Improving care while effectively managing costs is one of the central challenges faced by the modern healthcare industry. Over the past few decades, hospitals have slowly begun to adopt business and management practices from other industries, which has led to a re-evaluation of the patient-provider relationship.
In 2000, executives at Virginia Mason Medical Center, a non-profit regional healthcare system in Seattle, were tasked with finding a more patient-centric (as opposed to facility- or physician-centric) way of operating.
“Our board challenged us to take a closer look at our practices and processes to make sure everything we did was for the benefit of the patient,” says Gary Kaplan, M.D., Virginia Mason's chairman and CEO. “That's when we realized we needed a new management method that would work in our industry to improve care, reduce waste and allow us to spend more time with patients.”
Kaplan and his team turned to an unlikely source for inspiration: Toyota. The Japanese auto manufacturer has become an industry leader, in part because of the success of the Toyota Production System, a precursor of the Lean production methodology that is focused on eliminating waste and inconsistency.
With Toyota as its model, the hospital developed what it calls the Virginia Mason Production System, applying the methodology to everything from reducing patient wait times to better managing its surgical instruments. In the process, the hospital has saved millions of dollars and greatly improved the efficiency of its staff.
More and more hospitals are turning to quality and operational management techniques with origins in the manufacturing world like Lean, Six Sigma, and Total Quality Management (TQM). The Joint Commission on Accreditation of Healthcare Organizations has embraced many of these approaches as well.
Still, according to Chip Caldwell, president of St. Augustine, Fla.-based consultancy Chip Caldwell & Associates, only about a third of hospitals are actually using these approaches. “Most industries have much higher adoption levels,” Caldwell says. “There are competitive pressures in other industries that we just don't have in the healthcare space.”
It's important to note that Lean and Six Sigma, although they share some similarities, are not exactly the same. Six Sigma is a problem-solving methodology focused primarily on reducing process variation (or defects), while Lean focuses more on improving process flow (and efficiency). Some companies and consultants have combined the two into “Lean Six Sigma.”
Both approaches have been successfully deployed in hospitals, but typically with some minor modifications (at least in teminology) to fit the healthcare environment.
“On the Lean side, we have to do some translating,” says Caldwell, who is also a former president of the HCA Atlanta health system. “Six Sigma is suitable to almost any way of thinking. It's really a marriage of statistics and engineering. When you take all the mumbo jumbo out of Six Sigma, it's a model for experimentation.”
Since 2000, Virginia Mason has conducted more than 550 Rapid Process Improvement workshops involving nearly 4,000 staff members, and the results are impressive. The hospital has saved $11 million in planned capital investments, freed 25,000 square feet of space, reduced inventory costs by more than $1 million, reduced the time it takes to report lab tests results to the patient by more than 85 percent, and reduced staff walking time by 60 miles per day.
“The big picture is that we're seeing improved patient satisfaction, better access to physicians, greater safety and quality, increased staff satisfaction and more efficiency and productivity throughout the organization,” Kaplan says.
Mount Carmel Health System, which operates four hospitals in the Columbus, Ohio area, has been using Six Sigma methods since 2000, and has generated a combined $79 million in cost reductions and new net revenue through efficiency improvements and by reducing insurance denials and bad debt.
“At the time, we were struggling financially and were trying to find a way to get out of this perpetual cycle of struggle and recovery,” says Mount Carmel Executive Vice President and COO Ronald Whiteside. With the help of Longmont, Colo.-based consulting firm Breakthrough Management Group (BMG), Mount Carmel deployed Six Sigma to help reduce its operating costs, increase patient throughput, and increase revenue.
As is often the case with Six Sigma and Lean projects, Mount Carmel frequently uncovered surprises. For example, the hospital had a high ambulance diversion rate because of back-ups in its emergency department. The project team thought these delays originated in the ER, but discovered that bed management practices were actually to blame. “There are a lot of ‘a-ha!’ moments when you starting digging into the details,” Whiteside says.