Saving money, saving lives

Abstract

In 1996, Duke Children's Hospital was in serious trouble. Its $11 million annual operating loss had forced administrators to make cutbacks. As a result, some caregivers felt that the quality of care had deteriorated. Parents' complaints were on the rise. Frustrated staff members were quitting. In this article, Jon Meliones, DCH's chief medical director, candidly describes how his debt-ridden hospital transformed itself into a vibrant and profitable one. The problem, he realized, was that each group in DCH was focusing only on its individual mission. Doctors and nurses wanted to restore their patients to health; they didn't want to have to think about costs. Hospital administrators, for their part, were focused only on controlling wildly escalating health care costs. To keep DCH afloat, clinicians and administrators needed to work together. By listening to staff concerns, turning reams of confusing data into useful information, taking a fresh approach to teamwork, and using the balanced scorecard method, Meliones and his colleagues brought DCH back to life. Developing and implementing the balanced scorecard approach wasn't easy: it took a pilot project, a top-down reorganization, development of a customized information system, and systematic work redesign. But their efforts paid off. Customer satisfaction ratings jumped 18%. Improvements to internal business processes reduced the average length of stay 21% while the readmission rate fell from 7% to 3%. The cost per patient dropped nearly $5,000. And DCH recorded profits of $4 million in 2000. This first-person account is required reading for any executive seeking to revitalize a sagging organization. Meliones shares the operating principles DCH followed to become a thriving business.