Lean Management in Hospitals--The Humboldt Way

St. Joseph Health System-Humboldt County (SJHS-Humboldt County) is committed to meeting the highest standards in health care delivery. SJHS-Humboldt County consists of two hospitals: St. Joseph Hospital in Eureka and Redwood Memorial Hospital in Fortuna, both in California. With more than 1,200 employees, it is one of the largest employers in the county. SJHS-Humboldt County (HC) consistently receives high quality marks; in fact, Avatar recently named Redwood Memorial one of its national award winners in health care service quality for exemplary service in “exceeding patient expectations” for the year 2008.

SJHS-HC turns to the manufacturing industry for inspiration

Despite its consistently high marks in quality and service, administration believed they could continue to improve efficiency and sought inspiration from an unlikely source, the manufacturing industry. In 2007, SJHS-HC administrators visited several manufacturing companies and hospitals around the country that were applying the Toyota Production System (TPS) to improve processes and eliminate waste.

With a focused commitment on improvement called “The Humboldt Way,” in December 2007 SJHS-HC enlisted the help of Simpler Healthcare to coach hospital staff on the application of TPS skills to transform the organizational culture, engage staff, improve efficiencies, and improve the delivery of patient care.

Since implementing The Humboldt Way, SJHS-HC has realized approximately $1,130,700 in combined hard cost savings and has engaged more than 230 clinicians and employees, more than 20 percent of its staff, in learning problem solving skills and techniques.

Improving revenue with charge capture

The improvement management coaches from Simpler Healthcare worked with senior leaders at SJHS-HC to determine priority areas where The Humboldt Way could first be applied using TPS techniques. They concluded there was potential to increase revenue capture from medical, surgical, and implant supplies in the operating room (OR) that weren’t being properly identified as chargeable expenses.

Hospitals keep track (“capture”) of a patient’s use of hospital resources, such as equipment, medical supplies, diagnostic testing, medication, and hospital staff. These charges are recorded and then billed to patients and third-party payers. Often, the use of a resource may be overlooked. The process behind “charge capture” can be complex, making it very important that that a system is in place to capture charges completely and correctly, maximizing the potential reimbursement for revenue.

The problem

• SJHS-HC ascertained there were more than 100 implants missing Meditech charge codes, which represented an annual cost to the hospital of $164,520 and missed potential gross revenue of $700,598 annually.
• Additionally, staff determined there were more than 450 possible patient-chargeable surgical supplies that did not have corresponding Meditech charge codes, with a total cost of $540,246, and potential gross revenue of more than $3 million annually.  

The process

Simpler Healthcare’s hands-on sensei (coaches) went to work with a team of hospital administrators, physicians, nurses, and other staff, spending one week in a rapid-improvement event. In that event the group identified implants that had been used, but not charged. A flowchart was designed to identify whether an item was chargeable or not. Standard work was established to request Meditech numbers for chargeable items and to manage discrepancies of the material management numbers found within the OR documentation program. By the end of the week, all implants had a Meditech charge code that was put into the electronic system for tracking usage, as well as charging. The accounting department then readjusted the billed accounts to capture lost revenue.

The results

Although SJHS-HC is still in the beginning stages of applying The Humboldt Way to the revenue cycle, in one rapid-improvement event the team was able to:

• Establish processes to improve charge capture of more than 149 surgical supplies, resulting in more than $165,222 of added revenue in 2009
• Achieve nearly $930,000 in net savings
• Improve communication between the accounting department, the OR team, and materials management
• Engage in problem solving using a systems approach that respected all participants

In addition to improvements in the OR department, SJHS-HC is implementing The Humboldt Way across the health system. Since its implementation in 2007, the health system has realized approximately $1,130,700 in hard cost savings and has engaged more than 230 clinicians and employees, more than 20 percent of its staff, involved in learning problem solving skills and techniques. By actively engaging employees to seek out and eliminate waste, SJHS-HC has created a positive working environment that enables the health system to continuously cut costs and improve patient care.

About The Author

Lisa Shirk

Lisa Shirk is the regional director of Improving Performance at St. Joseph Heath System-Humboldt County. Shirk has more than 20 years of health care experience, with more than 10 years experience at SJHS-HC working in the rehabilitation department. Prior to her current position at St. Joseph’s Health System – Humboldt County, Shirk most recently served as the director of Rehabilitation Services.

For more information about St. Joseph’s Health System, visit http://www.stjosepheureka.org/AboutUs/AboutSJHSHC.