Montefiore Medical Center (MMC): A Case Study
This study reviews a Harvard Business School case on Montefoire Care Centers. The Balanced Scorecard is chosen for the strategic management initiative at Montefoire and the reasons and results of such a choice is reviewed in this case study.
The objective of this study is to answer the question of what were the underlying reasons for the development of a new strategy at Montefiore Medical centre (MMC)? Secondly this study will answer as to how could the strategic direction chosen by MMC be described and what factors likely influenced the chosen direction? This study will compare and contrast the old and the new organizational structures. With reference to the notions of synergy and responsiveness, this study will analyze the advantages and disadvantages or each of these and will explain what is meant by the term causal ambiguity. This work will take the Heart Center Value Map in Exhibit 4 under consideration and explain which relationships appear to be more or less problematic. Finally, in regards to the MMC case this study will compare and contrast the activity system view of the organization as recently proposed by Michael Porter, with the resource-based view (RBV) and will answer as to which appears more appropriate to the performance management process.
I. The Underlying Reasons for the Development of A New Strategy
In 1996, the newly-appointed vice president of operations for the Acute Care Division of Montefiore Medical Center, Elaine Brennan acknowledged the many challenges she faced as the Center had been the result of a large urban teaching hospital and a small university hospital merger with a large budget deficit.
This facility provided care to 1.2 million residents in the Bronx. Approximately 65% of recipients of medical care at the Center were either Hispanic or African-American comprising the largest group of Medicare patients in any institution in the United States. The area this Center served was characterized by slumlords, low rates of employment, high rates of addiction, disease and overwhelming poverty.
Montefiore also had a Home for Chronic Invalids that provided care for patients that other facilities could not help such as those with TB, syphilis, opium addiction, chronic kidney disease and arthritis. Separate from this institution, Yeshiva University’s sponsored program, The Albert Einstein College of Medicine came under the operation of Montefiore in 1963 and while both remained separate they still were joined. The institutions were separated by a large stretch of urban streets and combined the two institutions formed one of the country’s largest and most respected of all medical centers.
Bases for New Strategic Direction
Both management and financial problems plagued Montefiore by the mid- to later-1980s and the new president, Spencer Foreman, who was board appointed envisioned the Montefiore mission as being “patient care, teaching, community service, and research” while the majority of the faculty held that the institutions priorities were in a different order with teaching and research coming before care of patients. Foreman brought Robert Conaty as his executive vice president of operations with the duties of establishment of physician relationships that were effective and aligning the physician community with the new vision and strategy of Montefiore. As well, Conaty was charged with managing the clinical operations of Montefiore across the continuum of care in a profitable manner.
Conaty worked with Montefiore’s 24 academic chairpersons responsible for overseeing 800 full time medical center faculty and 750 residents. Conaty reported that the chairpersons were making decisions that benefited their clinical department while simultaneously negative impacting the operation as a whole. Financial problems plagued Montefiore again in the mid 1990s and Elaine Brenna was promoted to the head of the Hospital charged with taking on the operational and financial problems of the hospital and finding a resolution to these problems.
Division into Two Sectors
The hospital was divided into two sectors:
(1) operations; and (2) corporate services. (Harvard Business School, 2001)
Brennan is reported to have standardized functions including purchasing and information services and 150 management positions were eliminated through mergers of administrative departments and layers of management being eliminated resulting in $15 million being saved annually. However, there were less people left to accomplish what had to be done and stress increased and turnover of personnel grew. It was at this time that a strategic management team was formed and comprised by all levels of management. The task was the development of a new business strategy. Therefore, the reason for the formulation of a new business strategy was that of necessity and the need to focus on high quality, patient care that was cost-effective rather than focusing on cost reduction alone.
