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.
- The funding for improvement projects at healthcare organizations is limited, so when one is undertaken, senior executives are demanding increasingly solid ROI--a strong orientation of Six Sigma.
- The complexity of healthcare processes requires objective data as the foundation of any improvement-driven activity.
- The rigorousness of Six Sigma work is particularly appropriate for the rather unorganized delivery of care and management of business operations in healthcare, say initiative leaders. Even creating a Six Sigma strategy, using specific Six Sigma tools, and training staff members through the yellow, green, black, then master black belt chain of certifications is demanding and involves a high degree of structure.
The need to organize initiatives is "why Six Sigma fits in so well" in hospital improvement work, says Bay Medical Center’s Watts (who holds a Six Sigma black belt, meaning he is certified to lead initiatives and teach concepts). "It’s a far cry from the TQM initiatives of the past," he says. "The problem was that [TQM] had no real structure. It had local optimization, and people tried to improve everything, but locally. It didn’t help the whole system." Thus, a TQM project in one area could disrupt processes in another.
By its nature, Six Sigma can work only if it is championed directly by an organization’s CEO and executive management team. With its strong emphasis on data, objectivity and bottom-line results, Watts emphasizes, "Six Sigma forces improvements across the organization."
Six Sigma’s unapologetic focus on the bottom line and quantifiable results is highly appealing to senior executives, says consultant David Silverstein, president and CEO of Breakthrough Management Group (BMG), Longmont, Colo., which advises organizations in many industries on Six Sigma. For most of his clients in the healthcare industry (which include HIP and BCBSFL), reducing administrative costs is a major goal. Silverstein says that targets have included reducing billing errors to recapture "billions of dollars" in unachieved reimbursements, reworking the hiring process to speed job offers to nurses and become more market-competitive, and streamlining and optimizing such nonclinical tasks as delivering patients’ meals.
Northshore-LIJ’s Gallo notes that Six Sigma work is particularly valuable for organizations like hers--a huge multi- hospital system created through mergers and acquisitions, with many operational silos. Hospital executives decided to use Six Sigma as a "management vehicle," she says, because "We wanted to improve productivity and efficiency." It will do that and more, she notes.
It’s a vision thing
Although successful Six Sigma work is driven by objective data analysis, having sophisticated information systems is not a requirement for initiating Six Sigma development. In fact, many organizations, including Northshore-LIJ and Bay Medical Center, have yet to install comprehensive electronic medical record systems.
The idea behind the Six Sigma strategy is that organizations use their data to analyze fundamental dysfunctions in their operations: Then they use IT and other tools to correct the problems, rather than implementing information systems and then discovering they’ve automated dysfunctional processes.
During the two years that Schrader headed BCBSFL’s Six Sigma drive, she reported to a CIO who shared her view that business process improvement, enabled by Six Sigma strategies, is the foundation of organizational improvement and that IT enhances improvement. "Good business process is the foundation. Technology can be a wonderful tool to support ongoing operational improvement work," she says. Six Sigma leaders will have to begin work using imperfect data, but as work progresses, IT tools and the Six Sigma methodology in the hands of experts will improve data quality, she contends.
"For me personally, it was a goal to get past the data issue as a barrier. If we sat around and waited to have perfect data, we would never have gotten this thing going," Schrader says. "We didn’t have a lot of baseline data about our processes at first and continue to struggle with that." She and her colleagues have developed, among other things, a project tracking tool using available IT.
IT manager participation has been important at HIP as well, says Karagiorgis. For example, he notes that one IT executive achieved black-belt certification and did a "two-year tour of duty" implementing Six Sigma projects at HIP before going back to his full-time IT role in the organization. HIP’s chief technology officer, a senior vice president, "is looking to do an IT-specific Six Sigma deployment," Karagiorgis says, "one that would involve contracting with a vendor who’s into Six Sigma for software development" and that would focus on improving efficiency in some area of information system operations, such as the help desk.
Steve Gray, a partner at ACS Healthcare Services, Dearborn, Mich., says, "Hospitals and other healthcare organizations definitely shouldn’t delay operational improvement strategies simply because they don’t have the IT resources to manage the data. I haven’t found a single hospital that cannot at least produce basic reports off their computers." In his view, the crucial change is to remove "middle and frontline managers" from daily firefighting duties so they have big enough blocks of time to work on operational improvements.
Developing and implementing successful Six Sigma projects, Schrader says, requires long-term executive and organizational commitment. "One of the first things we did, acknowledging that this was going to require dramatic cultural change," she says, "was that we developed a vision. We said this was going to be a company that would encode this in the DNA of our genetic culture."
Since then, she says, BCBSFL has become "a company in which data-driven decision making is starting to be the norm, absolutely expected. Is it deeply embedded in everybody’s DNA yet? Of course not. But this is not a two-year gig, it’s a three- to five-year gig. But people understand the vision." That, Schrader emphasizes, is the most important asset of all.
Mark Hagland is a contributing writer based in Chicago.
Six Sigma Suggestions
Interviewees for this article were unanimous in citing key factors essential to the success of Six Sigma work. Among them were the following.
- Initiatives must be driven from the top down. Probably more than any other improvement strategy, Six Sigma depends on the active support and involvement of the CEO and the rest of the executive management team.
- CIOs and IT managers play a critical role in directing resources to support projects and helping strategize IT implementations around key organizational objectives.
- Implementation costs can be high, but ROI is even higher.
- Everyone involved in the effort should understand that success requires a firm, organizationwide, multiyear commitment, with many of the most impressive gains coming after a year or two of hard work.