Many healthcare organizations launched traditional cost containment tactics- reducing labor and supply costs-during the darkest days of the recession. As a result, providers are noticeably leaner. Not-for-profit hospitals have experienced a dramatic drop in median operating expense growth-to 5.7 percent from a three-year high in the mid to high 7 percent range, according to FY09 median report from Moody's Investors Service.
But the belt needs to be tightened several more notches. Hospitals and health systems are gearing up for deep reimbursement cuts-$148.7 billion in Medicare and disproportionate share hospital payments over 10 years-under the Affordable Care Act. Meanwhile, the slow economy continues to negatively affect patient volumes and investment portfolios.
As a result, providers are pulling out the big guns. They are moving from tactical to strategic cost management, using proven process improvement approaches to transform the way patient care is delivered. The goals: less waste, greater efficiency, and more coordination. As illustrated by the providers in this section, the journey is a constant balancing act between slashing costs and improving quality.
This is part of the Leadership Fall-Winter 2010 special report, Striving Beyond Reform.
Return to the full report.
Mercy Medical Center, an independent, one-hospital system in Cedar Rapids, Iowa, is not afraid of the future under healthcare reform. That's because leaders and staff have the tools they need to achieve critical goals in the years ahead: improving patient care through focusing on quality and safety, timeliness of service, and cost reduction.
Mercy's approach to performance management is the use of Lean manufacturing, a process improvement methodology borrowed from Toyota. "Lean is transformational," says Timothy L. Charles, Mercy's president and CEO.
The most visible evidence of that may be in Mercy's emergency department (ED), where the quality of care for chest pain patients is measured in minutes. For example, the average time from arrival to first EKG is 2.85 minutes, down from 10 minutes in 2005.
This is just one of dozens of improved metrics since Mercy's first Lean efforts in 2005, when ED staff reworked how patients flow through the department. Among other things, the ED has developed a "fast-track" service in which patients with less acute conditions- an earache, the flu, or a broken finger, for example-are treated and discharged within one hour.
"By removing nonvalue-added process steps in the ED, we reduced the patient length of stay and increased our capacity to handle more patients," says Kathy Berry, Mercy's Lean coordinator. "We had a 6 percent growth in ED patients in a flat market right out of the chute because of those first efforts."
Containing costs through value focus. Berry says that Lean management is not focused on reducing costs, but rather on transforming an organization's culture and changing the way staff members think. "By focusing on providing value to our customers by removing the waste in our processes, cost savings naturally occur," she says.
Mercy was introduced to Lean principles in 2005 as part of a collaboration between the Iowa Hospital Association and the Iowa Business Council. In the first year, Mercy undertook 12 Lean activities. More than 180 events have been conducted to date, and many have resulted in cost savings:
Other Lean events have positively impacted volumes and revenues. For example, process improvements in the Women's Center increased the capacity for accepting walk-in mammography patients by more than 86 percent. Previously, the center was able to accommodate a maximum of seven walk-ins per week; now the center is handling an average of 13 walk-ins each week, increasing revenues by more than $3,500 a month.
Building a Lean culture. In Mercy's ED, program coordinator Crystal Shannon RN, MSN, MHA, spends most of her time analyzing patient flow data, planning Lean projects, and looking for additional processes that can be improved. "With all the Lean events that we have participated in, our team has developed a Lean mentality," she says.
Lean management is a challenge in the healthcare industry, says Berry. She joined Mercy in 2007, after a decade of working with Lean techniques in other industries.
"We have very intelligent, highly technical people in health care, but their training and experience revolves around patient care," she says. "Understanding the organization's strategic goals, how individual efforts align with those goals, and the connection between process improvement and patient care can be difficult concepts for many staff members."
Pressing forward. With so many Lean successes under its belt, Mercy's ED is now extending its Lean influence to other areas of the hospital. The ED set a goal of moving a patient to an inpatient floor within 30 minutes of the admit decision. Historically, that time lag has exceeded two hours. Currently, it averages 50 minutes.
"We have knocked it down by half, which is significant for our operational efficiency and patient satisfaction," says Shannon. "Our team will continue to apply Lean concepts and analyze operations to meet our 30-minute goal."
Her goal is to make the back end of the ED visit match the front end, which would be the envy of most hospitals. "We hardly ever have any front entry patient waiting," she says. "Our door-to-doc times are averaging around 25 minutes."
