, uses six knowledge programs. They bring
outside commercial sources for in technical expertise, listen for
comparisons, including survey implementation issues, and create
companies, financial analysts, specific short-term and long-term

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 The Revolution in Hospital Management

plans. SSMHC (2002) and CHI employees.” All employees and

(Griffith and White 2003) use a physicians are encouraged to access
farm system—required, standard, the BHI intranet for information.
and nonstandard—that allows 3. Expand electronic medical record
individual units to experiment with capability. Access to clinical
new measures. information is now a high priority.
5. Involve line management in IHC has the most comprehensive
knowledge management. The electronic medical record, which
leaders have invested heavily was developed over several years
in managerial effort, worker (Griffith and White 2003). BHI’s
training, and data warehouses information system covers order
over a period of years. They believe entry and some results reporting.
these investments have paid off, SLH has only recently moved to an
and they plan to continue a high electronic order entry, results, and
level of investment. communication system.
4. Emphasize reporting to physicians.
The 2004 Baldrige Health Care SLH has built a system to supply
Criteria state, “Information and discharge summaries, key findings,
knowledge management . . . examines EKG results, and cardiac imaging
how your organization ensures the to referring physicians. It is also
availability of high quality, timely developing an electronic intensive
data . . . for all your key users.” The care unit monitoring and reporting
criteria address needs, not methods. system, allowing intensivists in
They do not demand an electronic the flagship hospital to care for
medical record or even computerized patients in smaller institutions.
patient order entry. The leaders do the SLH and CHI are working actively
following: on telecommunications with rural
hospitals and patients (SLH 2003;
1. Build the process management and Griffith and White 2003).
general business capability ahead of 5. Keep data secure and confidential
their clinical information systems. to meet HIPAA (Health Insurance
They have emphasized using Portability and Accountability
standard commercial software and Act) requirements. Permanent
the information it produces rather committees supervise confidentiality
than developing modifications. policies and access. SLH has an
2. Use web technology to put extensive firewall system, hourly
management information at the tape backups of critical data, and a
caregivers’ and the managers’ disaster recovery process.
fingertips. BHI (2003) claims
that it “provides a ‘no secrets’ This strategy emphasizes measures
environment with organizationally and users, as opposed to hardware and
educated, knowledgeable technical capability. The leaders show

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Journal of Healthcare Management 50:3 May/June 2005

that when the strategy is pursued for (2003) employee turnover rate
a few years, it results in a situation has declined from 31 percent in
where people “understand where 1997 to 13.9 percent in 2003.
the numbers are coming from and The percentage of staff reporting
move on to improving . . . operations” positive morale has risen from 47
(Griffith and White 2003, 35). From percent in 1996 to 84 percent in
that emerges a culture that is evidence 2001. In 2002 and 2003, BHI was
based, quantitative, and committed ranked in the top 15 in Fortune’s
to continuous improvement. CHI 100 Best Companies to Work For
has shown substantial results in in America. SSMHC’s (2002) all-
only three years, with a modest employee turnover rate fell from 21
investment in hardware (Griffith percent in 1999 to 15 percent in
and White 2003). IHC’s managers 2002. SLH’s (2003) employee re-
believe its cost accounting system and tention approaches 90 percent. All
deliberate collaboration with physicians three exceed the Saratoga Institute’s
are as important to success as its median, which is about 70 percent
medical record technology (Bohmer, in 2002.
Edmondson, and Feldman 2003).
2. Create human resources systems
that foster high performance. Job
F O C U S O N S TA F F
descriptions, career progression,
This focus is defined as “how your
motivation, communication, recog-
organization’s work systems and
nition, and compensation are well-
staff learning and motivation enable
designed, integrated processes.
all staff to develop and utilize their
Selection, training, and on-the-
full potential . . . . and maintain a
job reinforcement of knowledge
work environment . . . conducive to
and skills are tied to individual
performance excellence and to personal
and organizational objectives and
and organizational growth” (Baldrige
action plans. Explicit policies pro-
Health Care Criteria 2004).
vide ways to recognize employ-
The Baldrige expects human
ees, physicians, and volunteers.
resource practices that attract and retain
An executive career development
competent and satisfied employees
program identifies and develops
and that continuously improve their
future leaders (SSMHC 2002). SLH
skills. The work environment must
develop staff, volunteers, students, and (2003) uses matrix accountability
independent practitioners by aligning to manage work and jobs, empha-
their expertise and efforts with the sizing multidisciplinary teams and
organization’s overall strategy. The committees to enhance a patient-
leading institutions do the following: focused delivery model.
3. Emphasize organizational learning
1. Strive to identify and keep good and adaptation to change. These
employees as the core of the hu- organizations provide more than
man resources strategy. BHI’s 40 hours training to each employee

