Health Insurance Review &
By
Assessment Service
(South Korea)
Growing workloads,
a medically needier
population, and new
technologies were overwhelming the agency
charged with monitoring quality and cost for South
Korea’s public healthcare system. A new manage-
ment system, strong leadership, and mechanisms
that raised accountability took the agency to new
levels of performance—earning it a reputation as a
model government agency.
In 2000, 11 years after South Korea transitioned from a private to
a national health insurance system, the government integrated
numerous health insurance societies into a single insurer known
as the National Health Insurance Program. Simultaneously, the
government launched the Health Insurance Review & Assess-
ment (HIRA) Service, an affiliate of the Korean Ministry of Health
and Welfare. Its mission: to improve healthcare for the country’s
45 million citizens by ensuring the appropriate level of quality
and costs. Working with healthcare institutions, HIRA reviews
medical fees on patient claims and assesses the costs and per-
formance of the public healthcare system.
But by 2004, when HIRA placed last in the nation’s first customer
satisfaction survey of public organizations, HIRA’s leaders
knew that change was in order. The agency’s challenges were
mounting—in particular, an aging population that required
higher service levels, and a ballooning employee workload
exacerbated by medical advances, including new technologies.
HIRA desperately needed its own assessment to transform the
$200 million annual budget, 1,700-employee agency and elevate
its standing in the eyes of Koreans.
The first step was to improve service quality and customer
satisfaction. HIRA executives knew this required focusing on
business processes—such as accelerating medical refunds
(which averaged 74 days) and working with healthcare provid-
ers to improve treatment practices (which would, for example,
reduce prescription rates for antibiotics and injections). To
implement the needed changes—and accomplish HIRA’s overall
goals—leaders chose the Balanced Scorecard.
With strong backing from HIRA executives, a team was estab-
lished in late 2004 to launch the BSC. Enterprise- and division-
level strategy maps centered on the strategic themes Service
Quality Improvement and Customer Orientation. Because
processes were critical to these themes, HIRA embedded finan-
Palladium Balanced Scorecard Hall of Fame Report 2011
cial objectives in the process perspective of its strategy map.
2006, the departments that formerly handled strategic planning,
budget management, and performance management were
consolidated into the Planning and Coordination department,
effectively HIRA’s Office of Strategy Management (OSM).
Overcoming Initial Obstacles
HIRA’s leaders recognized that imparting a performance focus to
beleaguered government workers would take more than a new
management system. In addition, because HIRA’s mission and
goals were set by the government, the agency lacked autonomy
in its strategy execution and, in turn, had little control over
determining the time frames needed to achieve certain goals.
Furthermore, many employees did not understand the notion of
a strategy execution tool, instead seeing the BSC as an appraisal
tool. So strong was their initial resistance that some employ-
ees threatened to take the performance measurement issue
to their labor union. In response, HIRA’s president, in a speech
that became famous internally, accepted full responsibility for
the organization’s failings, offering an apology to employees.
“Change is a must for our survival,” he declared.
This speech proved instrumental in gaining employee buy-in to
the strategy. The president issued a steady stream of communi-
cations, through monthly assemblies, monthly strategy meet-
ings, weekly directors’ meetings, and status meetings on key
change initiatives—an effort that transformed employees into
active players in HIRA’s new performance-focused culture.
Recognizing that being focused on performance and strategy
begins at the top, HIRA’s president believed that senior leaders
and management could advance this mind-set through their
own behavior and accountability. Every year, HIRA revises its
organizational mission, vision, and strategic goals through a
management goal-setting workshop involving the president,
executive directors, directors, and external experts. Critical
strategic initiatives are identified, and key performance indica-
tors (KPIs) associated with them are included in a performance
contract between the president and the Korean minister of
health and welfare. This contract in turn shapes the perfor-
mance contracts the president signs with his executive
directors. This process is repeated at each level, in contracts
between executive directors and directors, and between
directors and general managers.
Models and Methodologies
In 2008, to drive performance management at the individual
level and align employee goals with organizational goals,
leaders introduced the management by objective (MBO)
methodology. With MBO augmenting the BSC system, HIRA
manages strategy execution and performance at multiple levels,
a capability that has helped it overcome its lack of control
over its strategy execution.