Trained as an engineer, orthopedic surgeon Anthony M. DiGioia, III, MD, admires process improvement approaches like Lean management and Six Sigma. But when he set out to optimize patient outcomes for his own joint-replacement practice at Magee-Womens Hospital of the University of Pittsburgh Medical Center (UPMC), he opted to create his own methodology that is "built on the shoulders" of other process improvement approaches.
Unlike industry-borrowed approaches like Six Sigma, DiGioia's approach-called Patient and Family Centered Care (PFCC) Methodology and Practice-was developed specifically for health care, which is unique because of the relationship between patients and their caregivers. A grassroots approach by design, PFCC involves six simple steps that caregivers can learn in a few hours of training (see the sidebar).
"Magee-Womens has always been focused on the patient experience, but the PFCC methodology has helped change the mindset of the organization so that everyone, no matter what their function or job, is engaged in the patient and family experience," says Magee-Womens' CFO Eileen Simmons.
Measuring the results. DiGioia brought his busy orthopedic practice to Magee-Womens Hospital of UPMC in 2006. Because he was building the hospital's joint replacement program from the ground up, he seized the opportunity to create a "hospital within a hospital" with its own processes rather than adopting traditional approaches.
In doing so, DiGioia and other caregivers worked with patients and their families to develop the new program using the PFCC approach, which requires staff to view all care experiences thru the eyes of patients and families. Inspired by the idea that health care needs "disruptive innovation," as described by Harvard business professor Clayton Christensen, the team envisioned an ideal patient experience and combined the people, processes, and places that were needed to consistently deliver that experience.
For example, the joint replacement program features a "one-stop," two-hour preoperative visit scheduled three weeks before surgery, during which all clinical testing and screening, patient and family education, and discharge planning with a social worker takes place. All patients are required to select a "coach" -a family member or friend who will help with postoperative recovery and rehabilitation and serve as the single point of communication between the patient and the care team. In addition, everyone who will be having surgery on the same day meet one another at that time.
The joint replacement program has grown to include four surgeons, and the program's clinical outcomes and length of stays outperform national averages. For example, in 2009, Magee-Womens had zero infections after total knee replacement surgeries. In comparison, nationally, 2.4 percent of total knee replacement patients develop infections. In addition, the average length of stay after total hip replacement is only 2.5 days-compared with a five-day national average.
Meanwhile, Magee-Womens' orthopedic program ranks in the 99th percentile nationally for patient satisfaction-on both Press Ganey and Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) surveys. More than 99 percent of the program's patients say they would recommend the program to family and friends.
"Organizationally PFCC is a proven winner in that it helps to keep costs down-by reducing length of stay, and it also improves the reputation of the facility, as demonstrated by the HCAHPS scores," says Simmons. "The PFCC methodology is an inexpensive way to approach process and performance change. Examining solutions at a caregiver level has resulted in low-tech/low-cost solutions."
Moving forward. PFCC is spreading organically across the 20-hospital UPMC health system, which is based in Pittsburgh, as well as nationally and even internationally through collaborations with the Institute for Healthcare Improvement (IHI) and the Picker Institute.
In 2009, 13 teams-called care experience working groups-completed 93 improvement projects in areas ranging from surgical care and rheumatology to new-hire orientation and caregiver retention. This year, 30 groups are at work. Each team is led by a clinical-administrative pair: a clinical champion (e.g., the nurse, physician, or program coordinator who knows the care experience best) and an administrative champion (i.e., CEO, COO, or vice president).
Among the results: Staff at UPMC's Children's Hospital of Pittsburgh integrated several techniques to create a painless blood draw for pediatric outpatient rheumatology patients, and an environment and lobby work group arranged for "destination coordinators" to serve as concierges or navigators for all hospital visitors.
DiGioia says the PFCC approach was designed to be a grassroots effort, but its success has attracted the attention of health system executives who want to position the organization for pay-for-performance initiatives. The PFCC methodology is now being adopted as a top-down initiative at two UPMC hospitals-Magee-Womens Hospital and UPMC Presbyterian- to prepare for the day that Medicare reimbursement is tied to clinical quality and HCAHPS scores as part of the value-based purchasing program described in Section 2.
Although the PFCC approach was not originally designed with hospitalwide transformation in mind, DiGioia says hospitals are in the same position he was in when he started to redesign his own practice.
"Whether we're doctors or hospitals, there are only two things that we have absolute 100 percent control over: our own overhead and our patients' and families' care experiences," he says. "We definitely don't control our reimbursement, or all the things that are circling around us. So we need to focus on the things that we have absolute control over and position ourselves for whatever is going to be coming down the pike. That's exactly what the PFCC Methodology and Practice allows us to do."
