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by Brian J. Swayne

Organizations worldwide have achieved major improvements in efficiency, quality and cost reduction through breakthrough improvement processes, quality improvement standards and evolutionary Six Sigma initiatives. Within the health care supply chain, however, those methods haven’t achieved similar results--or at least not at the same pace.

Although some successful exceptions do exist, many health care providers find themselves in quality and cost-performance crises. They must increase their rate of improvement just to remain profitable enough to drive health outcomes in the right direction and meet societal requirements.

The eye-opening numbers from a recent study sponsored by Juran Institute and Midwest Business Group on Health, a nonprofit coalition of major public and private employers, say much about the cost of health care. The report, titled “Reducing the Costs of Poor Quality Health Care Through Responsible Purchasing Leadership,” cited the following estimates:

Costs of poor-quality care for employers are at least $1,800 per employee per year for health care coverage.

Direct costs of health benefits for poor-quality care are at least $1,300 per employee per year per employer.

Indirect costs of lost productivity from poor care could add another $500 per employee per year.

Based on national health expenditures of $1.149 trillion, the estimated direct cost of poor-quality care in 1998 averaged between $344 billion and $698 billion.

Private purchasers paid between $112 billion and $224 billion, whereas public purchasers paid between $157 billion and $313 billion.

Cost of poor quality

How should the needed changes be implemented? This question is best answered in a new book, Juran Institute’s Six Sigma: Breakthrough and Beyond (McGraw-Hill, 2003), by Joseph A. De Feo, president and CEO, and William W. Barnard, Ph.D., the Institute’s senior vice president. Among other interesting challenges, the authors contend that, “Major organizationwide improvement can be achieved and sustained by pursuing a performance breakthrough road map that provides the structure to systematically identify and incorporate long-term business goals with the resources needed for efficiency, quality and remaining competitive.”

The essential first step for health care providers, then, is the same as in other environments. First, they must identify the specific areas in which the cost of poor quality is the highest. One of the basic tools to help determine this is a “cost of poor quality” analysis. This will help identify costs that would disappear if each task in a process was always performed without deficiency--meaning no waste.

Sources of poor quality in the health care supply chain fall into four categories:

Overuse--Tests such as X-rays and EKGs; lab work; prescribed medications, including sedatives, noninflammatory steroids and antibiotics; and procedures such as endoscopies, coronary artery bypass grafts, tympanoscopies and knee surgeries

Commenting on overuse, Lee Newcomer, M.D., a clinical participant in the study, suggests, “Assume overuse for about everything done in American medicine today; so start your list with those things that are most frequently done.”

Underuse--Diagnostic tests and screenings to prevent or detect conditions (e.g., mammograms, PAP smears, cholesterol screening, sigmoidoscopies and depression screening); medications and/or treatments (e.g., beta-blockers, aspirin and thrombolytics for heart attack patients; flu shots and inhalers for asthmatics); and exams (e.g., foot and eye exams and regular blood checks for diabetes)

Misuse--Errors in medication, diagnoses and surgery; misuse of medical equipment; and complications such as post-surgical infections

Other--Time lost tracking down or correcting paperwork and medical records, transporting patients, complexity, work-arounds, idle resources, inspections, wait times and throughput

Mark Chassin, M.D., another clinical member of the study group, adds: “The majority of these problems are not rare, unpredictable or inevitable concomitants of the delivery of complex modern health care. Rather they are frighteningly common, often predictable and frequently preventable.”

Achieving breakthrough improvements

To sustain systemwide breakthrough improvements, a health care provider must establish two basic cultural conditions with employees throughout the organization:

An understanding of the organization’s critical needs and the potential results from breakthrough improvement tools such as Six Sigma to achieve and maintain a truly successful health care system

A program led by top management and supported by a growing cadre of internal experts to exponentially improve the hospital’s performance by providing ongoing quality training, facilitation, analytical support and self-generating knowledge

Some ideas put forth in the Midwest study included:

Changing the current system to one of payment for evidence-based care as medically necessary

Sharing savings from quality improvement and waste reduction with providers, plans, purchasers and consumers

Requiring quality measures in health care contracts

Providing continuous feedback to health care suppliers

Juran Institute recommends that providers identify areas in which chronic deficiencies already exist, and then specify and provide the resources for specific projects to address these deficiencies.

As Joseph M. Juran noted, “All improvement takes place project by project and in no other way.”

Health care providers’ options for reducing their cost of poor quality include two proven methods. Both enable providers to make breakthrough improvements in transactional, clinical and administrative processes.

