Four levels of performance measurement

The quest to improve organisational performance in health care raises questions of definition, content and measurement. Figure 15.2 indicates how measures of performance vary according to the level of analysis. For example, global initiatives are largely concerned with the comparison of national health systems, in terms of population health status and expenditure, and explanations of variations in performance among countries. A worldwide framework for performance in health care was published by WHO (2000a) in its annual report. This framework seeks to measure attainment of key goals and the design and core functions performed by health systems that may explain goals achievement. Key goals specified in the WHO (2000a, p xi) World Health Report are:

good health;

responsiveness to the expectations of the populations; and

fairness of financial contribution.

FIGURE 15.2 Performance of health services from global to local.

Performance to achieve these goals is dependent on how well the system carries out four vital functions—service provision, resource generation, financing and stewardship. A steward is someone who is entrusted with the management of someone else’s property, and stewardship may be a factor in determining outcomes and satisfactory performance of the other three functions.

National measurement relates to the achievement of specific goals and targets in national policy and planning. National health goals and targets are affected by the stage of economic development of the country, past history, community, provider and political values (see Figure 15.2). Differences between nations emerge following consideration of public or private provision, balance of preventive and curative services, equity and efficiency issues, services provided, their financing, distribution and organisation. According to George and Davies (1998, p 98), organisation affects access, costs of the system, where costs are borne and outcomes. Some examples of services organisation are discussed in the next section.

In the public health care system in Australia (local, state, territory, regional or service delivery network) measures of performance derive from policy. For example, in New South Wales, performance agreements ensure a link between state policy and regional (or area health service) performance. In the private sector the performance of smaller organisations (e.g. private hospitals) is consistent with the priorities of the corporation, although constrained by government policy. As indicated in Figure 15.2, the specificity of performance measurement is directly proportional to proximity to service provision. Performance measures for services reflect policy, but are also related to specific health problems, disease groups and service delivery values.

Patient care performance measures ascertain the degree to which what is done for the patient is:

efficacious;

appropriate;

timely;

effective;

well coordinated;

safe;

efficient; and

caring and respectful.

Best practice

Best practice has been defined by the National Health Performance Committee (2000, p 59) as:

Here the emphasis is on cooperative partnerships between management and employees and among interdependent organisations.

Benchmarking

Benchmarking is defined by the National Health Performance Committee (2000, p 59) as:

The effectiveness of benchmarking is increased when it is an ongoing process, is incorporated into the management information systems of an organisation so that the data-capture processes do not require special programming or separate coding, where the costs can be shared or spread across departments or organisations, and where historical benchmarks can be adjusted to current conditions (Weller & Sayegh 1998, p 41).

Dervitsiotis (2000, p S641) suggests that:

internal benchmarking is more valuable than external benchmarking because there can be as much as 20 to 30 per cent difference for critical performance indicators between the best and the average performance within the same organisation;

process benchmarking is the most appropriate form of benchmarking, as it has to do with easily measurable aspects of a company’s operation;

benchmarking is best suited to high-performance companies that are attuned to the need to adapt to best practice;

medium- and low-performance organisations could benefit more from simpler, faster and less costly improvement efforts, such as developing better knowledge in relation to their customers and employees;

benchmarking works best when applied to the way business is currently done;

benchmarking points the way to incremental improvements that in time become smaller while the organisation remains in the same strategic operating paradigm; and

benchmarking is useful for incremental improvement in situations where an organisation is already successful.

The Independent Pricing and Regulatory Tribunal of New South Wales (IPART) (1998, p 106), in considering the organisational performance of the New South Wales health system, suggested that benchmarking was useful for:

monitoring trends in performance over time;

identifying role models to serve as benchmarks for a program of process benchmarking to lift performance;

defining the characteristics of efficiently operating area health services;

identifying area health services and/or health care facilities that are the most efficient at providing particular services;

analysing how the volume of services provided to patients affects organisational efficiency;

analysing the extent to which best practice clinical pathways overcome diseconomies of small size; and

analysing how differences in the operating environment can be accounted for when evaluating performance.

This same report (IPART 1998, p 107) suggested that good managers do not need voluminous pages of performance information. Rather they need illustrated brief exception reports that are timely and accurate; such reports are sufficient to enable superior management. An exception is a report that addresses exceptional events or performance (i.e. deviations from accepted practice or acceptable performance). These exceptions may be good or bad. It goes on to suggest that well-chosen measures (i.e. key performance indicators) allow management to focus on those areas where it is critical to improve and maintain performance. The IPART report also suggests that for performance measurement to be successful, key performance indicators must:

describe the targeted level of performance in understandable, tangible and measurable terms;

represent a small number of complementary measures, which reflect actual performance against the primary objectives of the entity;

be deployed to the organisational level, which is empowered to take the necessary action;

be balanced to adequately reflect the three perspectives of (1) finance and budgets, (2) quality and access, and (3) productivity.

