An Exploratory Study of Dynamic Capabilities and Performance Improvement in Hospitals

Goal: Recent efforts to push hospitals to provide high-value care have relied on payment incentives. However, evidence indicates that 70% to 90% of performance improvement projects do not achieve their desired goals. Therefore, in addition to managing external industry pressures, hospitals need to develop performance improvement (PI) capabilities that enable them to capitalize on improvement opportunities, effectively develop and adopt solutions, and ensure the sustainability of improvements over time. While operational capabilities enable hospitals to produce and deliver services, more is needed to attain and sustain superior performance. Dynamic capabilities drive changes in operational capabilities to meet environmental demands. Dynamic capabilities also enable hospitals to renew and reconfigure their resources to optimize performance. This paper proposes the dynamic-capabilities framework as an appropriate way to develop and manage PI capabilities in hospitals, and it discusses the implications of shifting to a strategy that is driven by dynamic-capabilities PI. Methods: The research team designed a semi-structured interview based on a review of the literature to understand whether hospitals were engaging in the activities outlined in the dynamic-capabilities framework. Nine study participants were recruited from a convenience sample of hospital PI staff at hospitals in Massachusetts and New Hampshire. De-identified transcripts were entered into NVivo12 qualitative data analysis software, and data were thematically indexed and coded following the principles of content analysis. Principal Findings: PI structures, improvement methodologies, and weaknesses did not vary significantly among hospitals. Most hospitals had a PI department and were more likely to adopt PI projects initiated by top management. While PI staff were trained in improvement methodologies, no programs were in place that required the rest of the hospital staff to become familiar with PI methods. Common areas of weakness were PI project selection, communication, coordination, learning from current and former PI projects, and systematic approaches to sustain improvements. Practical Applications: Dynamic PI capabilities provide an opportunity to systematically identify improvement opportunities, seize on and learn from those opportunities, and renew and reconfigure resources to optimize performance. Ad hoc PI projects are insufficient to enable a hospital to sustain superior performance. Internal and external pressures to deliver high-value patient care and services require hospitals to exceed their current PI efforts. By developing dynamic PI capabilities, hospitals will adopt a more systematic and effective approach to PI, which will likely result in superior performance.