Like Mercy Medical Center, Harvard Vanguard Medical Associates relies on Lean techniques and other process improvement approaches. In addition, the physicians group-which includes more than 20 office sites across eastern Massachusetts-is engaging system engineers to resolve certain types of complex problems.
Basic process improvement techniques, such as Lean and Six Sigma, typically generate some 70 percent of the potential maximum improvement, but the remaining 30 percent usually require more advanced methods, says James C. Benneyan, PhD, director of Northeastern University's healthcare systems engineering program and codirector of the NSF Center for Health Organizational Transformation and the VA New England Healthcare Systems Engineering Partnership.
Broadly used in manufacturing and other industries, systems engineering uses mathematical, statistical, and computer models to optimize a wide range of complex logistical processes. Benneyan and his colleagues are on track to save over $17 million through a variety of projects on preventable readmissions, inventory logistics, panel optimization, patient safety, surgical suite management, specialty services location, and cancer treatment optimization. Interest in using systems engineering within healthcare has grown significantly since the 2005 publication of Building a Better Delivery System: A New Engineering/Health Care Partnership, a joint project of the National Academy of Engineering and Institute of Medicine.
Reducing no-shows. Borrowing a concept from the airline industry, the Harvard Vanguard Medical Associates obstetrics/gynecology office in Quincy, Mass., plans to start overbooking selected appointments on a trial basis.
In 2009, the clinic's no-show rate topped 18 percent, costing the practice $446,000 in lost revenue. After conducting an engineering study, a team led by Benneyan advised the Harvard Vanguard physicians that more than half that lost revenue could be captured by overbooking certain types of appointments in a specific way.
"Occasionally, everybody shows up for their appointments, but that is actually quite rare, and now we have the data to support that," says Constantine N. Kralios, MD, practice leader in the Quincy office.
The process of scheduling outpatient visits is one that cries for optimization, says Benneyan. "When you ask healthcare professionals 'What is causing you misery?," almost everybody will talk about patient no-shows."
For Harvard Vanguard, the engineering team used a three-tiered approach. First, it used logistic regression to identify the types of patients and times of day for which appointments are most likely not to be kept. Probability and optimization methods were then used to determine to the best amount of overbooking. Finally, these results were used in computer simulation experiments to compare specific ways to overbook, such as clustering double-booked appointments at certain times of day, spreading them out throughout the day, or artificially compressing appointment durations.
In this particular clinic, the engineers found that annual exam appointments generate the highest rate of no-shows, and their mathematical models determined that these appointments should be overbooked by two per day, usually mid-morning. "The math could work out differently in other settings," says Benneyan.
Testing first. Kralios and his colleagues intend to experiment with the recommendation. "As clinicians, we are worried about what will happen when the patients who are overbooked actually do show up at the same time," he says. "We are thinking of doing a phased approach, overbooking one appointment per day and see how that will work."
The study/test/adapt/expand approach is one of the things Susan Haas, MD, MS, likes about systems engineering. "Our temptation is to just implement a recommendation," says Hass, Harvard Vanguard's director of obstetrics/gynecology "But Benneyan says, 'Wait a minute, this is just a model. Try a few experiments and see what you learn.'"
While methodologies like Lean and systems engineering are proven waste busters, healthcare leaders should never underestimate the power of plain old brainstorming by highly motivated staff members. Crystal Saric, coordinator of waste services and waste reduction at Fairview Health Services, knows what brainstorming can accomplish. She meets twice monthly with a group of nurses who serve on the University of Minnesota Medical Center's operating room (OR) green team.
"We just come up with different ideas to reduce our waste and reduce our environmental footprint," she says. "The nurses have reduced their energy use significantly. They've reduced their paper use significantly. They've eliminated Styrofoam in their break rooms. They are saving money, and they are avoiding a lot of waste."
Inspiring change. Like many organizational success stories, the medical center's OR green team is thriving because of a few influential people who showed passion and leadership. The nurses were not assigned to serve on the green team; they were inspired to do so.
That inspiration came from surgeon Raphael Andrade, MD, who decided to reduce the waste and pollution associated with his own surgical procedures. He started by reviewing the standard pick-the set of instruments and equipment for a specific procedure-used for vascular access port placement. He determined that several syringes, sutures, drapes, and dressings were rarely used and could be eliminated.
