Strategic Performance Management:Development of a Performance
Measurement System at theMayo Clinic
Jonathan W. Curtright, administrator. Division of Endocrinology, Metabolism,Nutrition, Mayo Clinic, Rochester, Minnesota; Steven C. Stolp-Smith, FACHE,administrative chair. Division of Medicine and Medical Specialties, Mayo Clinic,Rochester, Minnesota; and Eric S. Edell, M.D., associate professor. Mayo MedicalSchool and chair. Outpatient Operations Croup, Mayo Clinic, Rochester, Minnesota
E X E C U T I V E S U M M A R YManaging and measuring performance become exceedingly complex as healthcareinstitutions evolve into integrated health systems comprised of hospitals, outpa-tient clinics and surgery centers, nursing homes, and home health services. Lead-ers of integrated health systems need to develop a methodology and system thatalign organizational strategies with performance measurement and management.To meet this end, multiple healthcare organizations embrace the performance-indicators reporting system known as a "balanced scorecard" or a "dashboard re-port." This discrete set of macrolevel indicators gives senior management a fast butcomprehensive glimpse of the organization's performance in meeting its quality,operational, and financial goals.
The leadership of outpatient operations for Mayo Clinic in Rochester, Min-nesota built on this concept by creating a performance management and mea-surement system that monitors and reports how well the organization achieves itsperformance goals. Internal stakeholders identified metrics to measure performancein each key category. Through these metrics, the organization links Mayo Clinic'svision, primary value, core principles, and day-to-day operations by monitoring keyperformance indicators on a weekly, monthly, or quarterly basis.
For more information on this article, please contact Mr. J. W. Curtright at:[email protected].
T he literature extensively chroniclesthe rapid and accelerating changes
that affect U.S. healthcare. Healthcaresystems face strong pressures to im-prove clinical quality, enhance ser-vice, expand access, and reduce costs.Competitive pressures in tbe market-place require healthcare systems tomeasure, monitor, and report systemperformance to maintain and expanda market base. Thus, those healthcaresystems that are capable of clearlyarticulating and demonstrating thevalue of services provided enjoy acompetitive advantage.
As healthcare institutions evolveinto integrated health systems com-prising hospitals, outpatient clinicsand surgery centers, nursing homes,and home health services, the task ofmeasuring performance increases incomplexity. Leaders of these institu-tions need to develop a methodologyand system that align organizationalstrategies and core principles withperformance measurement and man-agement indicators.
The leadership of Mayo Clinic'soutpatient operations realized thatits current performance measuremeritsystems were based largely on financialindicators (e.g., total expense and ex-pense per unit of service) and clinicalproductivity (e.g., number of surgicalpatients and number of outpatient vis-its). The leadership therefore undertooka systematic approach to identify aperformance management and mea-surement system representative of theoutpatient practice. The system createsa building block for medical center-wide performance monitoring across
outpatient, hospital, regional healthsystem, and managed care operations.
This article describes (1) the envi-ronmental forces driving performancemeasurement and management, (2) thesystematic process used by Mayo Clinicleadership to develop the performancemanagement and measurement sys-tem, (3) the initial direct and indi-rect outcomes of this effect, (4) tbelessons leamed from this process,and (5) the future directions of thisperformance system.
THE ENVIRONMENTALFORCES DRIVINGHEALTHCARE PERFORMANCEMEASUREMENT ANDMANAGEMENTA Healthcare Management ImperativeCreating a system to measure and man-age organizational performance is animperative for healthcare management.A strategic performance managementsystem is essential to enhance a widerange of organizational competen-cies, including
• Clinical quality to maintain andexpand market share;
• Organizational agility in creatingand responding to market forces;
• Organizational focus on criticalperformance metrics; and
• Timely, accurate management in-formation to improve and predictperformance.
Corporate Business TrendsThe new performance measurementmodels incorporate financial figures asone among a broader set of measures
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(Eccles 1991). Many companies rec-ognize tbat long-term success cannotbe predicted by short-term measuressuch as quarterly earnings figures. Forexample, a Wharton School study of317 companies found that 36 percentwere using nonfinancial indicators toset executives' compensation (WhartonSchool 1997).
