[Case Study] Building a Closed-Loop Management System Integrating Operations, Assessment, and Performance for High-Quality Development at Heze Municipal Hospital

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Background: Self-Renewal amid the New Healthcare Reform Wave

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Public hospital reform is advancing in depth. The Opinions of the General Office of the State Council on Promoting High-Quality Development of Public Hospitals set out the core requirement of "three shifts and three improvements": shifting the development model from scale expansion to quality and efficiency, shifting the operating model from extensive management to precision management, and shifting resource allocation from a focus on material inputs to a greater focus on talent and technology. At the same time, the full rollout of DRG-based health insurance payment has fundamentally reshaped hospital operations, making precision cost control the key to hospital viability and development.

Faced with this new landscape, long-standing management bottlenecks at Heze Municipal Hospital have become increasingly visible. Strategic objectives were not effectively cascaded to departments and individuals, causing day-to-day work to drift away from the long-term development direction. Operational activities were not aligned with performance incentives, so the performance-based allocation system failed to direct clinical staff towards core indicators such as case-type difficulty, cost control and care quality. Assessment results were not fed back into strategic refinement or operational improvement, leaving no upward spiral of management. To resolve these systemic issues and achieve the fundamental shift from scale expansion to intensive development, the hospital has, in recent years, systematically planned and built an integrated closed-loop management system uniting operations, assessment and performance.

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Innovations: Building an Interlocking New Management Ecosystem

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Re-engineering the operating mechanism: from vertical control to network-style coordination 1. Refining top-level decision-making and strengthening strategic leadership.In 2025, in accordance with the Guiding Opinions on Strengthening Operations Management in Public Hospitals, and in line with the restructuring of internal bodies and middle-level management, the hospital carried out a strategic overhaul of the Operations Management Committee. The Committee is chaired by the Secretary of the hospital's Party Committee, with the President serving as standing vice-chair and the other hospital leaders as vice-chairs. Committee members are drawn from the heads of the core functional departments, including medical affairs, nursing, finance, health insurance, human resources, information, equipment, logistics and pharmacy, ensuring both the authority and the breadth of the decision-making body.

As the highest decision-making body of the hospital's operations management system, the Operations Management Committee is responsible for: reviewing the hospital's and specialties' development strategies, performance allocation plans and resource allocation; promoting precision cost management and process optimisation to improve resource efficiency and service quality; and convening regular meetings to study and decide on key operational issues, providing strategic direction for the hospital's high-quality development.

2. Integrating the central department to build a management hub.The Department of Operations and Performance Management was formed in May 2025 by merging the former Operations Management Department with the Economic Accounting Section. The move broke down the previous departmental silos, brought together operations monitoring, target-based assessment and performance accounting, and established an upward-spiralling management loop of "strategy-driven, operations-monitored, assessment-based, performance-enabled."

Positioned as a horizontal hub team that belongs to the hospital and serves the departments, the Department carries out the following core functions. On operations: building the hospital's operations analysis and evaluation system; carrying out data statistics, information mining and analysis; promoting data standardisation and indicator alignment; conducting DRG payment and case-type structure analyses; advancing lean management at the department level; and maintaining the hospital-department operations database with regular operational briefings. On assessment: managing the full workflow of the comprehensive target-responsibility assessment of clinical and medical-technology departments, including scheme design, implementation, data aggregation, result evaluation and improvement, forming an "assess–feedback–improve" closed loop. On performance: drafting and operating the hospital's performance management system, conducting monthly performance accounting and system optimisation, and using objective data to drive hospital- and department-level precision management.

To avoid overlapping responsibilities, the Department follows the principle of "segmented management with mutual coordination": it focuses on early-stage evaluation and recommendations and on later-stage review and feedback, while concrete execution is carried out by the respective functional departments, building an efficient and collaborative management force.

3. Building a systematic closed loop to drive precision decision-making.The Department of Operations and Performance Management works through a systematic closed loop of "environmental scanning – data monitoring – lean improvement – collaborative feedback". It regularly prepares the Operations Management Briefing and specialised analytical reports to track policy and competitive trends; uses monthly and quarterly operations reports together with DRG-specific analyses to pinpoint operational bottlenecks; participates in clinical handovers and specialty operations review meetings to bring management concepts and tools closer to the front line; and uses multi-department joint meetings, the President's executive meetings and an online suggestion channel to build a multi-channel feedback and refinement mechanism, creating a management ecosystem of continuous improvement.

4. Pushing management downward to take root in clinical front lines.To ensure that operations management concepts and systems are effectively implemented, the Department has adopted an innovative two-track model combining specialty operations assistants and project specialists. Specialty operations assistants serve as resident "management partners" in clinical departments, with standing responsibilities for routine operations analysis and lean management. They carry out specialty operations analysis and prepare department operations reports; maintain the department's basic databases for staffing, equipment and similar resources; evaluate resource-use efficiency and assist department directors in assessing and optimising resource use; support the formulation of departmental development plans with data and proposals; and drive intra- and inter-departmental process improvement projects. Project specialists focus on cross-departmental and cross-domain systematic improvements. They lead priority operations projects, develop implementation plans, coordinate delivery, track end-to-end progress and quality, and drive ongoing innovation in the operations management model. The two tracks together deliver vertical integration across the organisational system and deep grounding at the execution level, providing robust institutional support for precision operations across the hospital.

