Master Thesis
Measuring the performance of SMEs in the healthcare industry:
Developing business performance scans for GPs and pharmacies
Laura Anniek Cazemier
S2298163
MSc Business Administration - Strategic Innovation Management
& Healthcare Management Certificate
Thesis Supervisor: dr. W.W.M.E. Schoenmakers
Second supervisor: dr. P.M.M. de Faria
Word count: 15832 words
University of Groningen
Faculty of Economics and Business
ABSTRACT
Measuring business performance has always been an interesting field for research. Researchers have predominantly focused on studying the performance of larger healthcare organizations, such as hospitals and pharmaceutical companies. However, few previous studies have focused on measuring the performance of Small and Medium Sized Enterprises (hereafter: SMEs) in the healthcare industry. This study tries to fill this research gap by offering a scan that measures performance of healthcare SMEs. The outcome of this study helps scholars and managers to understand differences in performance between General Practitioners (hereafter: GPs) and pharmacies and indicates focus areas for improvement. The business performance scans are created for both GPs and pharmacies, and are based on previous literature, combined with 5 in-depth interviews with healthcare practitioners. Especially the Value Chain of Porter (1985) contributes to understanding different components that are important to overall performance. The scan has been tested and reviewed by 18 practitioners to validate the models and to find attention areas for healthcare SMEs. Based on the theory and the acquired qualitative data, areas for attention for healthcare SMEs have been identified, including innovation, investments, communication, transformational leadership and coordination. Possible limitations of this study are external factors influencing healthcare SMEs such as the government and insurance companies. Also, this research only looked at GPs and pharmacies, while there are many more healthcare SME forms. Finally, the research was qualitative by nature, but quantitative research is required to test the business performance scans more closely.
INTRODUCTION
Globally, healthcare systems are dealing with rising costs and quality problems despite the efforts of the well-trained hospital staff (Lee & Porter, 2013). Especially in the Netherlands, the pressure on healthcare institutions has increased while compensation from insurance companies has decreased. This has caused work pressure to rise, waiting times to increase, stressed medical staff and dissatisfied patients within healthcare (Purbey et al., 2007). Many healthcare institutes as well as policymakers have tried to fix the problems with incremental changes through enforcing the application of guidelines, implementing electronic medical records. Unfortunately, the impact has been insufficient. Currently, healthcare is looking for a new approach that helps them to deliver better performance and by doing so, reducing costs and increasing their profit margins. According to Lee and Porter (2013), a fundamentally new strategy is needed that has value for patients at its core: achieving the best outcomes at the lowest costs. To ensure the best outcomes of organizations, they need to be able to analyze, reflect and adapt their current performance. Healthcare organization thus need a tool that is both measuring accurately, as well as striving for improvements in performance that will lead to better patient outcomes, better care delivered and better professional development (Batalden & Davidoff, 2007).
differences between SMEs and large companies and these should not be neglected when analyzing applicability of performance measuring tools.
It is very difficult to find the perfect fit between an organization and a performance measurement framework (Wongrassamee et al., 2003). Often, implementation of such tools fails, specifically in the healthcare industry. One explanation for failure is the resistance of healthcare professionals to change when trying to implement performance measuring tools (Kim et al., 2006; Koning et al., 2006). To overcome this issue, it is important that a performance measuring tool for SMEs in the healthcare industry is created based on the input from healthcare professionals managing these SMEs, combined with their involvement when a performance measuring tool is tested.
The problems of rising pressures within the healthcare industry needs to be dealt with. SMEs in the healthcare delivery system need to be able to accurately measure their performance in order to find improvement areas. By improving their performance, they are better able to deal with the current pressure from the environment. Consequently, the research question of this study is:
1. How should a business performance scan look like that helps to advice SMEs in the healthcare industry to improve their business performance?
This research takes a qualitative approach by focusing on good performing and bad performing SMEs in the healthcare industry in two different sectors: General Practitioners (hereafter: GPs) and pharmacies. The method section elaborates on why these two segments were chosen. Furthermore, GP and pharmacy practitioners will be interviewed to find the different components of their business that, independently or combined, contribute to good or bad performance. A research sub question that is posed is:
1a. Which elements of a healthcare SME are important to the business performance?
After the different components of a healthcare SME that contribute to business performance have been found, an effort will be made to analyze the weight of each component. Since GPs and pharmacies differ in the kind of service they deliver, they might differ in composition of important components. By giving weights to the different components for both GPs and pharmacies, the business performance scan can more accurately measure performance. Therefore, a second research sub question becomes:
1b. How important is each element to the business performance of a healthcare SME?
research is particularly relevant for managers of SMEs in the healthcare industry. Those who are managing a healthcare practice are benefitting from the application of the performance tool as it enhances their understanding of their current performance and helps them to develop a beneficial approach to improve their performance.
METHODS
This research is constructed to develop a business performance scan that can analyze the performance of healthcare SMEs and highlights focus areas for future improvements. Furthermore, this research is focused on possible differences within the same industry, namely healthcare SMEs. GPs and pharmacies are chosen as two research segments, as they are two different types of practices that are both considered healthcare SMEs. Furthermore, their way of delivering care differs, as GPs have more patient contact and pharmacies rely more heavily on the efficiency of their logistics. It is important to research the possibility of differences within the same industry segment, as this might influence the construction of the business performance scan and the generalization of applicability.
Research Methodology
To develop the best suitable performance measuring tool, a literature base is needed to find the different components that individual or together influence the overall performance of a healthcare SME. The input from SME healthcare professionals is used to complement the existing literature base, to fully develop and implement the performance measuring tool as far as possible, to create a stronger evidence base and to demonstrate applicability. The first step of this research will thus be to conduct a literature review to analyze existing knowledge on both developing performance measuring tools, as well as different components of a healthcare SME that contribute to their performance. Next, an existing framework that is most suitable for the particular industry segment of healthcare SMEs is chosen and applied to the healthcare SMEs. The application of an existing framework for identifying business components that contribute to performance helps to answer research sub question 1a.
