Beruflich Dokumente
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www.emeraldinsight.com/0952-6862.htm
IJHCQA
23,8 Cooperation and competition:
balanced scorecard and hospital
privatization
730
Lars-Goran Aidemark
Vaxjo University, Vaxjo, Sweden
Received 17 January 2008
Revised 10 April 2008
Accepted 20 June 2008
Abstract
Purpose In 2000 the Skane Region (a public authority) and a private contractor made a five-year
agreement for the provision of both in-patient care and out-patient medical services to about 30,000
inhabitants in the south-east part of the region. The Skane Region is the main provider of health care to
about one million inhabitants in the south of Sweden and is responsible for all health care (private and
public), including ten hospitals. This paper seeks to answer the question of how the Skane Region can
control and cooperate with a private contractor, entering into competition with the public health care
providers in the region.
Design/methodology/approach This is a longitudinal study conducted between 2001-2006. It is
based on 28 taped interviews with employees responsible for the contracting process, participating
observations and comprehensive secondary material. The study presents experiences made by the
contractor and the public authority on how to work out and follow-up assignments within the health
care sector regarding patient interest, public interest and professional medical interest.
Findings Measurement within the frames of the balanced scorecard (BSC) made it possible to
control both volumes and health care quality delivered by the private competing contractor. The
political purchaser claims that the Skane Region has established a cost-effective and successful control
system based on trust and measurement.
Originality/value This paper reports on a control system, between public purchaser and a private
provider within health care, that focuses on and follow-up not only health care production but also
health care quality.
Keywords Balanced scorecard, Hospitals, Quality management, Competitive strategy, Sweden,
Health services
Paper type Research paper
Introduction
On the 1 November 2000 the local authority, the Skane Region, signed a five year
contract with a private entrepreneur for medical services for 30,000 inhabitants. The
private entrepreneur, Narsjukvarden Osterlen Ltd, is part of a producers cooperative
with more than 2,000 worker/owners. The Skane Region is the main provider of health
care in the south of Sweden and in the year 2000 was responsible for ten hospitals with
almost 24,000 employees and a joint turnover of 11 billion SEK. The purchaser, the
District Board for Ystad-Osterlen, elected by the Skane Region, had the responsibility
to contract and control the private provider. The agreement concerned the operation of
International Journal of Health Care the hospital in Simrishamn with approximately 45 beds, emergency room and
Quality Assurance out-patients. According to the agreement, the entrepreneur should provide an
Vol. 23 No. 8, 2010
pp. 730-748
q Emerald Group Publishing Limited
0952-6862
This paper was guest edited for IJHCQA by Mosad Zineldin, Professor in Strategic Relationship
DOI 10.1108/09526861011081868 Management, Linnaeus University, Sweden.
individual and health oriented local medical care which leads to secure and improved Cooperation and
health care for the inhabitants. The companys mission included close cooperation with competition
the municipal health and medical care organization as well as with other primary
municipal departments in the area.
The contract between a public and a private organization constitute an intermediate
or hybrid form between hierarchy and market. Williamson (1975) analysis the
problems, that causes the transformation from market to hierarchy. This theoretical 731
framework will be used here to describe and analyze the transformation to a hybrid
organizational form with market elements. The transformation may lead to an
information problem. Self-interest and the risk of opportunism may make this
information problem even more complicated. Further more, the transfer of a public
hospital into private ownership incorporates a risk that costs will increase for the
society. The district committee for medical care in Ystad-O sterlen carried through the
bidding procedures under competition. Further more, they presented the control
instrument that they wanted to use within the frame of the balanced scorecard. The
balanced scorecard (BSC) came to constitute both the basis for the payment system
that was introduced and the follow-up that the district committee regularly carried out.
However, the privatization will not be carried out in a traditional way. The contract
is not fixed in any detail. Instead, according to the terms of the contract both parties are
obliged to develop the terms of operations together and gradually based on
experiences. The privatization shall be devolved in cooperation. The question is
whether, and if so how, the purchaser succeeds in managing the information
asymmetry that the market solution may bring about. A further question is if the
privatization will lead to reduced health care costs for the Skane region.
Methodology
In 2000 the right wing majority of the county assembly in the Skane Region signed
over the operations of one hospital in the region to a private company. This study of
the privatization was carried out during 2001-2006. The authors commenced by
reading the official reports and investigations produced by the Skane Region and by
interviewing several politicians. Throughout 2002 interviews took place with
administrators and health care directors responsible for the privatization of health
care together with the management of Narsjukvarden O sterlen Ltd, the private
contractor. During 2005 and 2006 18 recorded interviews with managers at the
Ystad-O sterlen Medical District were undertaken. This cohort of managers as
responsible to control and to cooperate with the private contractor, and also with
managers and members of the staff at the private company. In 2005 the authors
participated in an annual follow-up meeting between the parties where the private
contractor reported the developments during 2004 to the politicians. Furthermore, this
study is based on comprehensive secondary materials, such as investigations and
reports from the Skane Region, investigations undertaken by external auditors as
commissioned by the Skane Region and reports from Ystad-Osterlen Medical District
and Narsjukvarden Osterlen Ltd.
