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Posts tagged “supply-chain management in health care

Lean 6 Sigma: The Ultimate Cure For Healthcare?

By: Oscar L. Orias
One of the newest concepts being thrown around in the Texas Medical Center seems to be 6 Sigma and lean management. With many hospitals facing smaller payments and tighter quality controls by CMS (Centers of Medicare/Medicaid Services), clinicians and administrators are thinking of ways saving money while maintaining a good service level. They have turned to 6 Sigma, a methodology that has seen successes in industries like cell phones, computers, and cars. Of course with this methodology, there have been failures in the past. In a study more than 60% of corporations that implemented Lean 6 Sigma have failed to yield the target results. Will this result reoccur within healthcare?

How Quality Variation is Killing Healthcare
One of the biggest threats, according to many experts is the variation of quality within the healthcare system. Wide variations in quality lead to reduction of the overall quality of service and increased cost, two very noticeable patterns seen today in healthcare and two things that Lean 6 Sigma focuses on. These quality issues come in the forms of variation like utilization, charging insurances, quality due to geography, quality of care due to socio-economic status, and services provided. There is also a quality issue when it comes to paying insurances and the government. This particular quality issue increases administrative costs of the hospital (a major cost in healthcare). The same pattern is seen with material and logistics management and utilization. For example, many healthcare systems don’t know the average amount of resources used most procedures. Many times they order materials based on past usage or other less accurate measuring techniques.

How does increase variation cause drops in service and increase costs? For starters, trying to determine how to utilize resources with such a wide range of variations becomes complicated and costly. This also leads to an increase of errors, since variations leads to disorganization. Errors in healthcare can become a costly marketing, financial, and even legal ordeal. For one patient it might cost a health care system $5000 per yr but for another similar patient due to differences in variation, it might cost $4000. With the government and private insurance reducing reimbursements, traditional methods of tackling expenditures like cost shifting are no longer viable options. Another way how variations make service worse by sending mix signal and expectations for patients. Patients retail customers expect a consistent level of service. With variations, trying to create steady level of service become very difficult. By delivering consistent levels of service, the organization can create sustainable patient satisfaction. Sustainable patient satisfaction is much easier and cheaper to manage than prospecting for new patients.

Why Lean 6 Sigma?
One of Lean 6 Sigma’s main goals in increasing quality is reducing such variations and reducing waste and non-value added activities. Lean 6 Sigma says that by reducing variations you improve service, which leads to real permanent cost savings for the company. Lean 6 Sigma can give you that consistency that patients want out of an experience in healthcare. Consistency also makes utilization, financial and human resource management much easier to measure and handle. Reducing variation in quality also make coordination operations and business strategy between different geography location smoother.

Another huge reason for Lean 6 Sigma comes in the form of creation of ACOs and CMS 33 points of quality. Now hospitals that service Medicaid and Medicare patients are heavily monitored for quality assure of the patient. ACOs under CMS reward healthcare systems that reduce cost and improve quality; something that lean 6 sigma excels in. Lean 6 Sigma traditionally tackles this issue directly by using several of this concepts, basic tenants, and methodologies such as:

1. Clear and measurable goals from 6 Sigma projects. Ex.: Healthcare systems can use this in reducing hospital staph infection.
2. Healthcare systems and institutes have to be deeply committed to continuous and quality improvements.
3. Engaging in Continuous Improvement using the DMAIC methodology. This stands for define, measure, analyze, improve, and control. These steps are utilized by black belt professionals and used in all stages of Lean 6 Sigma.
4. Using statistical tools like standard deviation in the bell curve to measure the variations between standard deviation. The farther the standard deviation is away from the curve, the higher the likelihood that errors and variations of quality will occur. The ideal goal is 1 sigma.
5. Empowering all employees. Bridge the gap between administrators and clinicians would be a good start to empowering employees. Make sure as an administrator that doctors have the ultimate input.
6. Reducing waste.
7. Reducing non-value added business procedures and units
8. Standardizing organizational and procedural issues.
9. The use of visuals signs or aids to help workers

Is Lean 6 Sigma Merely False Hope and a Fad?
With reductions in quality of service and an increase of cost, you would think that Lean 6 Sigma is a slam dunk for healthcare, but many administrators and experts are saying not so fast. More than 60% of Lean 6 Sigma projects fail to yield the desirable goals. Much of it is due to the complexity of healthcare, the discipline needed for real Lean 6 Sigma, and the changing nature of healthcare legislation.

Lean 6 Sigma faces many challenges due to the nature of health care. For far too long the culture of healthcare has been to consume and use the latest innovation and instruments without taking to account the cost and resources consumed. Part of the reason is that hospitals have been traditionally not-for-profit research institutes that are more concerned with using new technology; not reducing costs. Lean 6 Sigma would make these institutes do a complete transformation and many feel that Lean 6 Sigma is way too unproven to make such a large investment in money, time and energy. Another reason is that becoming a Lean 6 Sigma champion is difficult in a healthcare setting because many physician feel that power of treating patient or micromanaging them is too great.