Critics have suggested that managers waste time and money on external benchmarking when their best practices are better than that of the average practices of the ‘best companies’ and that there are greater benefits for them in an internal exercise. Moreover, internal benchmarking is more easily achieved (Puckett & Siegel 1997, p 12). However, many health care organisations benchmark externally. For some elements of performance they benchmark with organisations within the health industry and for others with service organisations in other industries.

Curley (2000) asserts that in health service organisations scientific inquiry and benchmarking are becoming a driving force for change. He maintains that:

For best practice and benchmarking programs to work in any context they need to be implemented into an appropriate organisational culture. Furthermore, the uses and limitations of these methodologies need to be understood by all who are to be affected by it. Where performance improvement programs have been initiated in an accreditation and/or quality management framework and the focus has been on outcomes, they have usually been effective in empowering staff, developing teamwork and committing an organisation to continuous learning and improvement. Table 15.1 outlines some of the changes in organisational culture that may be required to support an effective performance management system.

Table 15.1 Developing an appropriate culture to support an effective performance management and best practice system

The New South Wales Corrections Health Service (2000, pp 3, 4), subsequently renamed Justice Health, provides a useful example of benchmarking (Figure 15.3). This organisation delivers health services to the inmates of the state’s prisons. It embarked on a benchmarking program because it was seen as ‘… a method of continuous improvement that involves an ongoing and systematic evaluation and incorporation of services, processes and outcomes recognised as representing best practice’. In benchmarking with a group of health, psychiatric, forensic and corrective services in Australia and New Zealand, this health service sought to:

make concrete and measurable comparisons with benchmarking partner organisations;

assess current performance and highlight strengths and shortfalls in performance;

identify outliers as a means of focusing attention on previously unsuspected differences;

identify and learn from best practice leaders;

identify and recognise centres of excellence and areas of innovation;

recognise the efforts and challenges faced by health providers in a range of settings;

create partnerships between organisations and their staff to improve the quality of services; and

provide a mechanism for networking and sharing experiences and ideas.

FIGURE 15.3 An example of an area health service benchmarking methodology

Source: Adapted from New South Wales Corrections Health Service 2000 Benchmarking study. New South Wales Corrections Health Service (KPMG Study), Sydney

Balance in the use of performance indicators

Performance measurement involves understanding the differences between efficiency, which is about ‘doing things right’, and effectiveness, which is about doing ‘the right things’. Importantly, a proper balance must be struck between the indicators of performance used to assess efficiency and the indicators used to assess effectiveness, and whether they concern resource management or quality and safety management.

It follows that better measures of organisational performance are required than those provided by traditional management accounting systems. In the health industry it has been difficult for managers to move away from a concentration on ‘the bottom line’ when resources are diminishing, standards and expectations are growing and they are working in an increasingly turbulent environment.

The balanced-scorecard approach recognises a range of stakeholders with differing interests and provides measures that allow for various perspectives to be taken into account, thereby giving a ‘balanced’ approach to performance measurement. Performance indicators include the views of customers, financial indicators, internal business indicators and measures of organisational innovation and learning (Hubbard 2000, p 102).

Gearhart (1999, p 13) supports a balanced approach to performance monitoring and improvement in the public sector. He maintains that measures of performance should provide strategic information and operational information (see Table 15.2) that allows the organisation to engage in benchmarking with other high-performing organisations. A balanced performance system is one that provides a picture of how the organisation is currently performing and supports decisions about:

budgeting;

performance goals;

employee mix;

customer service; and

process re-engineering.

Table 15.2 A performance measurement framework

According to Gearhart (1999), this approach allows for the allocation of resources to the most strategic aspects of the business and improved operational control by targeting the activities, department or processes that are most inefficient and which have potential to re-engineer the processes or redesign structures to provide cost reduction and/or improve service.

The Uniting Church Aged Care Network (Uniting Care), like many other organisations, recognises the importance of balanced performance measurement. Its website indicates that it has developed a high-quality system of financial benchmarking that provides a standardised approach to financial management across its network. The organisation says that:

This organisation (Uniting Care) has recognised that in achieving balance in its approach to performance assessment and improvement the use of clinical indicators alone is not sufficient and is involved with others to research quality of life indicators and their relationship with quality of care indicators. Achieving a balanced approach to assessing organisational performance is no easy task in the health industry. One-dimensional financial performance indicators associated with measures of efficiency are often well developed, and managers recognise their value. On the other hand, measures of effectiveness associated with clinical services to patients and communities are generally seen as the domain of clinical staff. It is therefore not surprising that the two are rarely aligned. In a relatively simple way, Case Study 15.1 seeks to demonstrate the challenges of achieving a balanced approach to assessing and improving organisational performance.

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