Friday, May 25, 2012

Focus and Leverage Part 118

One of the major failures of many managers is their belief that improvements anywhere in the system will result in a system improvement. I've discussed the concept of suboptimzation before on my blog, but this time I want to talk about the difference between an optimizer and a satisficer. So what the heck is a satisficer? First, let's talk more about the concept of suboptimization and then we'll define both an optimizer and a satisficer. By the way, there's another great book for you written by Boaz Ronen, Joseph Pliskin and Shimeon Pass entitled Focused Operation's Management for Health Services Organizations.

The authors I referred to above define Suboptimization of a system as: Separate optimization of every subsystem, which results in underutilization of the performance potential of the whole system and may result in deterioration of overall performance.

Nobel laureate H. A. Simon recognized many years ago a managerial situation that causes decision-making hardship and his approach revolutionized management. Simon made the claim that executives and other decision makers are trying to become optimizers when making decisions. Simon defined an optimizer as a decision maker who always wants to make the best possible decision without any consideration of time constraints. He further claimed that decision makers will never have all of the needed information available to evaluate every conceivable alternative. Simon tells us that in a dynamic world changes are frequent and it is of utmost importance to make timely decisions. What good is a perfect decision if it comes way too late?

In 1957 Simon proposed an alternative approach to decision makers and recommended that they become satisficers. He defined a satisficer as someone who is satisfied with a reasonable solution that will significantly improve the system and does not look for optimal solutions.  The authors go on to explain that the satisficer sets a level of aspiration or a threshold that he or she aspires to achieve.  The objective here is not to maximize or minimize some performance measure, but rather to achieve a solution that will improve a measure.  And once the level of aspiration has been achieved, the satisficer can set a new level of aspiration.

A satisficer achieves excellence by complying with two basic principles:
1.    Set a high enough level of aspiration that is compatible with market conditions, competition, or investor expectations.
2.    Adopt an approach of continuous improvement.
The bottom line of all of this is that organizations don’t need to function perfectly, they only need to perform better than the competition.  This too is my message today.  Don’t try to seek perfection because usually in your quest for it, your decisions might be perfect, but they will most likely come too late.  This has been one of the problems I have with Six Sigma “projects.”  Although the DMAIC is a wonderful approach to improvement, I have seen too many examples where there is a failure to launch!  Collecting mountains of data, analyzing it using sophisticated statistical tools, but all of this at the expense of valuable time.

I am a total believer in the integration of Lean and Six Sigma with the Theory of Constraints simply because TOC provides the focus that is missing in many improvement initiatives.  In many ways Six Sigma is an approach used by many optimizers.  I am a satisficer and have been for many years.  Rather than quantifiable bottom line results taking months to achieve, since I am a satisficer my results typically come in weeks.  Are my solutions perfect?  Absolutely not!  But at the end of the day, in my opinion, a satisficer’s approach achieves leadership buy-in much faster because they see bottom line improvement much quicker than with an optimizer’s approach.  How many of you are optimizers?

Bob Sproull

Wednesday, May 23, 2012

Focus and Leverage Part 117

This is my final posting of my series on healthcare and I encourage everyone to get a copy of Performance Improvement for Healthcare, because it is a classic.  This book is not just for healthcare providers because the lessons learned by reading it apply to all industry segments.  My congratulations to the authors for their brilliant work!!  Again, I will use quotation marks to indicate direct lifts from their book.

“Healthcare is expensive. This claim has become so commonplace that it seems no discussion about healthcare is complete without mentioning its cost. While the severity of the financial crisis in healthcare is reported widely in the United States, even countries with more socialized health systems are heavily burdened by high expenditures in treating patients. Whether it is a government, an insurance company, or an individual—somebody must pay, and ultimately, it is us as a society. An economist once said, “There is no such thing as a free lunch.” Had he been a patient, he might also have said, “There is no such thing as free healthcare.” On some level, we all pay for healthcare.”