II. Description of the Strategic Direction Chosen by MMC
The strategic management team at MMC is reported to have made a choice of two strategies that were both ‘high-level’ and ‘easy-to-understand’ strategies including the following stated two strategies:
(1) Be ‘all things to some people’: develop a population-based approach focused on providing a full spectrum of health care services to specific populations including children, women and seniors;
(2) Be ‘some things to all people’: Develop specialty centers, such as cancer and cardiology, to attract patients from outside the Bronx, and maternal/child services to attract patients from lower Westchester County. (Harvard Business School, 2001)
These two strategic choices became known as GRIP representative of:
(1) Grow volume and market share
(2) Rebalance academic and clinical staff;
(3) Infrastructure: upgrade facilities, information systems and technology; and (4) Performance: set targets and achieve them. (Harvard Business School, 2001)
Objective of New Strategy
The objective of this new strategy was focused on finding a balance between “providing population-based healthcare and developing centers of excellence in five areas:
(3) children’s health;
(4) women’s health; and (5) HIV. (Harvard Business School, 2001)
According to the report a full-service delivery system across the continuum of care that was cost effective service and competent in managed care was required for population-based healthcare. In order to be designated as a center of excellence there was the requirement of “high-reputation, high-quality, specialty services for targeted patient segments that could attract a large customer base for Montefiore’s hospital and its medical school faculty.” (Harvard Business School, 2001)
III. Comparison of Old and New Organizational Structures
There is a remarkable difference in the old and new structure of the hospital and specifically, the operatio of Montefiore was with separate functional organizations for nursing, clinical care and operations for many years. Physicians were required to gain assistance and supported needed from somewhere between three and give separate groups that were centralized.
Following the reorganization and decentralization of Brennan’s management team of the Acute Care Division into three centers for support and five clinical care centers all of these would be focused on a specific patient population’s needs. The result was as follows:
Clinical Care Centers Support Centers
Medicine and cancer Clinical
Surgical Care Business
Women and children
Source: Harvard Business School, 2001
Since these changes the Heart Care Center makes provision of all services that are cardiac-related and while each clinical care center was previously multi-disciplinary and brought the nurses, physicians and management personnel under the heading of one organization that a three person executive team of manager, physician and nurse the care center would exert control over most services that inpatient ad ambulatory patients received and would purchase services it did not provide from other institutions.
It was the belief of Brennan that the care center structure would represent a framework for market share expansion and development of more capacity however, the broader clinical focus was the objective of Conaty who held that “Care centers provide a vehicle to get physicians from different specialties to work together on patient issues. Left on their own, they might focus on their specialty and live within their own clinical academic world.” (Harvard Business School, 2001)
Vice President for clinical services in the new Women’s and Children’s Care Center, Peter Semczuk is reported to have agreed. Lines of authority would be changed by the care center organization and this compared to the previous method of physicians asking Conaty or Foreman for resources. The physicians would initially work with the executives of the care center and then partner with them in making requests for resources. This is reported to involve a “new power-sharing arrangement” and the results of this initiative is that there was not a complete physician ‘buy-in’ to the new structure of the organization. (Harvard Business School, 2001)
The performance measurement system of Montefiore was reliant nearly 100% of on measurement relating to finance and this system was held by Brennan to be inadequate in terms of motivation and measurement of performance for care leaving the support centers with the responsibility for outcomes of various types including services, quality, work environment, employees and revenues and cost. (Harvard Business School, 2001, paraphrased)
The Balanced Scorecard was part of the executive program at Harvard Business School attended by Brennan in 1998 and this strategy implementation tool had potential for application at Montefoire since it is a “mission driven nonprofit academic medical center.” (Harvard Business School, 2001) The Balanced Scorecard, Brennan learned would assist in defending the institution against “sub-optimization” meaning that one care center taking actions that negatively impacted another care center would be prevented. This approach to measurements was one with balance and that served to bring about an increase in effectiveness through use of “real-time decision making” that enabled the center to make quick market adjustments. Foreman and Conaty approved use of this tool. The development of the nation level scorecard was a process with three steps:
(1) education and consensus building;
(2) design; and (3) implementation. (Harvard Business School, 2001)
It took six months for Brennan to combat the initial resistance to use of the scorecard system. Features of the scorecard included measures of patient satisfaction and the cost, quality and cycle times of both clinical and administrative processes. The new strategy was implemented through communication to the organizational employees and meetings that informed employees on how to acquire data to be measured. The SAP system was instituted at Montefoire and a new clinical information system was installed specifically that of PHAMIS. These systems were configured to enable streamlining of data acquisition and measure reporting. The changes at Montefoire included those in the financial procedures and reporting. Each of Montefoire’s institutions developed their own individual state and city level scorecards as well as developing their own value maps and measures all aligned with the overall strategy. The Balanced Scorecard is reported as such that did not result in the introduction of new measures but instead brought all the measures together and aligned them.