Andrade's pick for that procedure was downsized to 27 items instead of 44, and reusable gowns and linens have replaced disposables. The result: A savings of $50 per case, or $2,000 a year-plus 80 pounds of waste and 64 pounds of carbon dioxide emissions-from one surgeon and a single procedure.
Spreading success. When Andrade presented his waste reduction story at a department meeting, Lynn Thelen, RN, an OR nurse who is also passionate about environmental sustainability, asked for volunteers to serve on an OR green team that would follow his lead.
"She had a team within an hour," says Saric. "OR nurses are used to seeing so much waste every single day because everything is disposable. I think it really gets to them."
The team reviewed the standard thoracotomy pack and eliminated items that reduced waste by 600 pounds a year while saving $12,000. A "second pass" over the same pack a year later identified ways to reduce it by another 1,100 pounds and $11,000 a year.
Seeing the potential prompted the OR green team to review 38 procedure-specific packs earlier this year. Fairview's supply vendor provided a list of all the items in each pack. "We handed the lists out by specialty so, for example, the nurse who knew the most about eye surgery would take that pack list back to her coworkers, and they would all review it," says Saric. "Having their 'green eyes' on really gave them a different perspective."
Of those 38 packs, 14 were as lean as they could be while another 24 were easily "greened," she says. The focus was on finding disposable items that had little or no value during a procedure, such as a basin that was used to organize items when those items could just as easily be laid directly on the table.
"Dr. Andrade was needed to smooth over some of the changes with surgeons, which is why it is so nice to have a surgeon or physician as a champion," says Saric. "For the most part, though, the items that were eliminated would rarely be noticed by a surgeon and are handled mostly by the nurses and technicians working in the room."
All the individual items are stocked separately by the hospital. If a situation arises in which a certain supply, such as an extra basin, is really needed for a procedure, it is readily available.
Adding up the savings. The pack changes were sent to the vendor in March of this year, and are being phased in whenever new packs are ordered this year. By Jan. 1, 2011, all new surgery packs will be "greened," and the medical center expects to save $104,658 a year-and send 7,792 fewer pounds of waste to the landfill.
"That is in addition to the environmental benefits of not manufacturing the unused products, trucking them, packaging them, and so on," says Saric. "In many ways, the benefits of a source reduction project are layers deep."
The key to success, Saric says, is identifying OR staff members who are passionate about environmental sustainability. Then allow them time to work on green initiatives and give them leadership support.
The impact of the green OR will continue to grow as other Fairview hospitals follow the medical center's example; Fairview Riverside Campus is already starting to see similar results.
"It is our hope that this will spread to all our other hospitals," says Saric. "What's nice about this project is we are adding an environmental benefit to our community and saving healthcare dollars. In today's world, what could be more important than that?"
Returnto the fullLeadership Fall-Winter 2010 report, Striving Toward Reform.
Deloitte: Realizing the Potential of Your CDI Program
Suzanne Whitworth, director at Deloitte & Touche LLP, and LaVerne Romberger, MSN, CCM, CCDS, clinical operations manager-Seton Healthcare, share leading practices for maximizing the potential of clinical documentation programs under value-based care.
RevSpring: Customizing a Technology Platform to Drive Patient Payment
Martin Callahan, Senior Vice President, Healthcare Solutions, RevSpring, describes key industry trends affecting how patients engage with the revenue cycle and ways payment processes are changing as a result.
KPMG: Readying for Healthcare Today and Tomorrow
Dion Sheidy, a partner in KPMG's Healthcare Advisory practice, discusses healthcare's changing landscape and how having the right advisor can help organizations navigate challenges and opportunities.
Huron Healthcare: Readying Your Organization for Transformation
Gordon Mountford, executive vice president, Huron Healthcare, discusses business imperatives for undertaking transformative change.
Xtend Healthcare: A Custom Approach to Optimizing Revenue Cycle Performance
Tom O'Neill, CEO of Xtend Healthcare Advanced Revenue Solutions, discusses key areas where organizations risk revenue leakage and ways they can use outsourcing to better protect cash flow and support accurate payment.
KeyBank: Helping You to Realize Your Strategic Vision in Changing Times
Victoria Terekhova, senior strategist for Enterprise Healthcare at KeyBank, discusses key challenges when developing long-term strategy in a rapidly changing industry, and the role the right banking partner can play in helping healthcare providers navigate the opportunities before them.
SSI: Preparing the Revenue Cycle for Changing Payer Roles
Availity: Connect to the Future of Healthcare Information
Deloitte: Leveraging IT for Value-Based Care Transformation