“If costs are high and we all pay for healthcare, then it might follow that the primary issue facing healthcare is to reduce costs. While the impact costs have on healthcare delivery and outcomes is undeniable, concentrating primarily on costs is somewhat shortsighted. Reducing costs is not necessarily the same thing as increasing a hospital’s financial well-being: Financial viability includes revenue as well as costs. As long as revenues cover costs, the relevancy of costs diminishes because a hospital’s overall financial viability is ensured.”

“Rather than focus on costs only, perhaps healthcare systems should do something considered taboo—embrace that they are a business. And like all successful businesses, healthcare systems need to emphasize revenue beyond costs. If revenues increase, healthcare systems could reinvest the additional cash to provide better-quality care to their patients, expand coverage throughout communities, and increase profitability. After all, the potential to reduce costs is finite, limited by an organization’s budget, whereas the potential to increase revenues is infinite, restricted only by however the market is defined.”

“There is evidence from multiple disciplines to suggest that a focus on costs paradoxically can increase costs. This point is illustrated by the following: Consider a clinic performing a simple x-ray process. Suppose that there are three steps (each with one resource) that all patients must go through in the x-ray service process. And suppose that registration takes 10 minutes, the x-ray scan takes 20 minutes, and billing/discharge takes 5 minutes, as shown in Figure 2.14.  A “cost world” mentality would be to try to improve each component of the process to reap cumulative savings. Such thinking, as is widespread today, would have little difficulty justifying a one-time expenditure to implement a new billing system that saves two minutes, reducing the final step of the billing associate’s time (the rate for one minute equals the billing associate’s annual salary divided by the minutes he or she works in a year) multiplied by the number of patients seen by the x-ray clinic per day:”  (Note: I apologize for this gap, but I couldn't figure out how to place this equation correctly)

Figure 2.14

“If the payback period, return on investment (ROI), or net present value (NPV) were favorable, the new billing system would be approved. This example seems unexceptional and rather ordinary in today’s healthcare world.  However, the bottom-line impact of the new billing system is worth examining. The cost appears as an Operating Expense on the clinic’s bottom line, yet no positive effect can be found elsewhere on the bottom line—no new revenue is brought in as a result of the improvement because the same number of patients were treated as before, and the billing associate’s salary remains unchanged. Thus the ROI of the new billing system is negative.”

“If the capacity of the resources for each step of the process is analyzed using value-stream mapping—registration (6 patients per hour), x-ray scan (3 patients per hour), and billing per discharge (12 patients per hour before, 20 patients per hour after)—it becomes apparent that the x-ray scan step limits the number of patients that can be serviced overall, and therefore, this limitation determines the clinic’s potential revenue, as shown in Figure 2.15. No patients can flow through the entire system faster than the x-ray scan step can process them. Assuming that there is ample demand for the clinic’s services, improving the x-ray scan step of the process by increasing the number of patients who can undergo x-ray scanning per hour is the only way to grow revenue by changing the capacity of steps in this process.”
“The x-ray scan step is the only step that, if improved, will not just benefit that local clinic but also benefit the entire process globally. Improvements to this step allow more patients to be serviced by the overall system. This improvement would be reflected in the clinic’s bottom-line financial viability because not only would its cost be represented as Operating Expense, but an increase in profit also would be visible as well owing to the increased number of patients using the clinic’s services.” 

Figure 2.15

“Given that a manager’s attention is limited, improvement efforts should be focused on areas that have a global, system-wide impact in assisting a healthcare organization reach its goal. In the x-ray example, one way of measuring the process in relation to the goal of the clinic is the number of successful outputs, that is, patients with completed x-rays. This rate of output corresponds to the traditional definition of the Throughput of a system as developed in Constraints Management. The Constraints Management definition of Throughput will be reviewed later, but this meaning will be sufficient in this context.”

“As defined earlier, the factor in a process that inhibits it from reaching its goal and achieving more Throughput is called a constraint. In this case, since the constraint is a resource, the x-ray machine, the constraint is called a bottleneck. This example demonstrated that improving the billing system, a nonbottleneck, did not improve the Throughput of the overall x-ray clinic’s service process. Rather, it caused only a local improvement. Goldratt also stated, “An hour saved at a nonbottleneck is a mirage.” In other words, an improvement without a system impact is no improvement at all. For example, in an eight-hour workday, the x-ray clinic could service only 24 patients no matter whether the billing system is improved or not. Hence, speeding up the billing step does not affect the overall Throughput of the system.”