IV. Causal Ambiguity Explained and Problematic Relationships
Causal ambiguity is defined “as the uncertainty that stems from a basic ambiguity concerning the nature of the causal connections between actions and results.” (Ambrosini and Billsberry, 2008) Stated otherwise, “the factors responsible for firm performance may be difficult to identify because of causal ambiguity.” (Ambrosini and Billsberry, 2008) Causal ambiguity it stated to be “central to the resource-based view of the firm argument because it can act as an isolating mechanism protecting critical resources from imitation. However, it can also present a firm from learning from its own experience and from improving its performance over time.” (Ambrosini and Billsberry, 2008) The implication is that the “net effect on the sustainability of competitive advantage in the presence of causal ambiguity is unclear and hence that causal ambiguity represents a mixed blessing for strategic management scholars.” (Ambrosini and Billsberry, 2008) This also presents a mixed blessing for “Managers who need to both protect their valuable resources form competitive imitation and nurture them to exploit them or replicate them within their firm.” (Ambrosini and Billsberry, 2008)
The problematic relationships that can be identified in the Heart Center Value Map begins with the number of cases being central to the framework of this value map. Quality care in service to patients should form the focus of the value map. While it appears that the number of cases supports the advance of support for fellowships and teaching opportunities, this is not the case unless those cases are overwhelmingly represented by satisfied patients who have received quality care. Quality care is the foremost factor in ensuring that Montefoire has the largest count of cases possible. This is because the number of cases if a large portion of these cases are represented by patients who are not satisfied with the services received will result in a negative impact on the future number of cases. Therefore, the focus should be on quality care provision to patients and the number of cases will result due to satisfaction of patients.
V. Compare and Contrast Activity-System View with Resource-Based View
The activity-system view when compared with the resource-based view as it is applied to Montefoire is a much better view of organizational competence and efficiency. Porter (1999) held that competitive advantage is created as choices are made about what will and will not be done. Porter (1985) states that competitive advantage is defined as “the ability to earn investments consistently above the average for the industry.” (cited in: Halawi, et al., 2005) It is reported that the resource-based view of the firm “dominates the strategic management literature” and was developed in order to provide an explanation of how firms “achieve sustainable competitive advantages.
The enterprise is held in view of resource-based theory as “potential creators of value-added capabilities, and the underlying organizational competences involves viewing the assets and resources of the firm from a knowledge-based perspective. It focuses on the idea of costly-to-copy attributes of the firm as sources of business returns and the means to achieve superior performance and competitive advantage.” (Halawi, et al., 2005) The resources of the firm are held to be comprised of “all assets both tangible and intangible, human and nonhuman that are possessed or controlled by the firm and that permit it to devise and apply value-enhancing strategies.” (Halawi, et al., 2005)
Various names are utilized to discuss the firm’s unique resources and capabilities including such as “distinctive competences, invisible assets, core capabilities, internal capabilities, embedded knowledge, corporate culture, unique combination of business experience.” (Halawi, et al., 2005) In other words, “resources and capabilities that are valuable, uncommon, poorly imitable and nonsubstitutable comprise the firm’s unique or core competencies and therefore present a lasting competitive advantage.” (Halawi, et al., 2005) The resource-based view holds that intangible resources are more valuable than tangible resources to result in competitive advantage.
Activity-based management requires investment by the firm in measurement processes, software, tracking hardware and training . Activity-Based Management data enables the organization to “fine tunecosts to work the supply side.” (Halawi, et al., 2005) There is also a great advantage in “planning big, long-range process improvements.” (Clint Burdette Strategic Consulting, 2013) As noted earlier in this study there was a conflict as to whether Montefoire’s strategic goals were in order of providing patient services first in order of importance or if research and education should be first in order of importance in the goals and objectives of Montefoire.