Data collection
Data analysis
The in-depth interviews were manually coded after transcription by the researcher. Two code books were created to keep track of all codes of both the GPs and the pharmacists to explain the significance of each code, which can be found in the supplement document (p. 3-34). However, the codes, categories and themes in the coding process enabled a detailed analysis of all voiced issues without losing the rich diversity of the practitioners’ comments. After the transcripts were coded, the codes were divided into separate categories. These categories were then allocated into 8 themes. The coding process produced valuable insights and measures that were transformed into two separate questionnaires. These measures are needed to shape the first version of the proposed business performance scan as a quantifiable tool and also helps to answer research sub question 1b.
LITERATURE REVIEW
Performance measurement methods are discussed during this literature review. Furthermore, frameworks for identifying relevant business components for healthcare SME are reviewed and an appropriate framework is selected. These components will then be segmented by focusing on ways to quantify and measure them through literature as well as the contribution of qualitative interviews with both GPs and pharmacists. Subsequently, the literature on performance measurement and the insights of these interviews form the initial business performance scan for SMEs in het healthcare industry.
Measuring performance within healthcare SMEs
A practice or clinic needs to perform well in order for them to make a profit. To achieve a good performance, organizations need to understand their performance in order to improve it. Therefore, healthcare SMEs need to develop more information sources that contribute to the individual performance evaluation of their firm (Carraher et al., 2006). It is essential that these performance evaluations measure different factors affecting the overall performance. Those different components can individually or combined influence the overall performance of the firm. In the literature, two outcome measures of performance could be identified for SMEs in the healthcare industry that will be applied to the business performance scan: 1. economic performance (Grigoroudis et al., 2012 and Doetsch et al., 2017) and 2. patient satisfaction (Akdere, 2009 and Dahlgaard et al., 2011). Consequentially, performance of healthcare SMEs should not only be measured based on financial performance, but also from the perspective of the patient. This understanding that patient satisfaction is an important performance outcome in healthcare has become top priority (Kaplan & Norton, 1992). Previously there has been a lack of patient focus when improving healthcare (Olsson et al., 2003). Since healthcare is a service industry, the outcomes are produced in collaboration with the patient. When SMEs in the healthcare industry have both satisfied patients and a flourishing financial status, they can be perceived as high performers and the other way around, unsatisfied patients and a poor financial status indicate low performers. However, when SMEs in the healthcare industry have either a high economic performance or high patient satisfaction but perform worse on the other factor, they are identified as potentials, as they hold the potential to increase their performance further. Also, as patient satisfaction has become top priority in healthcare, performance of SMEs is more strongly influenced by patient satisfaction than economic performance. Studies confirm that patient satisfaction accounts for approximately 25% of variation in health practice’s financial measures (Naidu, 2009).
important issue with the existing models is the lack of a human-centered perspective that drives performance in healthcare businesses (McLeod & Clark, 2011). These generic organizational measuring tools cannot simply be applied while assuming they are equivalent to the healthcare industry. Some studies have focused on measuring performance in the healthcare sector by creating new frameworks, such as Purbey et al. (2007). His framework was divided into three categories, namely efficiency, effectiveness and flexibility. Although his research is very applicable to larger healthcare organization in providing insights in performance, process optimization and benchmarking, this model does not indicate problem areas and thus does not generate any future advice, nor does it focus on patient satisfaction (Bititici et al., 2012; Nudurupati et al., 2011). The focus on the hospital setting also makes the framework inappropriate for healthcare SMEs. These models are not undermined by this research and have all been validated and are used often in both literature in practice. However, as they are not applicable to the specific case of healthcare SMEs, a new measuring framework needs to be developed that takes into account patient satisfaction and maintains a human-centered approach.
A first step towards developing a performance measuring scan is identifying the relevant components influencing the performance of a healthcare SME. Two approaches are identified in literature to analyze different components of an SME that influence their performance, in terms of patient satisfaction and economic performance. The first approach that is commonly applied by SMEs is a Business Plan. How to construct a decent business plan is best explained by Barringer (2009). In an effort to help managers attract investors by explaining how the organization aims to make a profit, he introduced an approach for building business plans. This Barringer’s model can be useful for the development of our business performance scan, since having a business plan leads to higher turnover rates (Blackburn et al., 2013). Also, business plans are applicable to SMEs, but they are most useful to small enterprises (James & Gudmundsson, 2012). Even though the model of Barringer identifies different components that contribute to the performance of a firm, it offers little indication of how the different components should be operated to increase performance (Cooney, 2012). The second approach used to identify the relevant components for business performance is the Value Chain of Porter (1985). His framework analyzes performance by dividing the activities into two categories: primary activities and support activities. Each of these activities independently has an influence on the competitive advantage of the firm and combined, they influence performance. According to Porter (2001): “the value chain disaggregates a
firm into its strategically relevant activities in order to understand the behavior of costs and existing and potential sources of differentiation” (p. 50). A performance measuring tool can thus help
possible linkages between different components of an SME influencing each other, whereas the Business Plan of Barringer (2009) does not consider these existing interactions. Finally, the focus on profitability in the framework of Barringer (2009) is less consistent with our definition of performance than the focus of Porter (1985) on competitive advantages. To conclude, the Vale Chain of Porter (1985) is most suitable for identifying the different components of a healthcare SME and will thus be used as a foundation for the literature review.
The Value Chain components that are important to healthcare SMEs
The Value Chain (included in appendix 2) reflects the total value that is created by a firm through the performance of activities and the margin it captures as a result of its activities. This margin is the difference between the total value created and the costs of performing value creating activities. As indicated before, Porter (1985) makes a distinction between primary activities and support activities. Primary activities are divided into five generic categories: inbound logistics, operations, outbound
logistics, marketing and sales and service. Support activities can also be divided into four different
generic categories, namely: firm infrastructure, human resource management, technology development, and procurement. All of these categories should be further segmented into a number of distinct value activities that are specific to the industry being researched. Each of these categories may be vital to competitive advantage, but whether all mentioned activity categories are present differs per industry. The healthcare industry diverges from other industries since patients form both the input and output of the supply chain process. This has an impact on the presence and importance of the generic primary and support categories identified by Porter (1985). A book by Porter and Teisberg (2006) contained the care delivery value chain that was differently structured than the generic Value Chain (1985). This care delivery value chain (Porter & Teisberg, 2006) was structured specifically for large healthcare organizations such as hospitals and chronic care facilities. This care delivery value chain (2006) uses the structure of Porter (1985), but instead only focuses on operations, conditions and prevention as being the main components leading to performance, while disregarding some components from the original value chain such as service and human resource management. Therefore, the original value chain structure proposed by Porter (1985;2001) is applied to analyze the relevant components for healthcare SMEs. First, the outcome measures (called margin by Porter (1985)) that healthcare SMEs aim to collect is defined. Secondly, the presence and impact of the generic primary activities for healthcare SMEs will be discussed, followed by the generic support activities.