The first option is design for Six Sigma. This involves creating a detailed description of a product or service and the processes to produce them. The other is the classic Six Sigma model of quality performance improvement--define, measure, analyze, improve and control.

What follows is a set of outstanding examples of hospitals that are leading the way in using these and other breakthrough performance methodologies to achieve higher-quality patient care while reducing costs.

Bon Secours

The management culture throughout 47 facilities in nine states of Bon Secours Health System organizes thinking around four principles that focus on:

Customer needs

Process orientation

Analyzing projects based solely on facts

Empowering the right people to make better decisions through knowledge

The basic mission in achieving the best quality possible is to change leadership behavior, says Douglas Sears, director of performance improvement at Bon Secours. “We do this project by project so that our staff learns and achieves results by proactively participating in the Six Sigma process of defining, measuring, analyzing, improving and controlling events to reach the best solution possible,” he explains.

“At one of our hospital units the challenge was to redesign the process of patient placement to improve timeliness, reduce unnecessary delays, and achieve a more efficient and safe flow of patients throughout the acute care setting,” Sears continues. “The result [i.e., decline] in registered nurse overtime alone was 65 percent over one year. This is just one of many examples demonstrating how the accumulative effect can not only improve patient care but also reduce costs significantly for everyone in the health care supply chain.”

Sentara

Sentara Healthcare uses Six Sigma as one performance tool to improve quality, increase patient satisfaction and reduce costs. “The goal of our clinical project was to reduce the length of time a patient is on a ventilator, thereby avoiding potential complications associated with prolonged mechanical ventilation,” says Sarah Darwin, director of nursing and leader of the General Intensive Care Unit Six Sigma team. “The results were a reduced average ventilator length of stay of 25 percent and reduction of defects per million opportunities by

12 percent for annualized savings of $450,000. To hold the improved gains, we continue to use Six Sigma methodologies to ensure that patients on a ventilator receive care that is considered best-practice.”

Sentara has 21 Black Belt performance improvement professionals and another 20 Green Belt operational leaders. As one of Modern Healthcare’s top 10 integrated delivery systems for each of the last five years, Sentara continually works to improve quality, increase patient satisfaction and reduce costs.

A West Coast hospital

A large teaching hospital on the U.S. West Coast experienced serious problems in some of its treatment support services. The root causes remained mysterious and elusive. Management decided the curiously poor-performing processes must be improved.

Here are two problems the hospital faced along with preliminary results of the actions taken:

Problem 1: The time it takes for a physician to receive report results of inpatient tests is too long.

Mission: Reduce turnaround time for laboratory tests.

Symptoms: Only 50 percent of medical laboratory tests were available at the 8:30 a.m. goal.

Results of improvement: The goal of 8:30 a.m. was met, on a sustained basis, 96 percent of the time (up from 50 percent). This represented only the first pass.

Problem 2: Turnaround time for testing gynecologic cytology specimens takes 25 to 30 working days.

Mission: Reduce turnaround time for testing of gynecologic cytology specimens.

Symptoms: Turnaround time fluctuated between 25 and 30 days.

Results of improvement: Turnaround time decreased from 25 to 30 days to a new sustainable standard of three to five working days.

What made such dramatic--and potentially life-saving--improvements possible?

Executive management assumed the role of a quality council whose mission was to direct and support a cross-functional organizational attack on serious quality problems, problem by problem, project by project.

Management identified prospective project team leaders and facilitators and trained them in quality improvement methodology to diagnose and cure ailing products or processes. The approach involved two major steps: (a) diagnosis (i.e., searching for root causes) and (b) remedy (i.e., removing or going around the causes and putting in place new controls to prevent the causes from returning). This approach closely resembles the medical procedure for diagnosing and treating ailing patients.

The hospital formed improvement project teams consisting of staff from the area where the problem showed up and employees from departments upstream. All teams could call on a standby group of trained diagnosticians.

The project teams identified causes of the problems and changed the processes to solve the problems permanently.

Urgent action needed

It’s clear the health care industry must adopt or renew a quality improvement initiative designed to help make breakthrough improvements. Organizations in other industries recognize that when existing processes fail to meet their constituents’ needs, management has no alternative but to challenge existing processes. The health care supply chain must do the same.

Hospitals can learn some key lessons from successful businesses in a wide variety of industries in which business environments are increasingly restrictive and competitive. The health care supply chain is obviously complex; payers, patients, hospital staff and management often have contradictory needs. But hospitals are similar to these other organizations in many ways.