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 The Revolution in Hospital Management

per year, with managers receiving from 3 percent in 1998 to almost

almost twice as much as hourly 10 percent in 2002. SSMHC (2002)
workers. SLH (2003) appointed a has used a diversity mentoring
chief learning officer in 2003 to program to increase minorities
identify learning needs for all staff, in professional and managerial
volunteers, and physicians. BHI’s positions from below 8 percent
(2003) commitment to tracking in 1997 to 9.2 percent in 2001,
the learning investment in business part of a larger diversity program
results led to its recognition as a that was recognized as a national
“Top 50” learning organization by best practice in 2002 by the AHA.
Training magazine in 2003. Both SLH and SSMHC substantially
surpass the healthcare industry
4. Continually improve staff well-
average of 2 percent.
being, motivation, benefits, and
workplace safety. To attract and
PROCESS MANAGEMENT
retain the women who comprise
Process management deals with “your
82 percent of its workforce, SSMHC
organization’s process management,
(2002) offers flexible work hours,
including key health care, business, and
work-at-home options, long-term
other support processes for creating
care insurance, insurance coverage
value” (Griffith and White 2003).
for legally domiciled adults, retreats
The Baldrige approaches orga-
and wellness programs. Its workers
nizations as a large set of work
regard its tuition assistance and
processes. Each process is described
student loan repayment programs
and monitored by performance
as differentiating SSMHC from its
measures that usually cover availability,
competitors. At SLH (2003), factors
cost, quality, customer satisfaction, and
that determine employee well-
worker satisfaction. The benchmarks,
being, satisfaction, and motivation
goals, and stakeholder opinions
are uncovered through formal
from the strategic planning criterion
surveys, open forums with senior
are used to identify opportunities
leaders, targeted focus groups,
for improvement. A performance
senior leader “walk rounds,” “stay”
improvement council commissions
and “exit” interviews, and a peer-
PITs to pursue the most promising
review grievance process.
opportunities. Table 2 shows the
5. Promote a diverse workforce. SLH scope of process improvements
(2003) has focused intensely on among Baldrige winners. Because
ensuring that its workforce reflects of page limitations of this journal, the
the diversity of the community, processes listed are the applicants’ best
including diversity training for all examples. They include both outpatient
employees and “lunch and learn” and inpatient activities, although
sessions about diversity-related they focus on the expensive episodes.
topics. Minority managers and Prevention and chronic disease care
professional staff have increased remain frontiers, but many activities

183
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 ••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••

TA B L E 2
Examples of Successful Process Improvement from Baldrige Winners

Direct Care Processes Site Results

Implementation of hospitalists BHI Substantial reduction in length of stay, and 34 percent decrease in cost of inpatient care
Clinical pathways SLH ∼60 percent of patients assigned treatment protocols
Medication errors and patient falls All Decreased substantially
Heart-risk screenings BHI More than doubled in three years

Patient and Customer Focus

Patient satisfaction BHI Increased to, at, or near the 99th percentile (inpatients, outpatients, LifeFlight)
Referrals from primary care physicians SLH Improved by one-third
Admitting-physician satisfaction SLH Improved by one-quarter
Patient volumes BHI Six-year growth in admissions, outpatient, emergency department use
Cardiology and orthopedic market shares BHI Increased by one-third

184
Clinical Support Processes

Precision of blood chemistry results SLH “outperforms national stretch targets”

please fax your request to 312.424.0014.