Margin
performance scans. The in-depth interviews revealed that both outcomes are good measures for determining performance. As PH11 said: “Customer satisfaction is most important.” But economic
performance is also recognized as an important performance outcome: “as a pharmacy you have to earn
enough money to invest, but you do not want to earn enough money to get rich (PH1).” Literature says
economic performance can be measured using the following dimensions: (1) investments (Nicolaou & Kentas, 2017) and (2) profit. This was implemented in the business performance scan by asking participant about their satisfaction with their profits and their ability to invest. Patient satisfaction was measured by the business performance scan by asking for the latest score on their most recent customer satisfaction survey which most healthcare SMEs perform on a yearly basis. The dimensions that were used to measure these two outcome measures were later used as input for the scans.
Primary activities
Inbound logistics are all activities that aim to receive, store and possibly disseminate inputs (Porter,
2001). As patient calls are the input for the healthcare SMEs, such activities include: receiving incoming patient calls; employee scheduling; patient scheduling and storing medical supplies (Kim et al., 2013). Such activities are more important to some healthcare SMEs than others. For pharmacies for instance, the storage of their medicine is their most important activity, whereas GPs only need to store certain medical equipment.
Operation activities for healthcare SMEs are focused on the patient visit. Since every patient comes in
with a different demand, the output varies per patient. Operation activities for healthcare SMEs usually contain: consultations, performing procedures, ordering medication and ordering referrals to secondary care (Kim et al, 2013). Porter (2001) mentioned that for the service industry, operations are most commonly the vital activities. When comparing GPs and pharmacists, the primary task of GPs is to receive patients and treat them in order to make them feel better, whereas the primary task of pharmacies is to provide their patients with the right medication which is centered around risk monitoring and safety checks.
Outbound logistics activities generally include distributing finished goods to warehouses, wholesalers
and buyers (Porter, 2001). One argument in favor of existence of outbound logistics could be that GPs prescribe medications which are either dropped off at the patients’ front door or needs to be picked up at a pharmacy. However, as pharmacies in most cases do not make their own medications, that is not the case. Rather their primary operations activity is checking whether the right medication is prescribed and delivered to the right patient. Another argument that outbound logistics do exist among healthcare SMEs could be the storing of patients once they need to be referred to specialists. Porter (2001) however does not agree with this assumption, since you cannot physically store people like you can do with
products. However, as GPs deliver healthcare as services instead of products and pharmacies’ activity of storing and distributing medicaments is regarded as operations, outbound activities are mostly nonexistent for GPs and pharmacies (Kim et al., 2013; Porter, 2001).
The function of Marketing and Sales is informing patients about their presence and their availability of services. Activities of marketing and sales for healthcare SMEs includes building an image, building relationships with clients, handling patient complaints and patient education (Kim et al., 2013). Healthcare SMEs are not known for their strong marketing tactics, but they could benefit from strongly positioning themselves in the market. Patient complaints is one of the main problems in healthcare systems and can be costly and thus disadvantageous for economic performance of a healthcare SME (Laal et al., 2016).
Service activities for healthcare SMEs aim to maintain the value of the service after delivery of the
service (Porter, 2001) and include the follow-up care and monitoring the patients (Kim et al., 2013), but also accessibility (Naidu, 2009).
Support activities
The firm infrastructure is important to any industry and any company. Activities of firm infrastructure within healthcare consist of: general management, quality management, finance, legal and governance affairs (Porter, 2001). For healthcare SMEs, costs of delivering care play a major role (Lee & Porter, 2013), especially for GPs, as they hold a gatekeeper function in the Dutch healthcare system. Management of healthcare SMEs influence the overall performance of SMEs, as well as the impact of legal and governance affairs since the state plays a major role in healthcare delivery through regulations and restrictions (Taylor & Hawley, 2010).
Furthermore, human resource management is important to all healthcare SMEs and their performance, as delivering services strongly relies on the people responsible for performing these services (Kabene et al., 2006). Human resource management activities can be divided into: recruitment, hiring, training, development and compensation of all employees (Porter, 2001). Both pharmacies and GPs strongly rely on their personnel to deliver the best quality of care, so they are both expected to gain a competitive advantage if they are good at performing human resource management activities.
Technology development activities include: developing know-how, procedures or technology. It is not
just research & development (hereafter: R&D), but rather the improvement of processes (Porter, 2001). For healthcare SMEs, specific activities within technology development are: R&D as well as improving performance procedures (Kim et al., 2013; Porter, 2001).
Procurement activities are concerned with making investments to enable healthcare SMEs to perform
Previous studies enabled segmenting the primary and support categories into specific activities. These categories and activities combined can be filled into the Value Chain of Porter (1985), as shown below. This framework forms the foundation of the business performance scan.
Figure 1: The value chain components and activities for healthcare SMEs, based on literature
Quantifying the Value Chain components for healthcare SMEs
FINDINGS
First, the results of the in-depth interviews will be presented. The similarities and differences found between the two selected segments within the healthcare SME industry will be addressed. These findings contribute to building the two business performance scans. Next, the business performance scans will be presented, after which the results from testing the scan are shown and explained. The result section will finish with mentioning the feedback from the participants of testing the business performance scan and presenting a final version of the scan.
Findings in-depth interviews
Interviews have been held with 3 GPs (labeled: GP1, GP2 and GP3) and 2 pharmacists (labeled PH1 and PH2). The interviews were conducted using a semi-structured approach and the questions are included in the appendix (appendix 3). All interviewees were first presented figure 1, as this figure contains the foundation of understanding healthcare SMEs, according to the literature review. All their remarks about the figure have been collected and are presented below. First, margins for both GPs and pharmacies will be discussed. Next, primary activities are discussed, followed by support activities. Finally, some other important remarks collected during the in-depth interviews will be presented.
