utilizing continuous improvement and lean six sigma for effective cost-management in healthcare...

Utilizing Continuous Improvement and Lean Six Sigma for Effective Cost-Management in Healthcare Organizations

Ron Geguzys

©2010 Broadlane, Inc.

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Overview

� Costs spiraling out of control. You can't throw Lean Six Sigma at it because solutions will not stick.

� Requires a continuous improvement mentality, leadership and training.

� Lean Six Sigma projects fail due to lack of adequate targeting and scoping .

� Short term and immediate fixes: Identify what’s broken and fix it.

� Use operating metrics to point you in the right direction.

� The best practices framework is an effective tool to assess an organization and launch Lean Six Sigma.


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The various disciplines of cost management have advanced dramatically over the last several decades.


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In general, healthcare has lagged in adoption of these principles.


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We have leveraged our experience to develop health care supply chain best practice metrics.


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Best practice assessment provides immediate targets for improvements.

Functional Category Representative KPI Potential Financial

Impact

Best Practice

What is Your

Score?

Strategic Leadership# of C-Suite Sponsored Meetings to Review Progress Against the Formal Cost Reduction Plan 60 BPS > 12/year

Clinical Engagement # of Unique Vendors (Consumables) in Use 60 BPS < 350

Strategic Sourcing% of PO lines w/ Contract Identifier(GPO & Private) 60 BPS > 70%

Purchasing Controls & Automation

% of PO lines w/ MMIS Item Master Identifier 60 BPS > 90%

Logistics Efficiency & Service

Central Stores Fill Rate 15 BPS > 98%

Inventory Controls & Optimization

Central Stores Inventory Turn 15 BPS 15-17

Analytics & Reporting % Overall Compliance for Sole-Source Contracts 30 BPS > 95%

Total Potential Operating Margin Improvement 300 BPS


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Here’s an example of a typical client scorecard.

Function Category KPI # Key Performance Indicators General Goal Best Practice Current Range

Item Master Management

Item Master Accuracy

17Percent of contracted item master items with price = CMS enrolled price

> 95% 98% 99.6%

18Percent of item master items with price = Med Surg distributor file

> 95% 96% 66.2%

Procurement PO Quality

20 Percent of PO lines with an item master number > 88% 93% 88.6%

21Percent of PO lines with a contract ID (GPO and local).

> 70% 82% 55.3%

Invoice Reconciliation

EDI Utilization 30Percent of EDI 850 PO documents processed with corresponding 810 (invoice)

>60% 96% 60.4%

PO Accuracy

31Percent of PO's suspended due to invoice match error (price/UOM/receipt)

< 10% 3% 5.0%

32Average daily number of invoices suspended in system

< 200 124 109

33Percent of invoices that have been in the suspended QUEUE more than 30 days (from suspended date to current date).

<5% 2% 10.1%

34Percent of PO's suspended due to invoice price match error

< 5% 1% 5.0%

35Percent of PO lines edited during invoice matching due to PO error

< 2% 0.20% 0.7


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Once you know where to focus your efforts, apply Lean Six Sigma methodology.

� Examples of Lean Six Sigma applications:

• PO to payment process

• Contract on time performance

• Rapid implementation of Broadlane clients

• Examples of waste: If you can’t see it, you can’t fix it.


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PO to Payment Project

� Problem: Broadlane’s PO-invoice-receipt-payment reconciliation process for our outsourced clients was highly variable, leading to unacceptable levels of mismatches, poor productivity and client frustration.

� Outcome:

• Documented best-practice across accounts

• Standardized to best practices

• Reduced cycle time and open PO levels

• Increased client satisfaction levels

• Increased our ability to take on new outsourced clients


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Tools used to validate the current process•Identified variables contributing to lateness•Identified collaboration needs between Broadlane client and National Sourcing teams

Results•Developed end-to-end process •Implemented standard work across multiple departments•3x improvement for on time % for client

Contract On-Time Performance

Sample Update to Process MapsProject•Lean Six Sigma Project designed to enhance collaboration to improve a client’s on-time contract performance

PRE-Kaizen:

POST-Kaizen:

RESULT:

Aligned processes with codified

collaboration points


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Rapid Implementation of Broadlane Clients

� Establish a consistent client experience every time where client realizes savings.

� Goal: Reduce cycle time to “implement” the GPO portfolio for new acute care hospital clients by 75% (from average of eight months down to two months) and track supplier acknowledgement.

� Recent client achieved $1.8M in savings in first 60 days.


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� Not enough space

� Orders changed

� Patients discharged

� Taken back to Rx

� Return to stock

� Reversing charges

� Tracking temps in refrigerators

Waste: Over-Production Twenty-four Hours Worth of IVs


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Waste: Defects Upside-down Med Order Scan

� Med order scanned upside-down on the nursing floor.

� It takes 15 seconds to re-orient (“flip”) the orders and link them to a patient name in Pyxis Connect.

� Approximately 300 of 1,200 orders per day flipped.

� Eliminating this problem saved pharmacists 75 minutes per day (15 seconds/flip x 300 orders flipped/day).


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Summary

� Making the most of Lean Six Sigma requires a continuous improvement mentality, leadership and training.

� Have a methodology to target what projects to focus on.

� Short term and immediate fixes: Identify what’s broken and fix it.

� Use operating metrics to point you in the right direction and track success.

Ron Geguzys, SVP Operations, Broadlane

Email: [email protected]

Office: 972.813.7580

utilizing continuous improvement and lean six sigma for effective cost-management in healthcare...

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