Porter and Kramer (2012) report that many companies are “trapped in an outdated approach to value creation that has emerged over the past few decades.” Value is viewed as being narrowly created and short-term financial performance is optimized “in a bubble while missing the most important customer needs and ignoring the broader influences that determine their longer-term success.” (Porter and Kramer, 2012)
According to Porter and Kramer (2012)
“Companies must take the lead in bringing business and society back together. The recognition is there among sophisticated business and thought leaders, and promising elements of a new model are emerging. Yet we still lack an overall framework for guiding these efforts, and most companies remain stuck in a “social responsibility” mind-set in which societal issues are at the periphery, not the core.” (Porter and Kramer, 2012)
The solution is reported to lie in the principle of shared value and this is reported to involve creating economic value in a manner that results in the creation of value for society through addressing society’s needs and challenges. (Porter and Kramer, 2012, paraphrased) Porter and Kramer (2012) report that businesses are required to reconnect with the success of the company and social progress. Shared value is reported to not be “social responsibility” but to be “a new way to achieve economic success.” (Porter and Kramer, 2012)
Montefoire, therefore, should set as its objective that of ‘shared value’ within view of the Balanced Scorecard in an activity-based management initiative because as cited by Porter and Kramer (2012) the principle of share value when leaders and managers realize the “transformative power of shared value” they will “develop new skills and knowledge – such as a far deeper appreciation of societal needs, a greater understanding of the true bases of company productivity, and the ability to collaborate across profit/nonprofit boundaries.” It is reported by Porter and Kramer that capitalism:
“is an unparalleled vehicle for meeting human needs, improving efficiency, creating jobs, and building wealth. But a narrow conception of capitalism has prevented business from harnessing its full potential to meet society’s broader challenges. The opportunities have been there all along but have been overlooked. Businesses acting as businesses, not as charitable donors, are the most powerful force for addressing the pressing issues we face. The moment for a new conception of capitalism is now; society’s needs are large and growing, while customers, employees, and a new generation of young people are asking business to step up.” (Porter and Kramer, 2012)
Porter and Kramer state that the concept of shared value:
“recognizes that societal needs, not just conventional economic needs, define markets. It also recognizes that social harms or weaknesses frequently create internal costs for firms — such as wasted energy or raw materials, costly accidents, and the need for remedial training to compensate for inadequacies in education. And addressing societal harms and constraints does not necessarily raise costs for firms, because they can innovate through using new technologies, operating methods, and management approaches — and as a result, increase their productivity and expand their markets.” (Porter and Kramer, 2012)
Summary and Conclusion
This study has examined the case of Montefoire, both in terms of the company’s original strategic framework vs. its new strategic framework within view of the Balanced Scorecard. The new strategy of Montefoire is one that is focused on activity-based management rather than resource-based management and as a non-profit organization, Montefoire has a focus on creating shared value for the organization and those whom the organization serves, or that of the patient population. The focus of Montefoire should be on, rather than building the number of cases that the institution takes annually, on the number of satisfied patients that receive service provision from Montefoire on an annual basis. This focus will ensure that Montefoire is a care center of choice and that not only do patients return for health care service provision but that they additionally relate to others the excellent care they were provided ensuring that others choose Montefoire as well for their needs in health care services.
The Balanced Scorecard provides the necessary strategic framework to ensure that patient care provision is effectively and efficiently accomplished. While this may require some time for the organization in terms of employee buy-in, this method has been demonstrated as effective in other health care organizations and institutions as noted in the literature reviewed in this study.
Ambrosini, V. And Billsberry (2008) Value Congruence and Its Impact on Causal Ambiguity. 2nd Global e-Conference on Fit. 19th-21st November 2008. Retrieved from: http://www.fitconference.com/2008/fri01.pdf
Michael E. Porter — The Value Chain (2013) Clint Burdett Strategic Consulting. Retrieved from: http://www.clintburdett.com/process/05_research/research_05_4_valuechain.htm
Montefiore Medical Center (2001) Harvard Business School. 9 Apr 2001.
Porter, ME and Kramer MR (2012) Creating Shared Value. Harvard Business Magazine. Retrieved from: http://hbr.org/2011/01/the-big-idea-creating-shared-value
Rohm, H. And Montgomery, D. (nd) Link Sustainability to Corporate Strategy Using the Balanced Scorecard. Balanced Scorecard Institute. Strategy Management Group. Retrieved from: http://www.balancedscorecard.org/Portals/0/PDF/LinkingSustainabilitytoCorporateStrategyUsingtheBalancedScorecard.pdf
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