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Six Sigma Practices

January 1, 2006
by Mark Hagland
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Various process-improvement methodologies have come along over the past few years, but one has begun to sweep the healthcare industry, prompting significant change in hospitals, health systems and health plans. Six Sigma, like other approaches such as reengineering, continuous quality improvement and total quality management (TQM), has its own rules, vocabulary and mystique, and it first emerged in the manufacturing field.

But Six Sigma is different, say its proponents, in two crucial respects: it is highly data-driven, and it is focused on achieving very specific, data-documented efficiency improvements, cost savings, and customer satisfaction enhancements. Those features make all the difference in healthcare, especially at a time of tight resources and high expectations of return on investment (ROI).

Bill Smith, an engineer with Schaumburg, Ill.-based Motorola Inc., coined the term and started the Six Sigma phenomenon when he applied the concept of production-variation measurement to the manufacturing process, setting a goal of no more than 3.4 defects per million opportunities. With chairman Bob Galvin at the helm, Motorola (which retains a registered trademark on the term) made a concerted effort in the 1980s to measure defects per million opportunities, an advance over previous measurements of defects per thousands.

Motorola touted $16 billion in savings from its Six Sigma efforts. Since then, hundreds of companies across industries have adopted Six Sigma. Fairfield, Conn.-based General Electric and others have gone into the business of coaching other businesses on how to use it.

Four for Six Sigma
Executives at hospitals and health plans who have led Six Sigma initiatives are proud of the process changes and cost savings it has brought.

For example, 433-bed Bay Medical Center in Panama City, Fla., has saved a total of $2.04 million in the past 18 months with its Six Sigma projects, 10 to 15 of which are running at any one time, according to Brit Watts, director of operations excellence. The patient registration process has been optimized to register 90 percent of incoming outpatients in less than 10 minutes, compared with 45 to 60 minutes prior to the project, Watts says. Bay Medical Center teams have also reworked precertification processes and achieved a rate of zero penalties from insurers in the key area of cardiac catheterization. A project that assesses the preparedness of patients for surgery has saved more than $1.2 million a year through elimination of no-shows and cancellations.

At the 14-hospital, 35,000-employee Northshore-LIJ Health System, based in Great Neck on Long Island, N.Y., executives have unleashed a tide of Six Sigma-driven projects since founding a corporate university to spread a culture of learning and improvement, reports Kathleen Gallo, R.N., Ph.D., senior vice president and chief learning officer. Among the projects is reworking of care management processes in the postanesthesia care unit to get patients into regular medical or surgical beds as quickly as possible, thereby decreasing staff overtime pay.

At the 1.4 million-member Health Insurance Plan of New York (HIP), based in New York City, Jim Karagiorgis, managing director of business transformation, says, "We have achieved $19 million in hard savings alone in the past 20 months." Among other things, HIP completed a project that reduced the provider claims cycle time from eight days to two. HIP’s Six Sigma leaders have seen "defect rates in operational areas decrease and have seen our claims payment accuracies increase," says Karagiorgis.

Blue Cross Blue Shield of Florida (BCBSFL), Jacksonville, has completed more than 120 projects since it began its Six Sigma work in January 2003, says Elana Schrader, M.D., who until September 2005 was vice president of continuous improvement. (She recently transitioned to a position as vice president of BCBSFL provider services.) More than 3,500 of the health plan’s 9,000 staff members have already received Six Sigma yellow, green or black belts (a series of highly structured levels of training with formal proficiency and study requirements).

BCBSFL has focused strongly on optimizing the claims payment and enrollment processes to improve relations with providers and members. It saved $7 million in operational costs in 2004, a substantial amount of which was Six Sigma-enabled. It saved $12 million to $13 million in 2005, all Six Sigma-enabled and about half directly related to Six Sigma work, Schrader reports.

Data propels improvement
What do these initiatives have in common? They’re all driven by data and focused on bottom-line results. Industry experts believe Six Sigma work can bring important benefits in healthcare for at least three substantial reasons.