The need to assess performanceacross both financial and operationalindicators necessitates the developmentof a measurement framework. Kaplanand Norton's (1996; 1993; 1992)conceptual framework, known as the"balanced scorecard," is a potentialsolution to this complex manage-ment and measurement issue. Thebalanced scorecard, a reporting toolwith a discrete set of macro-level in-dicators, provides senior manage-ment with a quick yet comprehensiveglimpse of organizational performancein meeting its strategic goals. Kaplanand Norton (1992) envisioned a bal-ance between
Operational indicators, whichmeasure performance in planningand implementing organizationalstrategies. Operational indicatorssuch as internal and external cus-tomer satisfaction, quality metrics,intemal processes, intemal innova-tion, and continuous improvementefforts tend to drive future finan-cial performance.
• Financial indicators, which aretraditional financial measures thatreport results of past actions. Theseindicators include net operatingincome, earnings per share, andreturn on equity.
The threat of organizational my-opia arises if management overem-phasizes one set of indicators. Thus,organizations need to link strategicgoals to a limited set of indicators thatmeasure performance across a broadspectmm of categories.
Trends in the Healthcare IndustryNational accrediting bodies, such asthe National Committee for Qual-ity Assurance (NCQA) and the JointCommission on the Accreditationof Health Care Organizations (JointCommission), request that managedcare plans and hospitals prove theclinical quality and cost effectivenessof the care they provide (Denton andMatloff 1995; Ellwood and Enthoven1995; Solberg, Mosser, and McDonald1997). Examples from both bodies aredescribed in this article.
The NCQA's Healtb Plan Data andInformation Set (HEDJS) incorporatesmore than 60 performance indicatorsthat cover quality of care, access toand satisfaction with care, resourceutilization, finances, and organizationalmanagement. More than 300 managedcare plans measure their performanceaccording to the HEDJS measuresand report their results to employers.Further, private and public employerssuch as Allied Signal, Ceneral Electric,GTE, Xerox, and the states of New Yorkand Ohio require that health plansobtain NCQA accreditation beforebidding to provide medical servicesto their employees (Jglehart 1996;Schroeder and Lamb 1996).
The Joint Commission's ORYXsystem asks that hospitals measureperformance in the following broad
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TABLE 1 ;Description of Mayo Clinic Rochester
Mayo Clinic
St. Mary's Hospital
RocJiester Methodist Hospital
Mayo Regional Health System(Jowa, Minnesota, and Wisconsin)
1,147 staff physicians and medical scientists16,851 allied health employees1,157 beds available for service45 operating rooms794 beds available for service34 operating rooms351 physicians6,063 allied health employees
Source: Mayo Foundation. 1999. [Online article. Retrieval 3/3/99.]http://www.mayo.edu/location/rst/MHS/MHS.html.
domains: clinical quality, health statusof patients, patient satisfaction, andfinancial strength. Jn addition, orga-nizations must choose two clinicalquality measures that will have aneffect on at least 20 percent oftheirpatient population (Morrissey 1997).
The NCQA and the Joint Commis-sion promote performance accountabil-ity among managed care organizationsand hospitals by asking them to prove,with quantifiable data, the quality ofthe care provided.
CASE S T U D YDescription of the Mayo Foundationand the Mayo Clinic RochesterTo better understand the nature ofthis performance measurement andmanagement initiative, a descriptionof Mayo Foundation and Mayo ClinicRochester (Mayo Clinic) is provided.Mayo Foundation, an integrated aca-demic healthcare system, bases its op-erations in three locations: Jacksonville,Florida; Rochester, Minnesota; andScottsdale, Arizona. The three primary
locations provide subspecialty andprimary clinical care, educate residents,and perform basic and clinical research.
Mayo Ciinic Rochester (Mayo Ciinic)The Foundation's oldest and largestpractice, located in Rochester, includesan outpatient multispecialty grouppractice, tertiary-care hospitals, and aregional health system of communityphysician group practices and hospitalsin Jowa, Minnesota, and Wisconsin(Table 1). This article describes effortsundertaken at the Rochester practice.