Through the arrangement of the Operations Management Committee – the Department of Operations and Performance Management – specialty operations assistants and project specialists, the hospital has built a network-style operations management system with criss-crossing, interactive links. The system keeps operational activities fully aligned with the strategic direction of high-quality development, effectively resolves the problem of misalignment between objectives and operations, and lays a solid foundation for the subsequent reshaping of target-based assessment and performance management.

Rebuilding the assessment system: from vague evaluation to precision navigation 1. Improving a dynamic, layered assessment system.From 2024 onward, guided by the Implementation Plan for Comprehensive Target-Responsibility Assessment of Clinical and Medical-Technology Departments (Trial), the hospital has built a scientifically rigorous and dynamically adjusted target-assessment system. The system fully incorporates the National Performance Assessment of Tertiary Public Hospitals and the requirements of high-quality development, forming a two-layer assessment architecture of "hospital-level direction-setting, department-level delivery". At the hospital level, three core dimensions are set: medical quality, operational efficiency and sustainable development, complemented by common indicators such as Party-building leadership, integrity and clean governance, and valid complaints. At the department level, assessment is tailored to five categories – surgical, non-surgical, medical-technology, outpatient and other – with differentiated assessment schemes and personalised responsibility statements for every clinical and medical-technology department, achieving "one category, one policy; one department, one scorecard". In 2025, the hospital continued to refine indicator design and dynamic management on this basis, pushing the assessment system towards greater scientific rigour and precision.

2. Designing a multi-dimensional, precision indicator system.On indicator design, the hospital follows the principle of being demand-led by its development needs and has built a target-assessment indicator system with clear hierarchy and direction. The system includes indicators such as CMI, number of Grade-4 procedures and number of minimally invasive procedures, guiding departments to focus on difficult, critical and complex cases and to advance medical technology towards the high end. Composite indicators such as outpatient and inpatient volumes and medical-service revenue are used to optimise service workflows and improve resource-use efficiency. Resource-allocation indicators such as bed occupancy efficiency are used to promote precision resource management. Cost indicators such as CMI-standardised average drug and consumable cost per inpatient stay are used to tightly control medical costs, forming a closed loop from target-setting to cost control. This indicator system gives effect to the strategic requirements of high-quality development while accommodating the specific characteristics of each department, achieving organic unity between assessment direction and service development.

3. Establishing a closed-loop mechanism for continuous improvement.The hospital strictly follows the Operating Procedures for Comprehensive Target-Responsibility Assessment and treats assessment as a management tool for continuous improvement. It has built a closed-loop mechanism covering the entire assessment workflow, focused on delivering an "assess–analyse–feedback–improve" management loop.

Under the procedures, a progressive management intervention is applied to departments that do not meet the targets. If a department does not meet the targets for one month, the Department of Operations and Performance Management conducts root-cause analysis and provides feedback and guidance. If it does not meet the targets for two consecutive months, the supervising functional department conducts on-site supervision of the clinical or medical-technology department. If it does not meet the targets for three consecutive months, a Non-Conforming Department Symposium is convened, chaired by the Target-Responsibility Assessment Leading Group. The symposium uses a four-in-one linkage mechanism of "operations assistant data briefing, clinical department self-analysis, assessment task force advisory input, and hospital leadership precision guidance". It aims to direct departments to focus on internal causes, identify root issues and jointly develop feasible improvement plans. After the meeting, a dedicated rectification report is produced, setting out the issues, measures and rectification deadlines, and is then tracked through push updates. Where a department implements the rectification measures but achieves no significant results, departmental responsibility is held to account in a serious manner. Where a department actively implements the rectification measures yet still fails to meet the targets because of objective constraints such as medical-technical capability, sub-specialty development or talent pipeline, the leading group conducts a comprehensive review and, subject to approval by the hospital-level Party committee, adjusts the assessment method or target values for the department concerned.

This institutional design transforms performance assessment from a purely results-oriented evaluation into a management tool that drives continuous improvement, delivering the management outcome of "assessment promotes improvement, assessment promotes development". Through these interlocking mechanisms, the hospital translates the strategic objectives of high-quality development into concrete, executable and measurable tasks for each department, providing strong support for building the integrated closed-loop management system uniting operations, assessment and performance, and fundamentally resolving the systemic problem of misalignment between objectives and operations.