Margin
All GPs expressed job satisfaction to be a necessity when coming to work. Regarding the outcome of their work, they perceived job satisfaction just as important as economic performance. When this proposition was presented to the pharmacists, they expressed a differing opinion. As PH2 said2: “Yes, I do aim for a high level of job satisfaction, but that is mostly because I think that ultimately leads to better care and therefore a better company. I do not think that is the final goal, at least not for me.”
One other difference that was mentioned by both GPs and pharmacists between them was the difference in economic performance. GP2 explained it as follows: “I think we will be very different from
pharmacies because we are in an economically more luxurious position. We really have no problems with the margins. At the pharmacy the water is really to the tip of their head so there are really different choices being made there.” A few years ago, pharmacies had quite a lot of money. However, due to
governmental interference, their margins were forced down. Currently, the margins are still kept low, but salary rates have risen due to CAO negotiations, which means a lot of pharmacies are currently struggling (PH1). Finally, both practitioners agree that making a profit is not the ultimate goal for a healthcare institution. As PH1 said: “You do not have to make a big profit if you can keep it running,
since you are a health institution.”
Primary activities
Preparations and operations differed for GPs and pharmacists in the sense that pharmacists are strongly focused on their logistics, their checks and the process, whereas GPs are more focused on scheduling patients, performing triage and taking time to listen to their patients. PH2: “A GP actually provides a
service without a physical package involved. With us it is almost always linked to the product. If something is wrong with the product, we notice that immediately.” Therefore, quality checks and
working precisely are much more important to pharmacies, whereas the primary task of GPs is:
“Searching with the patient for a decent solution that also fits within the care framework (GP2).”
However, when discussing communication and additional service offered by healthcare SMEs, both GPs and pharmacies thought that those are all actually part of the responsibility of a healthcare deliverer. Communication was described by GP1 as: “You do this on your website but also in your consultation
room because it is all prevention. That is a part of our care.” And as GP2 explained the importance of
follow-up care and monitoring: “The funny thing is that services, that's what we find management
language. While I think, that's actually part of the primary process. That is part of building a long-term relationship of your patient.” However, both GPs and pharmacists also agreed that due to time issues,
both parties often fail to do as much follow-up care and monitoring as they would like to do: “What I
would really like more, pharmacies generally do not score well on that, that we also just ask more in the meantime how is it going. Just with the standard patients. But yes, it is a matter of time and we are busy too (PH2).”
Support activities
Both GPs and pharmacists struggle finding employees. As for hiring new staff members, GPs prefer to hire someone from within their own network (GP1) and they think that social activities outside of working hours is beneficial for employee satisfaction (GP2). Pharmacists also like to hire people from their local network or someone who first did an internship at the firm (PH1&PH2). Also, both pharmacies and GPs feel trapped by governmental and insurance interference. As mentioned earlier, both try to lower the costs of healthcare while increasing the quality by putting pressure on smaller healthcare enterprises. However, practitioners currently feel like they cannot perform their job anymore due to many rules and regulations. One example comes from one of the GPs who explained they put a lot of effort into cancelling a clause from their contract with the health insurer. This clause required them to let every patient who wanted a referral to mental healthcare to fill in a questionnaire from the health insurer to determine whether they would need a referral. GP1 stated: “No, the health insurer is
not deciding about referrals, we decide as GPs.” However, due to this interference, both segments work
the patient is something they both value greatly. Furthermore, pharmacists rely more heavily on protocols and quality checks, as they handle such a large number of prescriptions. For them, constantly staying aware of the number of errors being made and having enough checks in place is a crucial part of their work. To break the daily grind of their work, they can choose to opt for job rotation. As assistants and nurses at the general practice are often specialized, job rotation seems less feasible for them. Another difference was noticeable in attitudes towards new technologies and services. Pharmacists tend to be more willing to invest in robots, as this may provide efficiency gains. GPs on the other hand are more reluctant. They want to know whether the new innovation is actually delivering better care or whether it just yields more money, as usage is supported through substantial compensations by the health insurance companies.
More general findings
There were also some more general findings. One of the GPs mentioned that striving for efficiency may yield less (GP2) Also, GP2 recognized a problem that has existed among doctors for a while: “We
consider ourselves to be incredibly important. It took a very long time before we even allowed an observer in our practice, because we had to do it all ourselves. That is not necessary.” Most
importantly, time efficiency was less of a deal for GPs than it was for pharmacists. As one of the GP mentioned: “And finally if you listen carefully, you also gain time goals for yourself, but that should
not be the goal (GP1).”
All the insights that were gained from the interviews were collected and analyzed. To analyze the in-depth interviews, it is important to have a structured approach that fits with the research. The approach that was used is discussed next in more detail to explain the process.
Combining the insights from in-depth interviews with the literature review
Analyzing the five interviews was done according to an approach of Hennink et al. (2010), which is used to develop theories. This approach was chosen, because a systemic approach that is well supported by data is most likely to produce a grounded and valid theory (Hennink et al., 2010). This approach contains the following steps:
1. Collect textual data 2. Identify codes
3. Develop categories (categorization) 4. Link categories (conceptualization) 5. Develop theory
to developing the business performance scans, proceeded as follows: 1. The interviews produced the textual data. 2. The deductive codes were replenished with inductive codes that arose during analyzing the interviews. The code book thus contains codes (see appendix 4 & appendix 5), their meaning and all examples provided by the interviews and is included in the supplement document (p. 3-34), along with the transcriptions of the interviews (p. 35-100). 3. After creating the code book, all codes were categorized, to structure the findings. By categorization, first-level codes are clustered into subsets, which were called categories. The function of creating these categories is to reduce data, it enables the groundwork for cross case analysis and is helpful to understand events in cases. 4. These categories were linked to create 8 themes. This process is called conceptualization, as it creates a visual understanding of insights provided by the different categories. These 8 themes corresponded with the 8 activities of the Value Chain by Porter (1985), which suggests that figure 1 is grounded as a theory for creating business performance scans. The conceptualization for both GPs (Figure 2) and pharmacies (Figure 3) are presented below. 5. Eventually, after coding, categorization and conceptualization, the business performance scans could be produced. The next section will explain how the creation process was conducted.