Mayo Clinic has seen majorchanges in the past ten years as itmerged with St. Mary's Hospital andRochester Methodist Hospital. Mayoaffiliated with many providers in sur-rounding hospitals and clinics in Jowa,Minnesota, and Wisconsin, creatingthe Mayo Regional Health System.Because of these changes. Mayo Clinicleadership reorganized its clinicalorganizational stmcture.
Mayo Clinic's Board of Covemorsserves as the senior governing body
F I G U R E 1Structure of Mayo Clinic's Board of Governors and Standing Committees
Board of Governors
Education Committee CJinical Practice Committee Research Committee
F I G U R E 2Structure of Mayo Clinic's Clinical Practice Committee and Subcommittees
Managed CareOperations
Clinical Practice Committee|
OutpatientOperations
HospitalOperations
Regional HealthSystem Operations
and bears responsibility for the in-stitution's educational, research, andclinical missions. The board delegatesthe governance of these activities to thethree main standing committees: ed-ucation, clinical practice, and research(see Figure 1).
The outpatient practice, hospitalactivities, regional health system affil-iations, and managed care programscompose Mayo's clinical practice. Onthe basis of the breadth of organiza-tional responsibility, the clinical prac-tice committee (Figure 2) appointedphysician vice chairs and adminis-trators responsible for the managedcare operations, outpatient opera-tions, hospital operations, and regionalhealth system operations. Further, theBoard of Covernors directed the clinicalpractice committee to further integratethese distinct entities into a seamlesshealthcare system.
To help meet this end, the vicechair and administrators for the out-patient operations and its supporting
committee, the outpatient operationsgroup (OOC), initiated an effort to cre-ate a performance management systemthat provides a more comprehensiveview of the organization's performancein meeting its outpatient mission.The system enhances integration ofinpatient operations, regional healthsystem operations, and managed careoperations through the clinical practicecommittee vice chairs and administra-tors managing the performance of keymetrics in identified categories.
Creating the Conceptual FrameworkInundated with data on financial out-comes and patient volumes, Mayo'sleaders receive limited information onthe performance of the organization'sintemal operations (i.e., quality, access,communication, productivity, cycletimes, and efficiency). After research-ing the literature on the subject andbenchmarking Mayo's managementinformation systems against thoseof peer healthcare institutions, the
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OOC developed a report of criticalperformance indicators. The goal wasto devise a comprehensive report withclinical, operational, and financialmeasures of performance.
What would be the cornerstonecategories for the report? The report'sstmcture and information needed toensure that reviewers received a generalfeel for the pulse of Mayo's perfor-mance. For example, when CeneralElectric developed this t5T>e of reportingmechanism in 1951, it determined thatmarket share, productivity, employeeattitudes, public responsibility, andprofitability were the key categoriesaround which to devise critical perfor-mance indicators (Eccles 1991).
To benchmark Mayo against peeracademic healthcare centers, we gath-ered data from published articles ondashboard frameworks created byAllina Health System, Kaiser Perma-nente, Henry Ford Health System,Croup Health Northwest, and La-hey Hitchcock Clinic (Bushick 1996;Kennedy 1996; Nelson et al. 1995).We also commissioned a healthcareresearch and consulting firm to studyperformance measurement systemsused by other leading academic health-care centers.
We further studied the literatureon performance frameworks devisedby leading organizations in multipleindustries (Kaplan and Norton 1993).Jn addition, we researched performancemeasurement frameworks devisedby business school academics. Thesesources identified common themesand approaches. Conceptually, wefound many commonalties to the keydomains of organizations' performance
• Intemal business processes: effi-ciency of operations
• Quality of service or products
• Continuous improvement efforts
• Public responsibility and socialcommitment
• Financial performance
After analyzing the common themesand models identified in the literatureand in research performed, the outpa-tient operations leadership decided tointegrate these key common themeswith Mayo's vision, primary value, andcore principles (see Figure 3).