This completes my series on healthcare and it is my hope that my readers will spread the word about this book.  Our country and the world at large have needed this book for a long time because if the teachings within this book are followed, I am convinced that healthcare costs can be brought under control.  As I’ve said before, Performance Improvement for Healthcare is destined to be a classic!!

Bob Sproull

Monday, May 21, 2012

Focus and Leverage Part 116

Continuing with my series on healthcare and my push for everyone to get a copy of Performance Improvement for Healthcare, let’s now discuss how Constraints Management fits into our healthcare discussion, again using direct quotes from this wonderful book.
“In The Goal, Goldratt details a systematic approach to managing complex organizations by identifying and controlling key leverage points within a system or process. By managing these key control points, healthcare organizations can focus on areas that drive system-level improvement instead of trying to manage every element of a process, which can lead to local optimization without systemic impact.”
“Constraints Management is a systems approach that recognizes that every system has a goal and a set of necessary conditions that must be satisfied to achieve that goal. As such, Constraints Management begins by identifying the critical success factors necessary to realize the goal and aligns the system to attain greater levels of performance while minimizing waste.”
“Goals may range from reaching superior levels of profitability now and in the future for a for-profit organization to increased coverage or availability of provided services for a not-for-profit company or government agency. Because it is grounded in systems thinking, Constraints Management looks at materials, information, and money flows and encompasses techniques useful for production and logistics (e.g., drum-buffer-rope, critical chain project management, and buffer management), performance measurement (e.g., throughput accounting), and problem solving (e.g., thinking processes). It therefore breaks through the “silo mentality” of many organizations, focusing all efforts on satisfying end-user requirements. Dr. Kevin Watson of Iowa State University sees Constraints Management as focused, robust, scalable, and generalizable, as described in the next few paragraphs.” 
“A constraint is anything that limits the system from achieving higher performance relative to its goal. In healthcare, a constraint is anything that impedes the ability or means to provide or deliver care. H. William Dettmer, author of numerous books on Constraints Management, defines seven basic constraint types:”
·         Market
·         Resource
·         Material
·         Supplier/vendor
·         Financial
·         Knowledge/competence
·         Policy
“He also adds that a policy is most likely behind a constraint from any of the first six categories. On the other hand, Dr. Boaz Ronen, a business administration professor at Tel Aviv University and coauthor of the book, Focused Operations Management for Health Services Organizations, defines only four types of constraints in a managerial system”:
·         Resource
·         Market
·         Policy
·         Dummy
“The Theory of Constraints International Certification Organization (TOCICO) Dictionary calls policy constraint a common misnomer because “Bad policies are not the constraint; rather they hinder effective constraint management by inhibiting the ability to fully exploit and/or subordinate to the constraint.” Regardless of how constraints are classified, the Constraints Management body of knowledge provides tools to identify and manage all types of constraints. Constraints Management is focused, recognizing that the system’s ability to attain its goal is inhibited by a limited set of variables or constraints.”
“Constraints Management focuses attention and concentrates resources at the point in the system where they may be leveraged to achieve the highest level of goal attainment. Constraints Management allows the system to achieve optimal output and increase flexibility and responsiveness, all while minimizing waste. This synergistic effect results from subordinating the system to the constraint and creating protective capacity at nonconstrained resources, thereby better enabling the system to deal with the consequences of variability.