Figure 3: Conceptualization of pharmacy categories
Building the business performance scan
The conceptualization process resulted in two different figures. Figure 2 describes the theory and in-depth interviews for GPs, whereas figure 3 describes the theory and in-in-depth interviews for pharmacies. Both figures still use the structure of the Value Chain of Porter (1985), dividing the important business components into primary and support activities. These activities ultimately lead to the margins mentioned in the right sections of the figures. Furthermore, the primary and support activities can be segmented into 8 themes: 4 primary themes and 4 support themes. These 8 themes can again be segmented into different categories that are mentioned under each theme in the figures (figure 2 and 3). The next step to building the business performance scans was turning all these categories into measurable statements. The statements were created based on the code book, as the code book contains both deductive and inductive codes, which means the code book is based both on the theory as well as on the interviews. The codes identified in the code book are sorted by the different categories and contain all relevant insights gained from the interviews, as can be seen in the supplement file (p. 3-34). The measurable statements that were created all came from things that were said during the interviews. For instance, for general management staying aware of the decisions being made is important, as was suggested by GP1. She suggested to measure awareness of decision making by asking: “how many
minutes of how many hours of office hours you have and how aware is that choice?” This suggestion
was then turned into the following statement: 6. I know exactly what is going on in my practice, with
my employees and my suppliers (7).
from the interviews, as to make the responses measurable. The entire lists of statements can be found in appendix 6 (GPs) and appendix 7 (pharmacies).
When a participant would answer the statement with the optimal score, he would receive 10 points, whereas the least ideal answer would result in 0 points for that statement. This method could be used by implementing an =IF function. Those statements were clustered to measure the different categories. For every category, participants could thus receive scores ranging from 0-10, as averages of their scores on the statements for that category were taken. Combining these categories and creating averages also creates scores of the 8 themes on a 0-10 scale. To calculate scores for primary and support activities, the weights of the 8 different themes were taken into account (see appendix 8). This also resulted in scores for primary and support activities ranging from 0-10. This entire model was built in Excel, containing all formulas and measures to provide outcomes of the business performance scan (see appendix 9).
Creating the business performance scans is definitely an insightful addition to existing literature. However, the applicability of the scan has not yet been tested. By applying the scan to existing GP practices and pharmacies, reflection, validation and adaption of the scan is possible. Therefore, the scan was also tested, by creating an online survey to collect responses on the statements.
Testing the business performance scan
After the questionnaires were created and the business performance scans were built, the questionnaires were sent to pharmacists and GPs in the Netherlands using an online link to Qualtrics to collect responses. These responses were collected and analyzed, measuring outcomes for each individual GP and pharmacist. However, it should be noted that the results from the questionnaires are subjective and might be too optimistic. Very often, managers overrate their business performance (Venkatraman & Ramanujam, 1986). To compliment this subjective data, all participants were asked about their economic performance and their most recent score from their patient satisfaction survey.
1993). With this method of benchmarking a firm’s performance is measured against that of best-of-the-class performance to determine how to achieve performance improvement (Shetty, 1993). This method of benchmarking provides companies with insights in possible improvement areas. These areas provide new insights and also indicate focus areas for healthcare SMEs. Also, the Strategy Canvasses of GPs and pharmacists are compared to determine whether they are similar enough for a generic scan or whether they are too different by nature. A more detailed description of the findings is also included in the supplement document (p. 115-126).
A total of 11 pharmacists and 8 GPs participated in filling in the questionnaire that corresponds with the business performance scan. Participants were asked how they would indicate their own performance, based on the 8 components of the Value Chain. The reason no patients were asked to review their performance is that patients are really well protected by the Dutch Privacy Institutions and getting permission to interview patients was not feasible. The analysis of the results from the model contributed the following findings.
Business performance scan GPs
GP participants were divided into high performers, potentials and low performers, to look for differences and similarities between these three groups. 6 GPs were identified as potentials (hereafter: PO), whereas 2 GPs were categorized as high performers (hereafter: HP). No low performers (hereafter: LP) were identified among GPs. Below, the relevant findings are presented.
Primary and support activities GPs
As explained when the scan was built, average scores have been drawn from the scores on the different categories. The scores for primary activities were higher than GPs scored on support activities. As shown in the figure below, HP score higher on both activities, but the scores on primary activities are closer together than the scores on support activities. Also, the difference between scores on primary and support activities for HP were almost the same, whereas PO scores on primary and support activities differed more.
Figure 4: Strategy Canvas of GPs and their primary and support activities
6.50 7.00 7.50 8.00
Primary Activities Support activities
Scores
Strategy Canvas GPs
Primary and support activities
8 Themes of GPs
When taking a closer look at the 8 themes that the primary and support activities are built up on, some interesting differences and similarities emerge. Especially HRM and investments scored lower by PO than by HP, which are both part of primary activities. Furthermore, little difference exists between scores on firm infrastructure, innovations, communication and additional service. The highest scores for HP are scored on operations, whereas PO score highest on communication.
Figure 5: Strategy Canvas of GPs and the 8 themes of the business performance scan
Categories GPs
Even more differences are shown when looking more closely towards the different categories that are measured using the business performance scan. HP score higher on quality management, insurance negotiations, job satisfaction, recruitment & development, procurements, preparation, stock management and patient contact. Also interesting is that PO actually scored higher on governmental and legal affairs, managing employees and building relationships. The four lowest scores for HP were: quality management, economic performance, patient scheduling and stock management. Also, the four lowest scores for PO were quality management, recruitment & development, procurements and stock management. The four highest scores for HP were: job satisfaction, patient contact, gatekeeper function and customer satisfaction, whereas the four highest scores for PO were: governmental and legal affairs, delivering care, customer satisfaction and building relationships.
6.00 6.50 7.00 7.50 8.00 8.50 Scores
Strategy Canvas GPs
8 themes
Figure 6: Strategy Canvas of GPs and the categories of the business performance scan
Business performance scan Pharmacists
Pharmacy participants were also divided into high performers, potentials and low performers, based on their validation scores. 4 Pharmacists were categorized as high performers (hereafter: HP), 6 pharmacists were identified as potentials (hereafter: PO) and one pharmacist was labeled as low performer (hereafter: LP). This was done to look for differences and similarities when comparing their scores on themes and categories. Categorization and analysis produced the results presented below.