Since its inception. Mayo has at-tributed its growth and prosperity toadherence to its mission and values.Further, it is internally consistent forphysician and administrative leadersto base performance management andmeasurement on these fundamentalprinciples. Quite simply, Mayo's successas an integrated academic health cen-ter depends on its alignment with itscore principles.
Linking Performance Categories withPerformance IndicatorsThe next step in the process entailedthe identification of performance in-dicators that measure performancein eacb of the categories. To identifyproper performance indicators, thegroup determined the best performance
F I G U R E 3The Mayo Vision, Primary Value, and Core Principles
Mayo's vision
Mayo's primary vaJue
Mayo's core business principles
Mayo aspires to provide tlie highest quality, compas-sionate care at a reasonable cost through a physician-led team of diverse people working together inclinical practice, education, and research in a unifiedmulticampus system.
The needs of the patient come first.
• Clinical practice• Education• Research• Mutual respect• Continuous improvement• Work atmosphere and teamwork• Social commitment• Sustain practice financially
indicators without constraining theselections to readily available dataand existing management informationsystems (Eccles 1991).
The effort to identify the core setof performance indicators consisted offive steps:
1. The outpatient leadership teamidentified significant performanceindicators.
2. Currently available reports receivedby the outpatient leadership werecompiled. These reports helpedconfirm pur assumptions tbatfinancial and clinical volume in-dicators generally drive perfor-mance measurement.
3. Each member of the outpatientoperations leadership team sub-mitted, in writing, the key perfor-mance indicators that should be
included on the report according totheir judgment.
4. Members were given a comprehen-sive list of the suggested indicatorsand asked to individually identifythe indicators to include on theinitial version of tbe performancemeasurement report.
5. Members articulated tbe basis fortheir choices to the OOC.
These steps reduced tbe initialcomprehensive list to a more manage-able group of performance indicators.Table 2 shows the performance indi-cators included in the initial versionof tbe performance management andmeasurement system.
Operationalizing the ReportAfter gathering the data and analyzingthe results on the selected indicators.
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TABLE 2First Iteration of Performance Management and Measurement System
Performance Category Performance Indicator
Customer satisfaction
Clinical productivity and efficiency
Financial • i -
Internal operations
Mutual respect and diversity
Social commitment
External environmental assessment
Patient characteristics
Jlating of primary care providedJ^ting of subspecialty care provided
Clinical productivity per physician per workdayOutpatient visits per physician per workday
Expense per relative value unit (unit of service)
General examination average itinerary length in daysPatient complaints per 1,000 patientsPatient waiting times—access to appointments
Percentage of staff from underrepresented groupsEmployee satisfaction surveys
Mayo's contribution to society
Board of Governors' environmental scanMarket share
Patient mix by geography and payor group
we determined how to disseminate theinformation. The group concluded thatthe Mayo intranet provided the broad-est medium for this communication.The intranet allows Mayo employeesaccess to these data with "tbree clicksof their mouse."
CURRENT DIRECT ANDI N D I R E C T OUTCOMESThis effort produced several direct and,perhaps more significantly, indirectoutcomes. First, Mayo Clinic measuredoutpatient access in its most recentbudgeting and planning process ac-cording to the measure developed forthe performance management andmeasurement report. The institution
continues to work hard to balancethe demand for and capacity of theoutpatient services. Thus, the Boardof Covemors asked each departmentchair how each department wouldimprove access to services and mea-sure its performance in meeting itsaccess targets.
Second, the OOC intranet siteand performance management andmeasurement report now acts as atool for obtaining additional infor-mation. For example, if access was anissue, then institutional leaders coulduse the OOC intranet site as a directlinking mechanism to determine theactual number of physicians seeingpatients in any given week in selected
departments. This eliminates the needfor the creation of multiple manualreports because the data are now avail-able in an electronic format on theintranet in one location.
Third, this overall effort actedas a catalyst for the development ofan institution-wide clinical practicedata set. These data are available tothe clinical practice committee andother institutional leaders. The dataset is an evolution of the originalperformance management and mea-surement system, but this new re-port draws on the same concepts ofmeasuring performance in multi-ple domains.