Constraints Management tools are robust. Systems managed under Constraints Management strategically buffer against variability, do not impose rigid material-handling rules, and schedule only strategic control points in the system. Therefore, Constraints Management systems are better able to mitigate the effects of uncertainty than similar JIT systems. This makes Constraints Management adaptable for highly variable manufacturing and for the purpose of managing supply chains.
Constraints Management techniques are scalable and generalizable to a wide set of operations and supply-chain environments. Techniques that are useful at the process level are applicable at higher levels of aggregation.  Constraints Management tools are also generalizable to applications far beyond production and logistics as they were presented originally in The Goal.
The thinking processes used in the resolution of unstructured problems are applicable to decision making in such widely varying environments as conflict resolution, quality control, continuous improvement, contract negotiation, policy reengineering, and strategy development. Once managers understand the basic concepts, they are able to apply that knowledge with little additional training to a wide range of applications, for example, manufacturing and supply-chain environments—from control of a manufacturing cell, to project management, to distribution and logistics management.
Constraints Management Tools System improvements under Constraints Management seek to identify (1) what to change, (2) what to change to, and (3) how to cause the change. This follows a process of ongoing improvement (POOGI) comprised of two prerequisites and five steps that underlie all Constraints Management production techniques. The prerequisites for Constraints Management process improvement are (1) define the boundaries of the system and its goal, and (2) determine a means to measure goal attainment. While these steps appear obvious, failure to explicitly identify the scope and purpose of the system and measure how the system performs in achieving that goal can result in dysfunctional behavior. Having satisfied the prerequisites, system improvement proceeds according to the five focusing steps sequence:
1.    Identify the system constraint(s). What limits the performance of the system now? What is the weakest link in the system?
2.    Decide how to exploit the system’s constraint(s). How can the most performance be achieved from a constrained step in the process without additional investment? Here, exploit means “use, develop, make use of, take advantage of, and make the most of.”
3.    Subordinate/synchronize everything else in the system to the above decision. Set up and implement rules to maximize the capacity of the system based on the speed of the system’s constraint. In this step, all parts of the system that are not constraints are required to do whatever they can to support the exploitation plan. Additionally, all nonconstraints must not do anything that would interfere with the exploitation plan for the constraint. And most important, all nonconstraints (most of the system) must recognize that their own efficiency is not as important as supporting the system constraint, which requires measurement changes.
4.    Elevate the system constraint. To physically increase the capacity of the system through the acquisition of or investment in more resources.  Always remember to predict where the constraint will be after elevation and its resulting impact on global performance. The location of any new constraint definitely will affect an organization’s elevate strategy.
5.    Go back to step 1. This will ensure that improvement is ongoing and never ceases. It also helps to avoid inertia by keeping at bay the relentless tendency to accept established precedent. Even the most transformational improvements, once established, become the status quo.
Originally applied to manufacturing organizations, the concepts of Constraints Management have branched out successfully to many business environments, including service organizations, project-based companies, not-for-profits, and most recently, healthcare. By introducing Constraints Management, hospitals can gain significant insight into which areas to focus their performance-improvement efforts.
In my next posting we’ll take a look at a few examples of how this integration has worked successfully in the healthcare field.  My next posting will be my last one in this series on healthcare, so I urge all of you to get this book….you won’t regret it!