Primary and support activities pharmacies
When looking at the average scores of all three performance groups, they provide some valuable insights. HP score highest on support activities, PO scored highest on primary activities and LP score lowest on both. However, on average, the difference between scores on supportive activities are bigger than the scores on primary activities, as was also seen among GPs. Furthermore, PO differentiate less from HP than LP do from PO. It would thus be interesting to analyze these findings more closely to determine what differentiates PO from LP and HP from PO.
Figure 7: Strategy Canvas of pharmacists and their primary and support activities
8 Themes of pharmacies 5.0 5.5 6.0 6.5 7.0 7.5 8.0 8.5 9.0 Scores
Strategy Canvas GPs
categories
HP PO 6.0 6.5 7.0 7.5
Primary Activities Support activities
Scores
Strategy Canvas pharmacies
Primary and support activities
Of the 8 themes pharmacies were scored on, some categories scored quite similar. There is little difference between scores on firm infrastructure and additional service. Stronger differentiations in scores were noticed among HRM, innovations, investments, preparations, operations and communication. Within these more differentiating categories, PO scored lowest on HRM, while LP scored highest. Also, innovations were scored highest by the HP and lowest by the LP. Furthermore, PO scored higher on investments than HP, while LP scored much lower. PO scored lower on operations than both HP and LP, but higher on preparations. Finally, LP scored significantly lower on communication than HP and PO. Overall, LP score significantly different than HP and PO but there are only small differences between HP and PO. These small differences are noticeable among HRM, preparations, operations and additional services. Looking at the categories to find relevant differences might even highlight more insights.
Figure 8: Strategy Canvas of pharmacists and the 8 themes of the business performance scan
Categories pharmacies
When looking at the specific categories more closely, some interesting results are shown. Little difference can be found between scores for general management, quality management, economic performance, insurance negotiations, job satisfaction, managing employees, processes, delivering care, and services. Bigger differences, however, were noticeable among governmental and legal issues, recruitment & development, technology developments, procurements, inbound logistics, customer satisfaction and marketing & sales. HP only scored slightly higher on managing employees. PO scored highest on governmental and legal affairs, inbound logistics and service, whereas LP scored highest on quality management, economic performance, recruitment & development, delivering care and customer satisfaction. HP never scored lowest on any of the categories. PO scored lowest on recruitment & development and customer satisfaction, and LP scored lowest on governmental and legal issues, technology developments, procurements, inbound logistics, processes and marketing and sales.
2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 Scores
Strategy Canvas pharmacies
8 themes
Figure 9: Strategy Canvas of pharmacists and the categories of the business performance scan
Comparing Pharmacies and GPs
Comparing the results of both GPs and pharmacists by creating a strategy canvas of their scores contributes to understanding the healthcare SME sector and whether there are too much significant differences within this industry to create one generic business performance scan. To compare their scores, the averages were taken of every individual participant and divided by the number of participants to create average scores for both GPs and pharmacists. By creating average scores for both GPs and pharmacists, regardless of the number of participants in each category, comparison became possible. No distinction has been made between HP, PO or LP, as no LP existed for GPs. Also, averages create a more representative image of the whole population.
Comparing Primary and support activities for GPs and pharmacies
First, the average scores of both GPs and pharmacies are compared of their primary and support activities. Overall, GPs score higher both on primary and support activities. Also, both GPs and pharmacists score highest on primary activities and lowest on support activities. This suggests that more attention is needed for improving support activities. However, scores on support differentiate less, so pharmacists can probably also further improve their primary activities.
2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 Scores
Strategy Canvas pharmacies
categories
HP PO LP 6.5 7.0 7.5
Primary Activities Support activities
Scores
Comparing GPs and Pharmacies
Primary and support activities
Figure 10: Strategy Canvas of GPs and pharmacists and their primary and support activities
Comparing the 8 themes for GPs and pharmacies
GPs score higher on almost every theme, except for firm infrastructure and investments, as shown in the strategy canvas below. Pharmacists seem to be performing worse on all support themes, but also on HRM and innovations. What is remarkable about these results is that the same can be seen in the weight distribution differing between GPs and pharmacies (appendix 8). The weight distribution shows that pharmacies think HRM and innovations are less important than firm infrastructure and investments and they distribute less weight to these themes than GPs. In light of this difference, it should be accounted for that the nature of their operations differs, as GPs require more social interaction and pharmacies require more precision and analytic skills.
Figure 11: Strategy Canvas of GPs and pharmacists and the 8 themes of the business performance scans
Comparing categories for GPs and pharmacies
Comparing the categories provides more insights in the similarities and differences between pharmacists and GPs. As shown in the strategy canvas below, the results are somewhat different from the comparison of activities and themes, as pharmacists more often score higher than GPs on some categories, such as quality management, economic performance, insurance negotiations, managing employees, procurements and delivering care. However, GPs score higher on governmental and legal affairs, recruitment & development, job satisfaction, technology developments, inbound logistics, customer satisfaction, marketing & sales and services.
5.5 6.0 6.5 7.0 7.5 8.0 8.5 Scores
Comparing GPs and Pharmacies
8 themes
Figure 12: Strategy Canvas of GPs and pharmacists and the categories of the business performance scans
Figure 13 shows differences in scores of all specific categories when GPs are compared with pharmacists who participated in testing the business performance scans. The bars entering the green zone are the categories GPs score higher on and the bars entering into the red zone are the categories pharmacies score higher on. The height of the bars is determined by difference in scores, where higher bars indicate bigger differences in scores and vice versa. Almost no differences were seen in general management, procurements and processes, as shown in figure 11. For pharmacists, they scored highest compared to GPs on recruitment & development and job satisfaction. For GPs, they scored lowest compared to pharmacies on quality management, managing employees and delivering care.
