Lean Six Sigma Can Reduce Health Care Costs

In just three basic steps

Published: Thursday, October 8, 2009 - 05:30

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n his inauguration speech, President Obama called for improving health care quality and reducing costs. In 2008, U.S. health care costs exceeded $2.4 trillion and are expected to climb to $3.1 trillion by 2012, according to the National Coalition on Health Care.

Of these costs, 25 percent to 40 percent are caused by unnecessary delays, defects, and deviations that can be easily corrected with lean Six Sigma. That’s $600 billion to nearly $1 trillion dollars a year in unnecessary costs.

Although most visits to the emergency department (ED) take two to four hours (from admission to discharge), the Robert Wood Johnson University Hospital in Hamilton, New Jersey, a 2005 Baldrige Award winner, does it in 38 minutes for a discharged patient. The hospital offers a 30-minute door-to-doctor guarantee. The staff accomplished this by rethinking the emergency experience from the patient’s point of view.

The clinical side isn’t the only issue to be addressed. Health care operations—billing, ordering, and so on—waste even more money. Insurance companies are quick to reject claims and slow to pay the claims they do accept, which causes more problems. One health care provider found ways, using lean Six Sigma, to reduce denied claims by $330,000 a month.

Step 1. Simplify (lean, 5S, gemba)

Every work area collects out-of-date equipment and materials. To trim costs and boost profits, start by going through every nook and cranny, and throwing out everything that isn’t related to the current way work is done. When the clutter is gone, it’s easier to streamline the workflow. Then visually organize and label the materials (e.g., gloves, bandages) and equipment into consistent locations.

Step 2. Streamline (lean value-stream mapping and redesign)

The next step is to streamline the business by redesigning the workflow to minimize resistance and delays. Health care suffers from “Lazy Patient Syndrome.” Although clinicians work on the patient for perhaps three minutes out of every hour, the patient sits idle for the other 57 minutes (the 3-57 rule). That’s why an ED’s elapsed time from start-to-discharge takes hours instead of minutes. Follow a patient from start to finish and notice just how little time is actually spent with the patient. Notice how much time an insurance claim spends in a queue waiting to be corrected.

Step 3. Optimize

Every business makes mistakes and errors or has defects in processes that result in rework, scrap, lost profit, and in health care, even death. To optimize care delivery, start counting and categorizing the mistakes, errors, and defects.

Count. How many mistakes (e.g., medication errors, patient falls) there are in the product or service. Include everything from registration to discharge.

Categorize. What are the most common type of errors, mistakes, or defects? Where do they occur and in which steps of the process? How costly is each type of mistake? By categorizing defects in a variety of ways, it's easy to discover where they reside. Only four actions out of every 100 cause more than 50 percent of the mistakes, errors, defects, scrap, rework, and lost profit (the 4-50 rule).

Applying lean Six Sigma to health care

When you stop watching the doctors and nurses and focus on how long the patients are waiting for the next step in their care, it’s easy to see how to improve the process. When you find the 4 percent of the process that causes 50 percent of the delay, defects, and deviation, health care can easily boost quality, cut costs, and increase profits without breaking a sweat.

The good news is that any health care company can start today; the bad news is that the company will never be finished. But with focused effort, health care could easily save $1 trillion by the next presidential election.

This article originally appeared on NAHQ e-news.

About The Author

Jay Arthur—The KnowWare Man

Jay Arthur, speaker, trainer, founder of KnowWare International Inc., and developer of QI Macros for Excel, understands how to pinpoint areas for improvement in processes, people, and technology. He uses data to pinpoint broken processes and helps teams understand their communication styles and restore broken connections. Arthur is the author of Lean Six Sigma for Hospitals (McGraw-Hill, 2011), and Lean Six Sigma Demystified (McGraw-Hill, 2010), and QI Macros SPC Software for Excel. He has 30 years experience developing software. Located in Denver, KnowWare International helps service and manufacturing businesses use lean Six Sigma tools to drive dramatic performance improvements.