Bob Sproull

Sunday, May 20, 2012

Focus and Leverage Part 115

Continuing with my series on healthcare and my push for everyone to get a copy of Performance Improvement for Healthcare, let’s now discuss how Six Sigma fits into our healthcare discussion, again using direct quotes from this wonderful book.

“W. Edwards Deming, along with others, began emphasizing the need to understand variation through the use of statistical tools such as Pareto and control charts. This latter concept, known as Total Quality Management (TQM), also shifted responsibility for quality improvement to those directly involved in the process. It was not until Six Sigma came along that all these concepts were combined into a single methodology. While Deming focused on the cultural transformation of businesses, other management pioneers, such as Joseph Juran and Philip Crosby, addressed the management and cost of quality, respectively. From Crosby’s perspective, expenditures associated with improving quality should be offset by the resulting savings in warranties, scrap, rework, and other costs of poor quality.”

“Six Sigma has emerged as the primary vehicle for improving both manufacturing and service or transactional business processes. Six Sigma has been defined in many ways. The following definition, taken from The Six Sigma Handbook, by Thomas Pyzdek, is perhaps the most inclusive:

“Six Sigma is a rigorous and systematic methodology that utilizes information (management by facts) and statistical analysis to measure and improve a company’s operational performance, practices and systems by identifying and preventing “defects” in manufacturing and service-related processes in order to anticipate and exceed expectations of all stakeholders to accomplish effectiveness.”

“Six Sigma applies a five-step method called Define-Measure-Analyze-Improve-Control (DMAIC). Each letter represents one of the steps in the Six Sigma methodology, as shown in the figure below.”
 "The methodology includes the application of a full range of statistical tools yet recommends that it be implemented by teaching these statistical methods to workers throughout an organization—not limiting it to statisticians or industrial engineers. While the DMAIC methodology emphasizes the use of statistical tools, the strength is in the methodology itself. DMAIC is discussed further in Chapter 6."

"Certain industries have been slower to accept certain quality tools and methods from manufacturing despite more than 50 years of successful application. It is critical to note that the finding is about acceptance, not applicability; for example, while control charts have been used extensively in manufacturing since the 1920s, they are slow to be accepted in direct patient care."

"In healthcare, a Six Sigma project saves $500,000 annually, according to an article by David Frabatto in Managed Healthcare. However, in our experience, such claims cannot be taken for granted, but assuming that the project selection process is attuned, $500,000 or even more is achievable realistically. For example, a project within our deployment portfolio on a credentialing process for contracted healthcare workers resulted in validated savings of $789,000 per year and a replication potential to save an additional $114 million dollars. When a senior Six Sigma practitioner, called a Black Belt, normally leads four to eight projects per year, annual savings from a single Six Sigma Black Belt could exceed $3 million dollars. As indicated by the positive financial impact that typically far surpasses its associated costs, quality improvement can be a major factor in a business’s success."

"It is very interesting that the same article in which Frabatto cited the $3 billion revenue gap also stated that New York hospitals would save $3.4 billion annually by reducing length of stay to national standards. Length of stay is just one performance gap where the root cause is unknown and where applying the right tool to the right problem at the right time makes a lot of sense."

"The power of Six Sigma is its ability to identify root causes of complex problems and reduce variation, both of which are central to the improvement of processes. Examples of Six Sigma applications in healthcare include reduction of infection rates, patient falls, and missed appointments, as well as enhanced medication reconciliations and coding."

In my next posting we’ll discuss the concept and application of Constraints Management and then begin to look at a few real live examples of how this integration is poised to change the healthcare world.

Bob Sproull

Saturday, May 19, 2012

Focus and Leverage Part 114

Continuing with my series on healthcare and my push for everyone to get a copy of Performance Improvement for Healthcare, let’s talk a little bit about how Lean, Six Sigma and Constraints Management might apply in a healthcare environment.  I’ll start this post by talking about examples of the 7 deadly wastes as depicted in this great book and once again, I’ll be using direct quotes.  No matter what industry you represent, these same type wastes exist in your world just like they do in a typical hospital.  The more I read this book, the more I appreciate its contents and the impact it could have on the healthcare systems not just here in the US, but on the healthcare systems throughout the world.

“Prior to the 1950s, one could argue that the United States owned the automobile market worldwide. Then, in 1950, a Japanese engineer named Eiji Toyoda spent three months at Ford’s Rouge Plant in Detroit. This was the seminal point in the evolution of Lean. Between 1937 and 1950, Toyota had produced 2,685 automobiles total, compared with the almost 7,000 produced daily at the Rouge Plant.”

“In an effort to compete in the marketplace, Toyoda—along with others—adapted what he saw at Ford into the beginning of what came to be called the Toyota Production System. In 1990, Womack, Jones, and Roos coined the phrase Lean Manufacturing, and nothing has been the same ever since.  According to the Lean Enterprise Institute, Lean as a concept includes five basic principles:

·         Specify value from the end customer’s perspective.

·         Identify all the steps in the value stream for each service, eliminating non-value-adding steps.

·         Make the value-adding steps flow without interruption to the customer.

·         Implement a pull system based on customer demand.