Performance System Reform: Establishing a Value-Based Incentive Framework 1. Strengthening Top-Level Design and Anchoring Value-Oriented Distribution PrinciplesThe hospital implements the policy requirements of the "Two Permits," in strict accordance with the Heze Municipal Hospital Performance Management Plan. The plan was reviewed by the hospital's Party committee, discussed and approved by the staff representative assembly, and subsequently filed with and approved by the Heze Municipal Health Commission, the competent authority, ensuring the standardisation and legitimacy of distribution. The plan clearly stipulates the principle that staff performance pay is not linked to revenue from pharmaceuticals, medical consumables, examinations, or laboratory tests, severing the institutional link between remuneration and revenue generation and upholding the public-interest mission of a public hospital.

2. Innovating the Accounting Model and Building a Scientific Evaluation System Centred on RBRVSThe hospital undertook a fundamental reform of its performance accounting core by introducing and applying the RBRVS performance evaluation system. Using workload, technical complexity, labour intensity, and risk coefficients as core evaluation criteria, the system uses RBRVS workload point values to quantify the workload of clinical and medical technology departments, enabling a scientific and quantitative assessment of the technical value of staff labour. This shift repositioned the core of performance distribution from "revenue generation" to "technical value," accurately embodying the reform philosophy of "more work, more pay; better performance, better reward," and effectively guiding staff to focus on improving the technical service level and quality of care.

3. Integrating Diverse Incentive Methods and Refining the Performance Supplementary MechanismBuilding on RBRVS, the hospital implemented supplementary special performance incentives and linked the comprehensive target-based responsibility assessment results of clinical and medical technology departments to performance distribution, making assessment an integral component of the performance system. The target assessment translates hospital development strategy into specific department-level tasks. Through a "monthly settlement and annual reconciliation" mechanism, assessment results directly affect department and department-director performance, effectively reinforcing the primary accountability of middle management and ensuring strong alignment between department operations and hospital development priorities.

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Implementation Outcomes: Management Change Driving High-Quality Development

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The implementation of the system delivered positive changes across all dimensions, principally in the following four areas:

Dual Improvement in Care Quality and Efficiency

From January to November 2025, the hospital's overall CMI rose steadily year on year. Surgical volumes increased by 8.10% year on year, Grade IV surgical volumes increased by 4.72%, minimally invasive surgical volumes increased by 7.14%, and day surgery accounted for 21.66% of elective procedures. Through process optimisation and precision management, the average length of stay over the same period fell to 5.93 days, the time index decreased to 0.88, and the average waiting time after outpatient appointment fell to 17.82 minutes, with efficiency indicators continuing to improve. The surgical complication rate declined to 0.12%, the Class I incision surgical site infection rate fell to 0.01%, the antimicrobial use rate among discharged patients decreased by 4.61 percentage points year on year, and antimicrobial use intensity fell to 36.42 DDDs.

Dual Optimisation of Operational Efficiency and Service Mix

Under DRG-based payment, cost control became embedded across the organisation. Through targeted control measures, from January to November 2025, the average consumable cost per discharged patient fell by 8.84% year on year and the average drug cost per discharged patient fell by 10.08% year on year. The share of medical service revenue in the revenue mix became more balanced, rising by 3.18 percentage points year on year, reflecting stronger resilience and sustainability in responding to payment reform.

Dual Shift in Staff Mindset and Behaviour

The performance system reform redirected staff attention from "revenue generation" to "value creation." Focusing on case-type complexity, enhancing technical capability, and controlling costs became routine practice. Staff satisfaction survey results on performance fairness improved significantly, and team vitality was unlocked.

Dual Strengthening of Management Capability and Cross-Functional Coordination

The networked management system broke down departmental silos, making data-based decision-making the norm. In-depth analytical reports produced by the Operations and Performance Management Department provided precise evidence for specialty development and resource allocation, advancing management from "experience-led" to "data-driven."

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Lessons Learned

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By building and implementing a closed-loop "operations–assessment–performance" management system, this case provides a replicable practical reference for public hospitals seeking to overcome fragmented management and achieve high-quality development.

Top-Level Design and Organisational Commitment Are the Prerequisite

Re-engineering the management system requires committed leadership from the very top. Driven by the Party committee, the hospital established an Operations Management Committee, consolidated functions into the Operations and Performance Management Department, and deployed specialty operations assistants and project officers at the front line, creating a robust organisational structure that provided the foundation for breaking down departmental silos.

A Systematic Closed Loop Is the Core

The system's success lies in its spiral closed loop: strategic objectives guide operational direction; operational data inform target-based assessment; assessment results drive performance distribution; and performance feedback refines objectives and operations. Together, these elements form an organic, continuously cycling and self-improving whole.

Incentive, Constraint, and Continuous Improvement Are the Driving Forces

The vitality of the management system lies in its dynamism. The "monthly settlement and annual reconciliation" mechanism ensures rigour and timeliness, while ongoing operational analysis, supervisory rectification, and annual optimisation endow the system with strong self-repair and evolutionary capability, enabling it to adapt continuously to internal and external change.

Contributor: Jiang Zhenguo

This article is reprinted from the WeChat official account Shandong Health Research.

Read the original article:Case Study: Building an Integrated Closed-Loop Management System for Operations, Performance Assessment, and Performance Management at Heze Municipal Hospital in Support of High-Quality Development