Electronic diagnostic reporting to attending physicians SSMHC Increased fivefold
Mammogram turnaround SSMHC Four days to one day
Lab tests/adjusted discharge SLH “among the lowest in the nation”
Journal of Healthcare Management 50:3 May/June 2005

Other Support Processes

Financial
Bond rating SSMHC Rating achieved by only 1 percent of U.S. hospitals
Current ratio BHI Steady increase, exceeds Moody’s median
Days in accounts receivable SLH Reduced by more than half, now below COTH top quartile
BHI Reduced by two-thirds and dropped below Moody’s median
SSMHC Increasing

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Operating margin SLH Increasing trend, exceeds COTH top quartile

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SSMHC Increasing trend, matched top quartile of Catholic systems
 Return on assets, equity SLH Increasing trend, exceeds COTH top quartile
Cash collections SLH Increased by one-third (SSMHC and BHI reported similar progress)
Days cash SLH Improved by one-half
SSMHC Improved to exceed top quartile of Catholic systems
Net income per FTE (adjusted) SLH Improved by half, exceeds consultant’s benchmark
Productivity
Operating expense per adjusted patient day SSMHC Declined from 1999 through 2002
FTEs per adjusted discharge BHI Substantial reduction
SSMHC Reduced, below Catholic systems top quartile
Supply cost per discharge SLH Moved below COTH benchmark
Costs per hire SLH Reduced by two-thirds, below consultant’s benchmark
Human Resources
Employees trained on compliance and ethics SLH 100 percent
OSHA incidents SSMHC Reduced by 40 percent
Employee satisfaction BHI “Best in class” in 1999, improved subsequently
SLH Steady improvement
SSMHC Approached consultant’s “best in class”

185
Employee turnover/retention BHI Improved to “best in class”
SLH Improving, exceeds national benchmark
SSMHC Improving, top quartile of consultant’s data
Employees terminating because of dissatisfaction SLH Declining

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RN vacancy rate BHI Reduced to one-fifth of regional average
Special-effort recognition BHI Increased by one-third
Workers’ compensation rating BHI Improved to “best in class”
Lost-time injuries and claims SSMHC Declining, well below OSHA averages
Needle sticks BHI Reduced by one-third, less-than-half national average
SLH Exceeds national benchmark
Back incidents SSMHC Declining

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The Revolution in Hospital Management
 Training hours per employee SSMHC Increasing by two-and-one-half times the reported industry average
Advanced CQI training SSMHC Increasing
Training effectiveness—demonstrated skill SSMHC Improving
Return on training investment BHI Exceeds national “Top 100”
Employees performance on personal improvement goals SLH Steadily increasing
Employee health survey results SLH High-risk employees improved
Diversity in managerial/professional positions SLH Improving, exceeds local population and national average
SSMHC Improving, exceeds national average
Service Quality
Patient room work orders—ten-minute response BHI “Best in class”
Employee suggestions BHI Increased both submitted and implemented
Registration information accuracy BHI Decreased errors by one-third
Medical record completions BHI Decreased noncompliance by half
DRG coding errors SLH Reduced by two-thirds
Baldrige assessment scores SLH 400 to 600, before winning award
Admission wait time SLH Improving
“Single call” elective admission SLH Tenfold growth

186
Information system availability SLH 99.9 percent (SSMHC reported 99.5 percent; BHI reported “best in class”)
Information system customer satisfaction SSMHC Improving
Supply-order accuracy SLH Over 99 percent

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Charity care provided SSMHC Increasing

••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••
Journal of Healthcare Management 50:3 May/June 2005

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 The Revolution in Hospital Management