Finally, the institutional leader-ship is expressing increasing interestin measuring performance in areasbeyond the traditional financial andclinical productivity indicators. Forexample, one department has createda monthly report that includes indica-tors for patient and staff satisfaction,patient access, clinical productivity,and finances. Can we say that thisdepartmental change was a direct re-sult of our efforts? No, but we cansay that our efforts represent one ofthe first reports to operationalize anddisseminate expanded operationalperformance measurements at theinstitutional level. Thus, the OOC'sefforts broadened the focus of howthe organization defines and measuresoperational performance.
LESSONS LEARNEDMayo Clinic's leadership in outpatientoperations leamed many invaluablelessons from the development of aperformance management system.
Time, Commitment, and Critical ThoughtDevelopment of a performance man-agement system takes time and requiresa sustained commitment by seniormanagement. Development and imple-mentation demand critical thought andanalysis by organizational leadership.What key pieces of information helpthe management of the outpatient op-erations? This question arose repeatedlyin the development of the performancemeasurement and management system.
New Information SystemsMany performance indicators, althoughideal, remain unavailable in eithera manual or an automated format.The design and development of aperformance measurement system,with meaningful indicators, requiresthe development of new methods ofcapturing relevant data elements.
Multiple AudiencesHistorically, the design of performancemeasurement reporting systems tar-geted an internal audience of seniormanagers and the board of directors.Contemporary performance measure-ment reporting systems include seniormanagers, the board of directors, andall levels of management and staff inthe organization. Increasing competi-tion and the growing sophistication ofthe healthcare consumer now demandclear information to help the payor andconsumer make informed decisions.The public at large, patients, and payorsexpect healthcare provider systems toarticulate and demonstrate, in clearand understandable terms, the value ofservices provided. Information systemsdeveloped for measuring and reporting
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healthcare system performance needto produce reportable results easilyunderstood by the patient. For exam-ple, the Buyer's Health Care ActionCroup, a healthcare purchasing allianceof Minneapolis employers, broadcastsphysician-specific information on ap-pointment access, customer satisfac-tion, and clinical fees via the Intemet(O'Reilly 1998).
Evolving ProcessRegardless of the time commitment,critical thought applied, new systemsdeveloped, or multiple audiencesserved, the overarching lesson provesthat the development of a performancemanagement system is an ongoing,evolving, and iterative process.
F U T U R E D I R E C T I O N SImprove Prospective ForecastingCapabilitiesHealth systems need to improve fore-casting capabilities for both operationaland planning purposes. A reportingsystem with the ability to provideinformation on both retrospective andprospective organizational performancecreates an invaluable managementtool. The performance managementand measurement system helps fill thismanagement information need at theMayo Clinic.
Demonstrate Clinical Quality and CostEffectiveness to External StakeholdersToday and in the future health systemscapable of articulating and demon-strating clinical quality and costeffectiveness of services provided gaina competitive advantage in the mar-ketplace. The performance manage-ment and measurement system aids
Mayo with its external accreditationprocess and demonstration of clin-ical quality to purchasers of health-care services.
Tool of Clinical IntegrationThe first iteration of this evolvingreport focuses on Mayo's outpatientoperations. Future versions may includedata on inpatient operations, managedcare operations, and regional healthsystem operations. Management of theprocesses and technology driving theseindicators facilitates the continued inte-gration of disparate healthcare entitiesinto a more seamless continuum ofcare for the patient.
CONCLUDING THOUGHTSThe comprehensive process of studyingthe performance measurement andmanagement process began as andcontinues to be an excellent leamingtool for the physicians and administra-tors involved. The process aligned theconcept of measuring organizationalperformance with meeting Mayo'svision, primary value, core princi-ples, and operational strategies. Asan organization we have a long wayto go in meeting this ideal; however,we believe this is a worthy journeyin support of the organization's pri-mary value: the needs of the patientcome first.
A c k n o w l e d g m e n t sThe authors would like to thank severalcolleagues who were instrumental inthe development of the performancemanagement system and the review ofthis manuscript: Roger H. Evans, Ph.D.,Robert E. Nesse, M.D., John H. Herrell,Sharon E. Dunemann, Carleton T. Rider,
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