31
That same year, to ensure that operations and strategy were
solidly linked, HIRA launched its “3-Biz Model” for integrating
business, budget, and the BSC. This model allocates the budget
according to the priority of each strategic goal and initiative.
It also enables HIRA to incorporate performance into planning
and budgeting, thus linking budget planning for the current year
with that of the following year.
The rigor of HIRA’s target-setting process is matched by the rigor
HIRA applies to analyzing the linkages between strategic mea-
sures and operational KPIs. For quantitative indices as well as
qualitative measures tracked semiannually or annually, HIRA cre-
ates proxy indices, allowing performance to be monitored and
managed on a quarterly basis. In addition, future improvement
plans for any underperforming indices are evaluated. The agency
today has visibility as far out as eight quarters—a critical ability,
given its mandate to balance healthcare costs and services.
HIRA’s key risk indicator system gives executives early warn-
ing signs—such as the number of reviews closed in any given
quarter exceeding the legal deadline. Leaders can thus determine
whether the risk of delay in the review process has increased
and respond appropriately.
Best practice sharing has fueled innovation at HIRA, includ-
ing the development of a comprehensive medical information
system. Today, HIRA has more than 180 communities of practice
(CoPs), with nearly 4,600 members (many people participate in
multiple CoPs). The CoP for the Healthcare Fee Review depart-
ment, for example, consists of virtual “review rooms” categorized
according to the different areas of review (e.g., rehabilitation,
neurosurgery). In addition, HIRA’s OSM offers coaching and con-
sulting services to underperforming divisions by leveraging the
best practices of high-performing divisions.
A Model of Efficiency and Productivity
Among the most dramatic illustrations of the BSC’s effective-
ness at HIRA has been the agency’s One-Stop Service for Refunds
program, which reduced the processing time for medical fee
refunds from an average of 74 days to 32 days. Newfound ef-
ficiencies have led to significant cost reductions; in 2009 alone,
the agency cut $220 million in medical expenses by preventing
inaccurate or excessive prescriptions at healthcare institutions
that participated in HIRA’s on-site reviews.
Since becoming HIRA’s president in March 2010, Yoon-Koo Kang
has continued to champion the use of the BSC. He also actively
participated in the formulation of HIRA’s redefined organiza-
tional vision, “Proper Review, Proper Assessment: Together for
Public Health.”
HIRA’s impressive results have earned the agency numerous
awards, including the South Korean government’s Best Produc-
tivity Award (2008), Knowledge Management Innovation Award
(2009), and Global Standard Service Award in Management
32 Strategy Execution Champions
Division; and the Best Human Resource Development (HRD)
award (2009), conferred by the South Korea HRD Congress, an HR
consultancy that also publishes a leading Korean trade magazine.
Today, HIRA’s employees see how the processes they engage
in contribute to the development and continuous improve-
ment of the nation’s health insurance system. HIRA’s four-year
cultural transformation has made the agency the benchmark
against which many other Korean public organizations measure
themselves.
Execution Premium
(All results from 2005–2009 unless otherwise indicated)
• Customer satisfaction (as measured in the 2009 Cus-
tomer Satisfaction Survey for Public Organizations) rose
44.4% between 2004 and 2009, from 57.7 to 83.3.
• The agency saved $666.7 million in treatment costs by
linking its review and assessment systems. For example,
in 2008, HIRA reduced the rate of antibiotics prescribed
by 12.5% and the rate of overprescription by 24.5%,
compared with the previous year.
• The number of cases of federally prohibited drugs
prescribed fell from 118,741 to 66 cases.
• Review accuracy improved (as reflected in an appeal
rate of 0.82%).
• The rate of medical fee reviews completed within 15
days (the legal deadline) increased from 89.3% to 99.4%.
The average number of reviews completed per reviewer
increased nearly 153% in that period.
• The government’s Public Organizations Evaluation
recognized HIRA for having the highest level of labor
productivity of any South Korean public organization
for four consecutive years (2005–2008).
Future Focus
• Establishing an integrated management system that
automatically connects with other information
technology systems (such as the organization’s HR
and knowledge management systems).
• Upgrading the employee performance measurement
and assessment system to enhance employee
acceptance.
• Increasing the weight of performance in the HR
appraisal and the link between compensation and
performance to improve employee motivation and
advance the performance-focused culture.