Figure 13: Difference in performance (GPs vs. pharmacists) and the categories of the business performance scans
5.0 5.5 6.0 6.5 7.0 7.5 8.0 8.5 Scores
Adapting the business performance scan
After all participants had filled in the model, feedback on the business performance scan was collected to adapt it. This feedback was collected by asking participants whether they had any feedback or remarks after filling in the questionnaire. During this feedback collection, participants highlighted questions that were posed wrong or were irrelevant to their business. This process ensures validation of the scan by checking whether the scan measures what it is supposed to measure. Some changes were made to the statements of the questionnaires. For GPs, statements 23 and 85 were changed. Statement 23 previously was stated as: 23. I spend a lot of time negotiating with insurance companies and fighting
their restrictions (3). However, not all GPs negotiate with insurance companies themselves as was
addressed by PG6. This statement was adjusted to: 23. I find negotiations with insurance companies
and fighting restrictions important (3). As for statement 85: 85. I find it very important to be active at attracting new patients (5), not every practice is open for new patients. The revised statement was thus
DISCUSSION
A qualitative research approach has been used to build two business performance scans to measure the performance of GPs as well as pharmacies. These scans have been tested, analyzed and adapted to the feedback received from the participants. The framework of Porter (1985), called the Value Chain has contributed to the foundation of the scan. The insights from the in-depth interviews helped to further structure the business performance scan and create it. With the creation of two business performance scans, one for GPs and one for pharmacies, the research questions have been answered. A business performance scan for healthcare SMEs should include both primary and supportive activities. The primary activities should include the following categories: preparations, operations, communication and additional service. The supportive activities should include the following categories: firm infrastructure, HRM, innovation and investments. Further specification of each category depends on the subsegment of the healthcare industry the study is focusing on. The final sub question this research aims to answer is how important each element within the business performance scan is. Weights have been given to the business performance scans by asking the interviewees how they would divide 100 points among the primary and the supportive activities. Testing the business performance scans revealed several findings that derived from analyzing the responses.
For GPs, the following improvement areas can be identified based on the results of this study: recruitment & development(i), job satisfaction(ii), procurements(iii), patient contact(iv), gatekeepers function(v) and communication(vi). Although PO also scored low on quality management and stock management, the same goes for HP. Also, although HP scored very high on customer satisfaction, so did PO. Therefore, these two are not indicated as focus areas. Overall, results showed that GPs are better at performing their primary activities than their support activities. Furthermore, there is little difference between scores on primary activities. This is probably due to strict regulations of performance by the government as well as insurance companies on how GPs should perform. In 2006, the Dutch health insurance system was reformed. Consequently, insurance companies are triggered to gather and disseminate information about quality of care at both GPs as well as pharmacies and try to control performance of healthcare SMEs (Schut & Van de Ven, 2011). They hold significant power over healthcare SMEs. This was confirmed during the in-depth interviews, as GP1 explained: “when the
insurer says no, we do not agree with that, then we are finished. The only thing we can do is not sign, but that means we are missing out on 20% of our earnings and that 20% is our own income plus a bit more. In short, that is not possible”. So, spending a lot of time negotiating with insurance companies
might not be beneficial for you company, which might explain why HP spend less time doing so than PO.
support activities leave room for improvement for GPs, especially HRM and investments. PO should focus on increasing job satisfaction(ii), as well as recruitment and development(i) to increase their HRM scores, as increasing HRM confirmedly has a positive effect on overall performance (Bhattacharya et al., 2005; Collins & Clark, 2003; Sels et al., 2006). To increase their investment scores(iii), they should find some space for future renovations, or consider moving to a bigger practice, as was suggested by PH2. Furthermore, their willingness to invest in new innovations should increase. However, as previous scholars have found, willingness to invest in innovations is often linked to size of the healthcare practice (Chen et al., 2011). It is expected that larger organizations have a more solid foundation with more resources and better capability to tackle risks, which explains why they are more likely to invest in innovations (Grover & Goslar, 1993). As size was not measured during this research, this can neither be confirmed nor denied.
Besides these support activities, some differences were noticed among primary activities. Operations and communication differed for PO and HP. Especially patient contact(iv) and the gatekeepers function(v) of GPs as well as their efforts into marketing & sales(vi). According to the business performance scan, work pressure is one of the reasons underlying preparation time and having good patient contact. Also, as PO score highest on communication(vi), this indicates that it may be beneficial for them to spend less time and effort on this to increase performance. One way to still maintain a good communication with patients while increasing effectiveness has been recognized by researchers. Both DeVoe et al. (2008) as well as Dudeck (1998) found that patients perceive their doctors being better communicators when they work with standardized methods. These methods include using the same channels for the same group of patients, as well as working according to set standards. Also, Kay (2007) concluded in his research that healthcare organizations need to better utilize their marketing tools to inform consumers and assist in healthcare decisions. According to Kay, this might improve quality of care and increase accessibility to care.
Pharmacies are currently in an economically difficult position, as has been learned from the in-depth interviews. This results in pharmacists making different choices to stay economically viable. Comparing high performers, potentials and low performers showed that differences mainly depend on how they score on supportive activities rather than primary activities. As primary activities are more structured by regulations and laws, it makes sense that the results differ less than the scores on primary activities. As low performers scored lower on governmental and legal issues, innovations and investments, inbound logistics, customer satisfaction and marketing and sales, these are indicated as the most important focus areas for future improvement for these healthcare SMEs.
the interviews highlighted was that as a pharmacist, not spending too much time on these issues leads to a higher job satisfaction and better work performance. However, no research exists regarding governmental and legal interference in the healthcare system and how this effects healthcare institutions. PO scored lowest on recruitment and development(ii). Having difficulties finding new employees is not easy to influence, but they could pay attention to the development of their employees. Interviews indicated that reflecting on performance and stimulation to participate in trainings are both beneficial, as is supported by the article of Babakus et al. (2003). Jameson (2000) also suggests that small service businesses should write training plans and have training budgets to stimulate staff development. Oladeru et al. (2017) offer an alternative approach for healthcare SMEs, namely using role-playing exercises to develop the skills of staff members. Whether this approach is beneficial for healthcare SMEs should be investigated further.
The understanding that innovation(iii) is important is consistent with the research of Jippes et al (2010), where they explain the importance of innovation for healthcare businesses (p. 1): “Improvements and
innovation in health service organization and delivery have become more and more important due to the gap between knowledge and practice, rising costs, medical errors, and the organization of health care systems.” As innovations are important for future existence, it would be advisable to pharmacies
to invest in innovations. Regarding the importance of investments(iv), research mainly focuses on the importance of investments in information systems, as this enables pharmacies to operate more efficiency and more effective, resulting in enhancement of quality of care delivered (Bernstein et al., 2007; Menon et al., 2000). Menon and Lee (2000) found in a different study that even though regulatory effects have driven labor expenses up, healthcare was moving towards cost containment because of IT investments.
through accessibility of a practice and complaint handling, according to the interviews. Accessibility does not require the longest opening hours anymore, but rather using innovations such as dispense machines (Coffman et al., 2017; Jordan et al., 2017; McLean et al., 2018). Such machines however do require investments in innovations.