Another problem with Lean 6 Sigma is that many companies simply don’t have the time, discipline, company wide support, and resource to sustain 6 Sigma as a long run methodology. For example, hospitals today are concerned with filling as many beds as possible with as many patients as possible. According to 6 Sigma, the quality of care of a patient is more important than the quantity of bed filled. For many healthcare systems the fill rate is very important to generating revenue to keep costs down. Many managers might not have the discipline or have the company wide support to put quality always over volume. Of course this discipline problem is made worse by the uncertainty of healthcare and its future.

Healthcare legislation also plays a huge role into the uncertainty of Lean 6 Sigma in healthcare. Lawmakers and health leaders agree that a change is need but what kind of change is still up for debate even after the passing of the new healthcare legislation. For example CMS reduced the quality measure from 65 points to 33. Heck Republicans in many states are trying to remove the law altogether. This unstable nature makes the jobs of healthcare administrators harder, especially when they are trying to implement and sustain a complex program such as Lean 6 Sigma.

Fundamental or Fad?
Lean 6 Sigma creates some interesting solutions as well as challenges in healthcare. For the most part, it brings the important focus of reducing quality variations as a way to reduce cost while improving the patient experience. In this blogger opinion I think Lean 6 Sigma will fall short of goals set by many healthcare systems but it will bring concepts like waste reduction, creating quality by reducing variations in care, reverse logistics, lean management, and DMAIC to the culture of healthcare. These concepts, ideas, and methodologies are sure to make a positive impact in the future. At the end Lean 6 Sigma will leave a positive legacy for the health industry as a whole.

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Hospitals Celebrate Unsung Heroes

By: Oscar L. Orias

Lets the Celebrations Begin
The Texas Medical Center along with other hospitals around the country are celebrating Supply-Chain Management Week (Oct 4-10). This was a week created by AHRMM (Association for Health Care Resources and Materials Management) as a way to congratulate the tireless efforts of material managers and their staff. In a time of shrinking budgets, growing demand, and government intervention in medical industry hospitals are turning to their supply-chain for cost savings and efficiency solutions. Material costs are only second to labor costs in the hospital so controlling the flow of materials and bringing down costs has become imperative. The task is not any easy one for supply-chain managers and their staff. Hospital departments traditionally are very silo and tend not to cooperate with other departments and the corporate level.

Importance of Supply-Chain
The advent of material management has made hospitals much more centralized and has lowered the cost of buy goods. Now medical facilities have a whole department dedicated to getting contracts, purchasing, and monitoring supplies. In a complex hospital environment that can be very difficult to do. Another variable that adds to the complexity of a hospital is that they can’t reject customers that need treatment. Any other industry can afford to exclude a segment of the market if it feels it the cost and resources will outweigh the profit. Hospitals’ don’t have that luxury since countless lives depends how well it delivers services. For example; hospitals routinely loses money on Medicare and Medicaid patients since the government has very strict sets of payments. If a treatment cost more than what the government says it will pay then it is up to the hospital has to absorb the cost. This is one of the reasons why supply-chain management has gotten more attention over the last decade.

Even with the extra attention the tiring job of material management staff doesn’t get easier. The supply-chain is continously under pressure to have materials always on-hand, increase the fill rate, lower costs on supplies, expedite orders quickly if needed, resolve legal matters, and work with staff to solve materials issues. As one director of a hospital put it, “Job security isn’t guaranteed. You are only as good as your last fill rate.” This puts the stress on the value-chain to perform at the highest level at all times and to do it on a shrinking budget.

GPOs and distributors like Owens & Minor also share in the stresses of the medical supply-chain. They work hard to hammer contracts with manufacturers, bring down material cost, match the right orders with the facilities, quickly resolve any backorder issues, expediate supplies quickly if needed, and work with medical facilities on improving its material management. It takes the combined effort of many different people and companies to make sure that resources get to medical staff in a timely manner and those hospitals get the necessary items at the lowest price.

Tipping My Hat Off to Them
Doctors, nurses, and other practitioners work endlessly to deliver the best care to their patients but there is another group of administrators also doing the same. There job may not be glamorous nor visible but they make sure that doctors get all the resource they need to take care of you. Supply-chain management serve as bridges that makes sure the needs and goals of clincians and the hospital are both aligned and met. In a time of economic uncertainty especially in the medical industry they are the first and best line of defense in delivering effective, affordable care for all. Next time you are in a hospital and you run into an employee with a badge that says Materials Management take a second to thank them and if you can tip your hat off to them, I know I will.

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