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This is the first of several postings on Strategic Initiatives in Hospital and Health Care, a topic that touches everyone.  If you follow the logic of the excellent book, The Innovator’s Dilemma in Healthcare, in a few short years the entire hospital and health care industry will look completely different.  That includes the exit of many hospitals (large and small) from the market. There are numerous implications for the formulation and execution of strategy in that industry.

In this first example, I examine a success story of an organization uses strategic initiatives to improve performance and support achievement of the strategic goals.

Strategic Initiatives at Duke Children’s Hospital

Duke Children’s Hospital is part of the Duke University Hospital (www.dukehealth.org). It has been recognized as one of the world’s great health care providers by such publications as Time and U.S. News & World Report. In a recent paper, Duke reported on 10 years of performance improvement initiatives. Here are some of the following positive results:

• Increase in the variable contribution margin by 240 percent
• An improvement in net margin
• Reduction in morbidity, a decrease in re-admits from 7 percent to 4 percent, a decrease in infection rates from 3 percent to 1 percent, and a decrease in length of stay by 0.6 days
• Patient satisfaction scores have exceeded the set targets
• Team Training and the associated process improvements have resulted in significantly improved communication and an increased awareness of safety process

How did Duke University Hospital accomplish these benefits? They recommend, “A systematic approach that identifies a specific goal and links projects to a specific initiative.” Some specific practices for strategic initiatives include:

• Duke adopted the Balance Score Card, and modifying its strategic perspectives to address and prioritize on healthcare-related metrics. It started with the Quality and Patient Safety perspective and added supporting measures of Quality and Patient Safety, Customer, Finance and Work Culture
• Using the strategic plan as an input, Duke determined specific goals that linked to each of the strategic perspectives. Duke recommends limiting the goals and metrics to three or four per perspective, because it maintains focus on initiatives and the strategic plan. They found it best to pick a modest improvement from baseline, such as 10 to 20 percent in the initial scorecard.

Leadership Lessons for Strategic Initiatives

• Tailor metrics to culture and expectations – The balanced score card perspectives were modified from for-profit business criteria to recognize the peculiar challenges of the health care environment
• Link metrics from board priorities to the unit and individual contributors – Duke used its metrics to align initiatives with strategic goals. This avoided two common problems: 1) reactionary behaviors and 2) initiatives focused solely on local concerns that may have little impact on organizational outcomes. This practice assures that the entire organization benefits from collaborative efforts.
• Communicate the linkages of strategic initiatives to strategic intent – Leaders need to help important stakeholders understand the reasons for various initiatives.  “Training” was one part of the program management solution.
• Create effective teams – Team building could be seen as a strategic initiative in its own right. Team building requires specific learnable, observable skills that are sometimes difficult for technically trained people.
• Keep a long-term perspective – Duke has given its strategic initiative portfolio over ten years of sustained attention.  Obviously, this long-term perspective requires both vision and patience.

* For more, see “10-Year Experience Integrating Strategic Performance Improvement Initiatives: Can the Balanced Scorecard, Six Sigma, and Team Training All Thrive in a Single Hospital?” http://www.ahrq.gov/downloads/pub/advances2/vol3/Advances-Meliones_40.pdf

Do you tailor your performance metrics?  Do you link your initiatives to strategic intent?

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