·         As value is specified, value streams are identified, non-value-added steps”

“In alignment with these principles, all processes should—must—add value to the customer, include only value-adding steps, and flow continuously from customer order to delivery. This Lean archetype, along with recognition that perfection is a journey, is equally applicable to manufacturing, services, and healthcare.”

“Efforts to apply Lean are focused on addressing specific issues or wastes.  Seven deadly wastes have been identified. While these were developed originally for applicability within manufacturing, they are equally relevant in healthcare. An explanation of wastes as they relate to healthcare appears in the image below.”

·         Transport. Any time people, materials, or information must be moved, it is defined as waste. Moving patients from room to room is an example of waste. While in many cases necessary, this transportation nonetheless is viewed as waste. Use of a spaghetti diagram may help to minimize this type of waste.

·         Inventory. While it is necessary to maintain inventories to ensure availability, anything short of just-in-time (JIT) availability is categorized as waste. Tools such as kanban can mitigate this kind of waste.

·         Motion. A nurse’s station with a desktop computer at one end and a printer at the other that requires nurses to move excessively to pick up printouts is an example of waste. Good ergonomic practices and more efficient workspace layouts can moderate this waste.

·         Waiting. This waste is endemic to healthcare. We even call our primary customers patients—is this because it is an expectation? Elimination of non-value-adding activities can diminish this waste.

·         Overproduction. Running too many tests and printing too many copies of paperwork are examples of overproduction. Reviewing standard lab panels or pursuing paperless processes can mitigate this type of waste.

·         Overprocessing. Requiring excess approvals and running the same test twice are examples of overprocessing. The elimination of non-valueadding activities can lessen this sort of waste dramatically.

·         Defects. When a product or service does not meet specification or customer expectations, it is a defect. Defects often result in rework, and the associated costs frequently go unaccounted for.

“A process-level value-stream analysis (PVSA) and rapid improvement workshop (RIW) are often applied toward eliminating or reducing these wastes. These aspects are addressed in much more detail in Chapter 6 of this book.”

“The power of Lean is its ability to eliminate waste and improve flow, which is central to the simplification of processes and reduction of delays and handoffs. Examples of Lean applications include reduction of nonvalue-added steps in the delivery of care, mistake-proofing hand sanitation, and standardizing referral management.”

In my next posting, I’ll show you what these authors have to say about Six Sigma and then Constraints Management.  I know I’ve said it already, but if you’re in a healthcare environment (and even if you aren’t), you really need to grab a copy of this book for your own personal library!  It’s a gem!!

Bob Sproull

Friday, May 18, 2012

Focus and Leverage Part 113

Continuing with my series on healthcare and my push for everyone to get a copy of Performance Improvement for Healthcare, let’s begin with another quote from this wonderful book.  Whenever you see an entry in quotation marks, it is a direct quote from this book.  “The problems with and the solutions to the healthcare crisis are not about people nor technology nor science. They are about transforming the system. Fifty percent of $2.3 trillion spent per year on healthcare in the United States is wasted because of inefficient processes. Therefore, the answer is to fix the system of inefficient processes, to prevent mistakes, and to manage the bottlenecks better by focusing on the right problem with the right tool at the right time—in other words, to use an integrated approach to performance improvement.  Is it possible for a hospital to improve outcomes while improving its performance as a business at the same time?”  The answer to this question is yes, absolutely!

I’ve written many times about the power of integrating Lean and Six Sigma with the Theory of Constraints (TOC) and while most of my examples have come from manufacturing and Maintenance, Repair and Overhaul (MRO), everything that I’ve ever written applies quite nicely to the healthcare field.  TOC provides the focus that is missing from so many improvement initiatives being worked today.  That is, by identifying the system constraint and focusing waste and variation reduction efforts on the constraint, you set the stage for significant improvement in throughput.  Imagine a hospital surgical unit and being able to operate on 30-40% more patients without adding any additional expense.  Would that add to your bottom line?
“Until the late 1990s, Lean, Six Sigma, and Constraints Management methodologies were like three different religions—coexisting but independent of each other. As late business process management pioneer and father of the swim-lane diagram, Dr. Geary Rummler, said, there are “turf wars between competing process-improvement philosophies, methodologies and technologies.” Then Lean and Six Sigma were integrated and became the leading approach in the early 2000s, whereas integration of Lean and Constraints Management also were applied in manufacturing and defense. Constraints Management is arguably the least known among these three methodologies, especially in the U.S. healthcare industry. An informal survey conducted by NOVACES shows that very few U.S. hospital executives have even heard of Constraints Management.”