As with other businesses, health care providers must improve their performance by making continuing breakthrough improvements within a single, holistic process that’s integrated in the organization’s strategic plan. Despite what many hospital management leaders might believe, higher quality and lower costs aren’t contradictory; they’re synergistic. Breakthroughs are possible if health care organizations adopt quality initiatives to improve patient care, reinforce financial viability and better serve their communities.

As most citizens, employers, insurance and financial institutions, hospitals, government agencies and political leaders know, the U.S. health care system is in a crisis. The industry must decide whether to adopt processes that will solve existing problems or be challenged to do so through legislative or regulatory action.

Hospital management must assess organizational strengths and weaknesses before proceeding to a methodology such as Six Sigma. Too few hospitals fully leverage their resources by:

Integrating them to maximum advantage

Eliminating steps in a process and accelerating the pace of each step

Training employees with the right skills

Transferring knowledge seamlessly from one unit to another

Prioritizing projects by giving less attention to low-yield tactics and more to critically strategic goals

Improving financial processes such as billing and collections, reducing denials and improving coding accuracy

Many hospitals continue to waste precious resources by maintaining processes that no longer provide a benefit to patients, by duplicating efforts or by keeping productive employees working at tasks that require lower-level skills. Clinical costs outweigh administrative costs, so they offer the most promising opportunities for performance improvement.

Deployment and leadership

Of course, goals and projects must be aligned with a deployment strategy. Success requires a commitment by decision-makers to provide the focused and disciplined leadership that holds every participant accountable in meeting goals. Management must own the deployment process and make certain incentives are aligned with it. Management must also understand that quality and operational efficiency can’t be improved without pain. Side-stepping challenges by creating yet another committee, which delivers reports rather than value or improvements in performing key processes, is a bureaucratic route doomed to disappointment and failure.

In any improvement process, it’s vital that commitment comes in the strongest terms with direct and well-publicized involvement from the chief executive officer down through an entire organization. He or she must articulate what it means to achieve clinical, treatment and operational successes as well as understand performance improvement’s benefit to the organization’s bottom line. Top management will act effectively only if the savings are real.

Health care organizations must avoid cannibalizing revenue streams when preventive care measures are implemented. For example, a smoking cessation program can cut revenue from thoracic surgery. Obviously, little incentive exists to make quality improvements when an improvement carries penalties. Communities that share the direct and indirect benefits among its hospitals also share the costs.

Choosing the right projects when pursuing breakthrough improvements is equally critical. Once the projects are identified, the right people must be chosen to initiate and follow through with the process. With up-front planning based on strategic deployment, breakthrough improvements in quality and cost savings can then become realities.

The possibilities in breakthrough improvements, cost savings, patient satisfaction and loyalty, and employee development are enormous. The return on investment from a disciplined process like Six Sigma can be truly significant.

Out-of-pocket health care benefits represent one of the largest cost items for employers. Many of these purchasers have used performance-based improvement systems to improve their productivity and have concluded that these systems can be applied to health care.

These purchasers are viewing their health care providers in the same way they do other suppliers: They want to get more value at lower cost. They also know their employees have become more informed about the failures of poor health care processes. There’s no question that employers are moving aggressively to seek change.

Looking ahead

The U.S. Congress might not appropriate more money for Medicare, and the state-level picture is even gloomier. “Looking ahead, the picture gets worse,” states the Juran-MBGH report. “Unless action is taken, the direct and indirect costs of poor-quality health care could run over $1 trillion by 2011, equivalent to more than 6 percent of our nation’s projected gross domestic product for that year.”

Before investing in new processes and technologies, health care organizations must work on current procedures to make them efficient and cost-effective. In quality jargon, this is called reaching process entitlement. Then, after upgrades, organizations must continue to improve all their processes to ensure that these providers leverage the most they can from their efforts and investments.

That’s the measure of Six Sigma. Its true value is three-fold: a financial focus on how projects are selected, how controls are put in place to ensure savings are achieved and held, and in improving patient safety.

About the author

Brian J. Swayne is vice president, Transactional Business Development Team Leader and Six Sigma Master Black Belt for Juran Institute Inc. He leads trainers and consultants in guiding financial and service-industry clients to Six Sigma levels of performance. Swayne’s areas of expertise include breakthrough improvement, strategic deployment, transactional processes, benchmarking and lean manufacturing.

Juran Institute was founded in 1979 by Joseph M. Juran, a pioneer in the quality revolution, who developed many of the techniques and tools on which the Six Sigma methodology is based. Its clients include organizations throughout the health care supply chain.