that generate general waste and quality workers, and other stakeholders
problems are addressed. is broadly sought and sensitively
The leaders’ process management analyzed.
programs do the following: 6. Revise processes based on careful
analysis of qualitative and
1. Change the culture of their
quantitative information, “outside
organizations from professional
the box” search for alternatives,
judgment to measured performance.
and study of the work of others.
Nursing, medicine, human
Like the measures, the processes
resources, and accounting are
are compared to similar situations
not evaluated on the opinion of
elsewhere. Learning from others
their professional leaders; rather,
is a way to speed improvement
they are evaluated by performance
and reduce its risks. SSMHC
measures.
(2002) has “collaboratives,” and
2. Support a service line structure that CHI has “affinity groups” of
organizes accountability around managers that perform similar
groups of patients with similar jobs across their systems (Griffith
needs, rather than the traditional and White 2003). SSMHC, CHI,
functional silos. The service lines and IHC participate in Institute for
integrate inpatient and outpatient Healthcare Improvement programs
activity. to share best practices (IHC 2004).
3. Pursue all important opportunities. 7. Train improvement team leaders.
The leaders have the capability to Team leaders get “meeting in a
support many teams simultane- box” tools, analytic skills, money
ously. They have no sacred cows, to travel to comparison sites, and
where history or authority protects funds for experimentation.
a process from review.
8. Monitor improvement teams
4. Decision of whether performance closely. Timetables and interim
is “good” or “not good enough” is goals are set. Rigorous analysis is
based on comparison to goal. Any expected. Constructive advice on
measure, from the post infarction complex situations and conflict
mortality rate to days of accounts resolution assistance is available
receivable, is “good” if it achieves a from senior management.
previously negotiated goal. The goal
is often moved forward each year, O R G A N I Z AT I O N A L
based on benchmark or, in some P E R F O R M A N C E R E S U LT S
cases such as incorrect surgical According to the 2004 Health Care
sites or medication errors, on zero Criteria, this criterion refers to
defects. “performance and improvement. . . .
5. Listen extensively to supplement relative to those of competitors and
the measures. Qualitative other organizations providing similar
information from customers, health care services.”

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Journal of Healthcare Management 50:3 May/June 2005

The measurement focus of leading their quality journeys before 1990, BHI
hospitals allows them to document began intensive employee training in
their achievements, which, in turn, 1997 and CHI achieved success in just
has led to a number of awards. The three years. As Sister Mary Jean Ryan
Baldrige winners exceed national (2004), president and CEO of SSMHC,
medians in more than 75 percent of says, “the Baldrige criteria also establish
their reported measures. a path to meet that challenge.” The
first four leadership steps—mission,
DISCUSSION AND measures, prompt reporting, and two-
CONCLUSION way communication—are the right
These institutions’ achievements beginning.
set a new standard for performance Revolutionary change includes
accountability and excellence that we profound shifts in organizational
believe is a revolution in hospital culture. Governance becomes proactive
management. Simply put, they rather than reactive. It turns to
have shown how to run healthcare ongoing cooperation instead of
organizations substantially better negotiated settlements. The concepts
than is typical. Similarly, they have of professional domains—the board’s,
documented the processes that the physicians’, the nurses’—gives
produce excellence. The new norm way to dialog about the cost and
will not be overlooked in boardrooms, quality per case; it is a fundamental
reimbursement negotiations, bond shift in perspective from inputs to
rating agencies, accrediting reviews, outputs, from tradition to results,
and courts. Just as medicine now from static to dynamic. Management
follows guidelines for care; successful is now dually accountable—upwards
managers will use evidence and for results, downwards for supporting
carefully developed processes to guide and training associates and teams.
their decisionmaking. Healthcare The approach is firmly grounded in
systems and hospitals that copy learning and rewards; it is not punitive
these processes can expect to do or coercive. Collaboration has become
well. Their stakeholders—patients, the key word at all levels. Teams
trustees, physicians, nurses, payers—will collaborate to improve care, support
be pleased. As word spreads, other units collaborate to meet caregiver
stakeholders will demand no less. needs, and the organization as a whole
Professional excellence for hospital collaborates with stakeholders to
management will become the ability further mutual aims.
to use these processes and match
or exceed these numbers. Hospital References
managers, across the nation and at all Baptist Hospital, Inc. 2003. Baldrige Award
levels, face a substantial challenge. Application. Pensacola, FL: BHI.
Bohmer, R., A. C. Edmondson, and L. R.
The evidence suggests that the
Feldman. 2003. “Intermountain Health
challenge can be met in only a few Care.” HBS Case9-603-066. Cambridge,
years. Although IHC and SSMHC began MA: Harvard Business School Publishing.