Comparing scores of GPs with the scores of pharmacies also contributed to understanding the healthcare SME industry and differences within segments of this same industry. Part of the differences in performance can be explained by the economical position pharmacies are currently in, especially in the Netherlands (ING, 2013). Their margins indeed have decreased due to interference of the government and insurance companies. But there are also other differences that conduce to the conclusion that there are too much significant differences within this industry to create one generic business performance scan.
The differences between GPs and pharmacists were biggest between customer satisfaction and job satisfaction and are thus suggested as focus areas for pharmacists. Pharmacies did score higher on firm infrastructure and investments. These outcomes are both in line with literature. The biggest difference of firm infrastructure was quality management. This makes sense, as quality management is very important to pharmacies, as they handle so many prescriptions. Prescribing the wrong medication can have a detrimental effect on a patient’s health. For pharmacies it is also important to control their quality, as this has a positive effect on productivity, efficiency and employee satisfaction within pharmacies (Westlund & Lothgren, 2001). Even more so, quality control on output supposedly positively influences the willingness to invest in innovations (Cardinal, 2001). This explains why pharmacies score higher on both themes.
Pharmacists scored specifically low on recruitment & development and job satisfaction. According to the business performance scan, pharmacies less often stimulate their employees to participate in trainings or reflect on themselves. However, reflection has proven to beneficial for dealing with performance challenges for employees (Walumbwa et al., 2008), and should rather be encouraged. Also, self-reflection and development are often linked to transformational leadership. In healthcare settings, transformational leadership can be beneficial to development and job satisfaction, as (p.1): “it
was found that transformational leadership is significantly related to increased satisfaction, increased staff-well-being, decreased burnout, and decreased overall stress in staff nurses (Weberg, 2010).”
CONCLUSION
The main objective of this study was to measure the performance of healthcare SMEs. As both GPs and pharmacists were introduced as two distinct research segments, this study revealed that within the healthcare SME industry differences exist that require business performance scans to be specific instead of generic. With building the actual business performance scans, answers to the research questions have been provided. Both economic performance and patient satisfaction were identified as being outcome measures, which contradicts theories such as Total Quality Management (McLauglin & Kaluzny, 1990) and Six Sigma (Harry & Schroeder, 2000). But including patient satisfaction as an outcome measure supports the understanding of more recent studies (Epstein et al., 2010; Lee & Porter, 2013; McLeod & Clark, 2011) that healthcare should focus not only on economic performance but also include a human-centered perspective. Also, the Value Chain of Porter (1985) has provided relevant insight for building the scans. The distinction that Porter (1985) offers between primary and support activities has been supported by the findings his research. Furthermore, the primary activities being preparations, operations, communication and additional service (Kim et al., 2013; Porter, 2001) has been confirmed by all interviewees (GP1, GP2, GP3, PH1 and PH2). The same holds for support activities being firm infrastructure, HRM, innovations and investments (Kim et al., 2013; Porter, 2001). This research has added to this framework, by distinguishing categories that those 8 themes exist of. These insights add value to and a better understanding of existing literature.
Areas for improvement have been indicated by testing the performance scans and using a competitive benchmark strategy. The understanding that innovations are important to the performance of healthcare SMEs’ performance is consistent with the research of Jippes et al (2010). Furthermore, investment, especially in information systems, can create a competitive advantage for a healthcare SME, which is in agreement with previous research (Bernstein et al., 2007; Menon et al., 2000). Also, transformational leadership could help improve scores on HRM (Weberg, 2010) when this is indicated as an area for improvement for practices and communication efforts should be standardized to increase effectiveness and improve performance (Carrol, 2018). Future research is urged to further develop and test the business performance scans. Researchers are encouraged to find other application areas for business performance scans, as many healthcare SMEs could benefit. Hopefully, by making performance of healthcare SMEs more insightful and by indicating areas for improvements, some pressure can be lifted from the healthcare industry.
Theoretical implications
they differ too much to create one generic business performance scan. Those findings resulted in two distinct business performance scans. Testing those scans showed that both GPs and pharmacies would benefit from focusing on areas for improvements that the scans help to highlight for every individual. However, more insights could be drawn from testing the scans, as will be explained at the end of this section.
Managerial implications
The results of testing the business performance scans of both GPs and pharmacies have produced some valuable insights to scholars, but also to managers of healthcare SMEs.
First, by investing in new innovations and think about new ways to train staff and offer service to the patients, managers and practitioners of healthcare SMEs can increase their performance. Robotics and information systems offer new ways healthcare can be structured and healthcare SMEs should benefit from the possibilities these innovations bring to their performance. It is recommended to pharmacies to make use of innovations such as dispensing machines that are available 24/7. Although such an innovation is a big investment, “We have earned it back within 3 or 4 years if I am right. Then that is
a good investment (PH1).” Secondly, pharmacies are encouraged to make sure they correctly inform
their patients using their communication channels in a structured manner. By standardizing communication, time efficiency and clarity can be gained, which stimulates patient satisfaction. Also, one of the practitioners mentioned taking into account illiterate people when communicating with patients, as 2.5 million people in the Netherlands are illiterate (NRC, 2018). Thirdly, transformational leadership has positive effects on the satisfaction of employees and their development (Weberg, 2010). By reflecting on their own performance, they are better able to deal with challenges on the job and are more committed to the organization (Park, 1997). Lastly, all healthcare SMEs are advised establish good coordination between all parties involved in the healthcare delivery chain, as this is both beneficial for their own performance, as well as for the patient.
Limitations
the business performance scan, a larger sample would possibly show more insights. The final limitations of this research are the external factors influencing performance of healthcare SMEs. The government and insurance companies are both major players in the healthcare system in the Netherlands. As they hold a lot of power over healthcare SMEs, their performance very much depends on their decisions. This limits their freedom to make their own decisions and thus limits their potential. How they should deal with new laws, governmental interference and restrictions has not yet been researched and thus a request to future research is to investigate this phenomenon to determine the limitations their power places on healthcare SMEs. Also, approaches for attracting new patients has not been adequately addressed in previous literature and remains unknown for now.
Future research
