Six Sigma
Last Word


Quality Management
A. Blanton Godfrey

Managing Key Suppliers

Find and maintain quality health care with these five tips.

In the past 15 or 20 years, almost every good company has radically changed the way it manages its key suppliers. But in a recent joint study by the Juran Institute and the Midwest Business Group on Health, a number of shocking facts emerged during interviews with health care providers and top business leaders. For many companies, health care providers are their most expensive suppliers.

 Recently, new attention has been focused on both the cost and quality of health care. A study by the Institute of Medicine revealed that 45,000-90,000 people die each year from health care errors. And this study focused on only the most easily meas-ured errors; many types of errors, such as those occurring in out-patient care, doctors' offices or home care, weren't included. To put the numbers in perspective, consider this statistic: You're more likely to have a life-threatening problem involving medicine during a hospital stay than you are to lose your luggage on a national airline. Health care providers' cost of poor quality is estimated to be as high as 30-50 percent of the total paid for health care. For some companies the cost of employee health insurance is now higher than profits.

 In the Institute of Medicine study, researchers concentrated on two areas: identifying the biggest opportunities for high costs to occur and determining how a company can avoid them. A surprising number of ideas emerged during the interviews. Many companies are beginning to actively manage at least parts of their health care partnerships. If all of these proven practices were combined, we would have a good start to developing meaningful quality partnerships with our health care providers.

 Some of the problems have simple solutions. Every year numerous preventable cases of flu slow worker productivity and cause employee absences. Flu shots are effective, inexpensive and widely available, but few companies have a program to provide them conveniently and monitor the percentage of employees receiving them. The return on investment for companies that provide these shots is easily better than 10 to 1.

 What's the proper role of the employer in its employees' health care? Employers increasingly believe that actively managing their health care providers is not just a way to ensure the best quality for the best price but also a moral obligation. General Motors used the Institute of Medicine's study result to estimate that their more than 3 million employees', families' and retirees' share of the accidental medical deaths is one to two per day. If any company had that many deaths due to safety accidents in one year, a major safety campaign would be underway.

 Some companies have created strong partnerships to focus on certain areas of possible improvement. Alcoa is working with hospitals in the Pittsburgh area to reduce infections and readmissions after knee and hip replacements. Infection rates range 0-50 percent by doctor and 4-20 percent by hospital. When Paul O'Neil, CEO of Alcoa, considers the progress Alcoa has made in many areas of quality and safety in the past 15 years, he sees no reason that, with Alcoa's help, the hospitals can't achieve similar results. Alcoa has reduced in-plant accidents by more than a factor of 30. What if we reduced infection rates by the same ratio?

 The Juran Institute and Midwest Business Group on Health identified a number of best practices that companies can implement now. Small or mid-sized companies should band together in consortia to ease the burden of some of these practices, but larger companies often have adequate staff to start many of these methods now.

 First, the requests for quotes for health care service should include quality measures and questions. This quality appendix should require the health care provider to provide information about current performance levels, improvement goals, and how key processes and outcomes will be meas-ured and reported.

 Second, quality information should be shared with all employees during the enrollment periods to permit employees to choose health care providers based on quality, not just price.

 Third, results should be reviewed with the providers periodically and feedback given from independent reviews of employee care. Much can be learned through simple interviews with sample groups of employees receiving care. Providers should be held accountable for engaging in care standards corresponding to known best practices.

 Fourth, employees should be given information about how to ensure they receive good care. One organization is providing large posters to put over its employees' beds that say, "Wash your hands before you dare touch me!" The most prevalent cause of in-hospital acquired infections is still the failure of nurses and doctors to adequately wash their hands between patient visits.

 Fifth, employees should be given good information about how to manage their own health before, during and after treatment. We can become partners in our own care--and often prevent the need for care--with the right information.


About the author

A. Blanton Godfrey is dean and Joseph D. Moore Professor at College of Textiles, North Carolina State University. For the past 13 years he was chairman and CEO of Juran Institute Inc. In 1987, he co-founded (with Donald M. Berwick) the National Demonstration Project on Quality Improvement in Health Care. A copy of the report referred to in this column can be obtained from Juran Institute or the Midwest Business Group on Health. Godfrey can be contacted by e-mail at agodfrey@qualitydigest.com .

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