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please fax your request to 312.424.0014.
 The Revolution in Hospital Management

Catholic Health Association. 2001. Community Institute for Healthcare Improvement. 2004.
Benefit Program. St. Louis MO: CHA. Also [Online information; retrieved 6/30/04.]
see http://www.chausa.org/RESOURCE http://www.qualityhealthcare.org/IHI
/COMMBENEFITPROGPROMO.ASP. /Topics/Improvement/ImprovementMethods
Dominican Hospital. 2003. Baldrige Award /Literature/LessonsfromtheBaldrigeWinnersin
Application. Santa Cruz, CA: Dominican HealthCare.htm.
Hospital. Malcolm Baldrige Health Care Criteria for
Friedman, P. 2004. Personal interview, Sep- Performance Excellence. 2004. [On-
tember 3. line information; retrieved 2/27/04.]
Griffith, J. R. 1998. Designing 21st Century http://baldrige.nist.gov/HealthCare
Healthcare. Chicago: Health Administra- Criteria.htm.
tion Press. Ryan, M. J. 2004. “Achieving and Sustaining
Griffith, J. R., V. K. Sahney, and R. A. Mohr. Quality in Healthcare.” Frontiers of Health
1995. Reengineering Healthcare. Chicago: Services Management 20 (3): 3–11.
Health Administration Press. Simons, R. 2000. Performance Measurement and
Griffith, J. R., and K. R. White. 2002. The Well- Control Systems for Implementing Strategy.
Managed Healthcare Organization, 5th Upper Saddle River, NJ: Prentice Hall.
edition. Chicago: Health Administration SSM Health Care System. 2002. Baldrige
Press. Award Application. St. Louis, MO:
. 2003. Thinking Forward: Six Strategies SSMHC.
for Highly Successful Organizations. Chi- St. Luke’s Hospital. 2003. Baldrige Award
cago: Health Administration Press. Application. Kansas City, MO: SLH.
Heskett, J., W. E. Sasser, and L. Schlesinger.
1997. The Service Profit Chain. New York:
The Free Press.

P R A C T I T I O N E R A P P L I C A T I O N

David L. Bernd, FACHE, chief executive officer, Sentara Healthcare, Norfolk, Virginia

W ith one-third of the nation’s hospitals running in the red and another third
breaking even, the need for a model of healthcare management cannot be
more imminent. This article provides an insightful glimpse into the practices of
some of the nation’s best health systems and begins to answer the need for a stan-
dard management approach through which organizations can achieve excellence.
By operationalizing the Baldrige Criteria and using process-based decisionmaking,
the systems described in this article have achieved superior quality in operations
and excellence in relationship management.
An emphasis on the Baldrige criteria, however, will not forge excellence in and
of itself. The Baldrige winners described here and other organizations that strive
to emulate them must undertake a simultaneous culture shift—one that embraces
quality as a differentiator and a key to long-term success. The acceptance of these
principles will prove useful for the practitioner in several ways.
The Baldrige approach to management does not create a cumbersome new
bureaucracy as a means for achieving results. This initiative is successful because

189

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 Journal of Healthcare Management 50:3 May/June 2005

quality roots itself within and throughout an organization. The choice of adoption
and belief that quality will make a difference in care delivery are large components
of achieving excellence.
The Baldrige model provides intangible principles through which management
can lead and derive operational goals. More important, however, are the tangible
experiences of the systems that have implemented the Baldrige model and have
incorporated quality into their raison d’être. Organizations that strive for similar
recognition and results can learn from the mistakes of past Baldrige winners.
The establishment of a common ground for comparison is another advantage
for organizations that implement the Baldrige approach to quality and manage-
ment. The accomplishments of organizations that live by these principles provide a
standard against which the industry can measure performance. The implications of
standardization reach beyond internal system boundaries and extend out into the
community, providing a language for collaboration across systems and improved
health information for consumers.
Most importantly, this article is a guide, demonstrating how some of the most
successful systems have achieved results. Healthcare institutions do not have to
reinvent the wheel; instead, they can look to these exemplary organizations to
learn how to focus resources into a formula that will result in operational excel-
lence. Change is both realistic and realizable, and it does not take a lifetime or
enormous capital investment to create a culture of quality.
The authors assert that “The institutions’ achievements set a new standard
for performance accountability and excellence that we believe is a revolution in
hospital management.” I challenge that proclamation, arguing that while a rev-
olutionary groundwork has been laid, the true revolution will occur when many
more hospital executives guide their organizations using a commitment to quality
and the Baldrige criteria as a foundation. In turn, these hospitals and health sys-
tems will exceed the standards of today and become the models for operational
excellence of the future. In the words of Dr. Joseph Juran, “We are headed into the
next century which will focus on quality . . . we are leaving one that has focused on
productivity.”

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