Management and control of public hospitals - the use of performance measures in Norwegian hospitals. A case-study

This paper investigates the use of performance measures in the management control and decision-making processes in the Norwegian hospital sector. The motivation for the study is to understand the implementation of performance-based management systems which is an element in the international New Public Management (NPM) reforms waves now affecting the hospital sector. The theoretical framework is based on the description of hospitals as complex and decoupled organizations. The use of benchmarking is discussed, and the focus is put on the information biases that exist in such data. The main finding in the empirical study is that the ambiguous information which exists in the performance measures used at the hospital department level, maintains the decoupling between the clinical activities and the management control practices. This decoupling creates management control problems because it hampers the knowledge on the cause-effects of actions, which is important in order to undertake strategic decisions and diagnostic action. In order to increase transparency, cost information should be decomposed as to develop practical indicators for interactive control purposes in clinical departments. Copyright (c) 2006 John Wiley & Sons, Ltd.