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Waste Management

February 25, 2009
by Kate Huvane Gamble
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Smart CIOs are borrowing techniques from other industries to remove waste and save costs

It's time to get lean.

With so many health systems facing financial difficulties, there is increasing demand for techniques that can cut costs without requiring a significant outlay of resources. One method being utilized by a small number of facilities to more effectively allocate resources is performance improvement (PI), an idea built around the concept of identifying inefficiencies and fixing the problems.
Jeff Bauer, Ph.D.

Jeff Bauer, Ph.D.

Going lean, as hospitals are finding out, requires an enterprise-wide effort and dedication to a new way of doing business. It's a philosophy that seeps into every layer of an organization and dictates how a project is carried out, whether it's something as simple as standardizing surgical tool kits or as complex as deploying a workflow system.

“It permeates the organization and becomes part of the DNA,” says Jeff Bauer, Ph.D., partner, management consulting and futures practice leader at ACS Healthcare Solutions (Chicago). And if it's done right, the reward is a more efficient use of resources - an easy sell in the current economic climate. “Performance improvement is going to become much more widespread, especially with budget crunches that are the result of the financial crisis,” he says. “If people don't start doing this, they're going to be lucky to survive.”

Those that do can realize significant economic benefits.

Virginia Mason Medical Center in Seattle, which first initiated the Virginia Mason Production System in 2002, reports that it has saved $11 million in planned capital investment by using space more efficiently, and has reduced inventory costs by more than $1 million through standardization. In fact, the organization has been so successful that it established the Virginia Mason Institute to educate other hospitals and health systems on lean manufacturing.

One of those organizations was the University of Michigan Health System, a 913-bed network located in Ann Arbor. “Our interest was in continuous process improvement,” says CIO Jocelyn DeWitt, Ph.D., who made the trip to Seattle with several other executives and faculty members. “We had tried other methodologies in the past - total quality and PCA (Principle Component Analysis) - and because that group was a healthcare delivery group and was having positive outcomes, it felt like that might be something that we could apply here and get more sustainable outcomes.”

While Michigan's leadership was skeptical, fearing it was merely “the next process du jour,” the organization gave it a shot, developing and implementing Michigan Quality System (MQS) in 2005. Its goals were to eliminate waste, prioritize investments, and focus resources more efficiently. The biggest driver, however, was to improve quality of care, DeWitt says.

“We've done things around appointment scheduling for patients, hand-offs from caregiver to caregiver, transfers and the discharge process to make the care process more seamless,” she says.

Michigan has implemented several tools as part of MQS, including value stream mapping and standardized reports to analyze potential capital investments. The changes, according to DeWitt, have resulted in increased efficiency, cost savings, and improved care (see sidebar).

But while the system has saved money, “We don't use the financial drivers to determine which processes we want to improve,” DeWitt says. “We focus on safety and quality care and patient throughput, and that translates down the road to finances.”

Finding the value

Drex DeFord

Drex DeFord

At Seattle Children's Hospital, the Toyota Production System (TPS) has been part of the 250-bed facility's fabric for six years and plays such a key role in its strategy that teams travel to Japan for instruction. Last year, the organization sent two contingents; the first focused on supply chain improvements and the second featured teams from transplant, cancer center and pharmacy. The objective, says Senior Vice President and CIO Drex DeFord, was to examine how the system is used in other industries and emulate those steps within the hospital setting.

Seattle Children's has been able to trim some of the fat by examining its contracts and licenses to better understand maintenance costs and prevent duplication. “We're looking at how we can make things simpler and clearer so that we've got an easy-to-understand bill to pay and ultimately, a lower bill,” DeFord says.

The organization has established value streams around customer service, project management, operation of the enterprise architecture and application support management. This, DeFord says, will enable Seattle Children's to “deliver the same level of service for less cost, or better service for the same cost,” which in turn will improve the patient experience.

“These things all go hand-in-hand, so while you may be controlling costs or removing waste, at the same time, what you're doing is making a better situation for the patient,” DeFord says. “With these processes in place, patients can spend less time at the hospital and can plan their visits more effectively. All of those things add value to the patient's experience.”

Seattle Children's is also looking to improve patient throughput and solve bottleneck issues. With the tools honed in Japan, executive leaders are using data analysis to determine where inefficiencies occur in hand-offs and discharges.

Another area it has looked at is supply chain. Like Virginia Mason, Seattle Children's has deployed a technique known as kanban system for replenishing supplies. With the kanban (which means “visual card” in Japanese) system, a card is placed near the bottom of a stack of supplies such as gauze strips, so that when a nurse or physician sees the card, he or she knows it's time to restock. This, DeFord says, can help prevent over-ordering in areas like pharmacy and radiology. “The kanban process has put us in a much better position to control the costs and the wastes associated with excess inventory,” DeFord says. The project, known as Demand Flow, is projected to save about $3 million per year in materials costs and around 48,000 hours of non-value-added time, he says.

“In terms of financials, it has helped us to control costs and improve service to our customers,” says DeFord, adding that PI methodologies helped put Seattle Children's in much better position to weather the economic storm. “I can't tell you how many times I thought to myself, thank goodness we have this process in place. Because as I look out across my peers and talk to them, it's a negative, slash-and-burn approach to cost cutting with no real in-depth thought as to what those costs are going to affect long-term. With the methodology we have, we continue to look at costs, and we at least have a better understanding of how those adjustments can affect the organization overall.”

Seattle Childrens' experience is one that other organizations can learn from, says Bauer, who urges others to take a page from their book. “The healthcare system has to get rid of the inefficiencies and reallocate internally. Without growth or income, the only way you're going to survive is by tightening your belt.”

Healthcare Informatics 2009 March;26(3):24-27

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