Atmosphere
In the local election in the autumn of 1998 the political majority shifted from a
left-of-center coalition to a conservative alliance. In the right-of-center majoritys policy
document for the mandate period 1999-2002 new ideas were formulated. The ambition
was to radically change the health and medical care of the region. A
purchaser-provider model was to be introduced. This meant that the politicians
would no longer directly control the hospitals:
The most important factor was perhaps that we have said that we want to change the role of
politicians to be citizen representative, not executives (Carl Sonesson, President of the
Regional Council).
Other principle ideas in the renewal were that the hospitals should be open to Cooperation and
competition and run in different forms, leading to a good financial position for the competition
Skane Region. The privatization of medical care in Simrishamn was a political project
in this spirit. It was driven by the rightist parties and articulated primarily by the
Conservative Party. The medical care policies of the rightist parties abandoned the
ongoing amalgamation of hospitals (hospital twinning) and carried out a privatization
for a number of reasons. The hospitals in Simrishamn and Ystad are only 22 miles 733
apart but belonged to different local authorities until the second half of the 1990s. It is
not likely that a single authority would have built two hospitals so close to each other.
In the meantime, increased choice for patients had changed the conditions for the
hospitals. In 1989, the Swedish Federation of County Councils recommended that
patients should be able to choose between medical centers and hospitals within the
region (Decision number 1989:41). County councils in southern Sweden also made an
agreement that citizens could have the possibility to seek care in other county council
areas. The close proximity of the hospitals in Simrishamn and Ystad meant that there
was a risk of a situation where each hospital had to be worried about the ability to
compete for patients. In 1996, the political control group for the Skane Region (this was
a temporary institution which oversaw the combination of the two previous county
councils into one) recommended an overall structure for medical care in Skane that
should reduce these risks. Five health care districts were organized based on the
principle of cooperating hospitals. Amongst other things, the intention was that the
hospitals in Simrishamn and Ystad should cooperate in the Ystad-O sterlen health care
district. It proved that this cooperation did not work in practice. In Simrishamn the
twinned hospital formula caused concern for the future of the hospital and strong local
turbulence:
It began in 1998. Simrishamn Hospital was threatened with closure; the twin hospital model
with Ystad Hospital did not work. In Simrishamn they used the slogan: Dont touch our
hospital. Over a number of Saturdays many people assembled in the town square to protest.
They had whistles horns and anything that would make a noise while politicians, hospital
staff and other actors in society took the stage (Ingvar Holm, Conservative politician in
Simrishamn website, 4 June 2002).
In Simrishamn various groups ran campaigns with the aim of severing the hospital
link with Ystad. One of these groups actively lobbied for the hospital to be run
privately. Before the election in 1998 the Conservative Party articulated the criticism
against the hospital twinning between Ystad and Simrishamn. The Conservatives
made it known that they wanted to let in private entrepreneurs in Simrishamn. The
rhetoric was along the lines of giving staff the possibility to develop ideas and realize
ambitions that could not be carried out in a public hospital. With hindsight we
interpret the actors driving this process actually had private management in itself as
an overarching ideological aim. There was, according to a centrally placed council
officer, no investigative document that discussed the eventual consequences of
alternative forms of management in the Skane Region. It was not accidental that
Simrishamn was privatized. A certain contribution was the turbulent situations that
had arisen with the formation of the twin hospitals. The hospital in Simrishamn was
seen as the little brother. There was deep concern that the future of the hospital was
threatened. This led to strong local support for radical reforms in Simrishamn
concerning how to run the hospitals. The local population and staff acted to try to save
IJHCQA the hospital. With this background, the political ambitions to introduce alternative
23,8 management forms in the hospital had good possibilities.
739
Figure 1.
Goal fulfilment
Narsjukvarden Osterlen
Ltd 2004
IJHCQA and medical care strategist and the chief doctor with the entrepreneur. They went
23,8 through all the measurements that had been carried out within the frame of the
balanced scorecard and commented on deviations from the goals from their respective
roles as purchaser and supplier. The chief doctor had a special responsibility to take up
the measurements carried out in the patient/direction perspectives and the committees
representative put special weight upon measurements that concerned the health of the
740 population and the viewpoints of the patients.
After four years the medical director stated that there had been a change of interest
among the politicians. From focusing on performance and finance, now they put
patient reactions and health aspects of the population in the foreground. The number of
treatments and doctor visits was no longer the primary follow up for the purchaser.
This was on the contractors table. Instead patient perception of availability and
medical results were given the highest priority by the politicians.
The balanced scorecard had no employee perspective. That was perhaps natural as
responsibility for employees would be an internal matter for the contractor. There was
though an exception. When it concerned the cooperation between the company and the
municipal health and medical care there was a follow up of the attitudes of the staff.
The district committee followed up how both the parties experienced the relation
between them. This led to Narsjukvarden Ltd taking several concrete initiatives to
improve relations. Amongst other things, the municipal employees were invited to
mutual training activities. This training led not only to better treatment
within municipal medical care and therefore fewer emergency visits from patients in
municipal housing, but also to a better climate of co-operation. The signing out
procedure for patients, who were in the municipal sphere of responsibility, was
improved. The nurses who learned to know one another through the shared training
took informal contact and a responsibility that the signing out procedure would work.
The balanced scorecard had in its patient perspective demands for the follow-up on
current waiting times. The Skane Region introduced a flow model where factual
waiting times should be measured, and not just the estimated waiting times that were
usually reported. Here the entrepreneur played an active part and gave feedback to the
region on weaknesses and possibilities of the model. In this process the demand for the
follow up of factual waiting times within the frames of the BSC was a driving force. In
the flow model it was evident whether the waiting times depended on the capacity of
the hospital or other factors.
Conclusions
We have observed that this privatization was accomplished in a very positive
atmosphere making the strategic change quite easy for the Skane Region (Pettigrew
et al., 1992). The threat of closure and difficulties of co-operating with a neighboring
hospital gave a positive attitude to the reform both in the local community and
amongst the hospitals employees. A form of hospital that was freestanding in relation
to the politically controlled public hospitals was seen as the savior from closure for
Simrishamn.
The tender process also expresses certain imaginable experiences. According to the
actors in this process the mission in a contract of this kind should be formulated
vaguely and room left for the contractor to develop ideas and show how it will use its
IJHCQA special competences. But the resources shall be specified in detail so that the
23,8 entrepreneur will know the platform on which to begin to build.
Depending on bidding procedure under open competition the contract gave lower
costs for society than running operation under public authority. Experiences from
Simrishamn show that it is possible to form a payment system that does not encourage
increases in volume, but stimulates the entrepreneur to monitor the interests of patients
746 and maintain the quality of service. A precondition for this is that the catchment area is
well defined so that normal volumes can be estimated. Another condition was a
balanced scorecard where demands/goals on the quality process can be clarified and
integrated into the ongoing communication between purchaser and health care
provider. The mission for local medical care is further characterized by integration
between the hospital and other institutions within the local community and a limit to
pass on costs to other health care actors. Within the direction perspective in BSC
there is a regular following up of that these intensions will also be realized. Instead of a
detailed contract as transactions cost theory would prescribe the purchaser forms a
control structure that limits the contractors space of action, but leaves place for new
and original solutions.
The information problem has been solved by the implementation of the balanced
scorecard. However, the top-down control in this model (Kaplan and Norton, 1996b) has
been replaced by a dialogue between the parties and a balance between perspectives
(cf. Aidemark, 2001). Certain measurements were impossible to carry out with
precision and were replaced by description and dialogue. The balanced scorecard has
provided a language for that dialogue and a platform for generating new ideas. There
is an expressed respect for the contractor and an ambition to channel the development
optimism and richness of ideas that exists with the entrepreneur and employees. The
balance between the perspectives means that the BSC integrated the purchasers and
the providers different interests when they together developed the concept of local
medical care.
The control system has also led to a change of interest amongst the politicians in the
district committee. The traditional measurements of costs and volumes became less
interesting. The financial aspects are solved with the contract and production is seen as
the contractors responsibility. Instead the politicians concentrate on patient
satisfaction and the interests of the citizens.
On a theoretical level, there seems to be a dilemma between wanting to control the
entrepreneur and to co-operate with him. During the tendering the ambition to
co-operate was to solve the problem to make an attractive offer to tender. And the
competition for the contract results in lower costs for health care than operations in
public form. During the five-year contract this co-operation strategy came out as recipe
for success. The risk of information asymmetry was reduced through dialogue on a
regular basis and by the measurements within the balanced scorecard model. This
privatization under co-operation involved both an ambition to improve
goal-congruence and to reduce the ambiguity of performance evaluation by
measurement within the frames of the balanced scorecard.
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Corresponding author
Lars-Goran Aidemark can be contacted at: Lars-Goran.Aidemark@vxu.se