“On the other hand, Constraints Management applications have been resulting in major improvements in the hospitals of the United Kingdom, New Zealand, South Africa, Singapore, and Israel and is remarkably popular in Dutch healthcare. If a hospital in the Netherlands has a process improvement methodology applied, then one-third chooses Constraints Management. Constraints Management is significantly more popular in Dutch hospitals than in Dutch manufacturing. Breakthrough potential is even greater when Constraints Management is carefully integrated with Lean and Six Sigma.”
“Three methodologies—Six Sigma, Lean, and Constraints Management—have risen to the forefront and bridged the gap between manufacturing and service/transactional industries—especially the ever-expanding healthcare environment. These three approaches are very complementary. Lean and Six Sigma are primarily process-improvement approaches. On the other hand, Constraints Management takes a system perspective at a higher level by looking at the interdependencies among processes and their dynamics for system improvement.”
“When separated, Lean tools cannot bring a process under statistical control, and Six Sigma cannot improve cycle time dramatically, as Michael George states in his book, Lean Six Sigma. Lean promotes elimination of waste everywhere without necessarily a focus on the overall system, and Six Sigma has an inherent risk of local optimization. Constraints Management highlights where to focus improvement efforts for system level

impact by offering a dynamic holistic view where bottlenecks and the weakest links of healthcare organizations become not only visible but also manageable for maximum value. Lean and Six Sigma tools allow teams to produce solutions to better manage constraints. Constraints Management is excellent in providing a step-by-step approach to direct improvement efforts, but it does not tell you how to get the most mileage out of the bottleneck. Once the direction is set, Lean and Six Sigma tools help an organization reach its destination.”

“The integrated approach is analogous to looking through three windows into a system: Lean, Six Sigma, and Constraints Management windows. The Constraints Management window is like looking at the forest from a hot air balloon and selecting the best tree from which to pick fruit.  The Lean window shows the simplest way to pick the low-hanging fruits as well as the fruit on the floor with very little effort. And the Six Sigma window shows how to consistently pick the bulk of the sweeter fruits, without bruising them, at higher, difficult-to-reach branches of the tree.”

In my next posting we’ll continue our discussion of how this integrated approach dramatically improves results when applied correctly.

Bob Sproull

Thursday, May 17, 2012

Focus and Leverage Part 112

As promised in my last blog posting, I’m going to start a series of postings on continuous improvement in the healthcare field.  I’m also going to be sharing excerpts from a remarkable new book entitled, Performance Improvement for Healthcare – Leading Change with Lean, Six Sigma and Constraints Management written by Bahadir Inozu, PH. D., Dan Chauncey, Vickie Kamataris and Charles Mount.  These four authors have combined their writing talents, knowledge and experience base to create what I’m convinced with become a classic.  I hope you like this series and even more, I hope you will seek out this book and share all it has to offer. I think the best way to begin this series of posting is to share some quotes directly from the opening chapter of this book. 

 “Even though we are at the forefront of the most advanced ability to heal, a great many people are deprived of the best of care either because they cannot afford it or because they are otherwise denied access to treatment. This book is not about the social aspects of that state but about what every healthcare leader and his or her organization can do to make healthcare more available, more affordable, with better outcomes . . . and yes, if desired, more profitable.”

“The United States spends more on healthcare than any other nation in the world, yet 50.7 million people in the United States have no health coverage. In 2008, $7,681 was spent for every U.S. resident on healthcare, some $2.3 trillion, as reported by the Centers for Medicare and Medicaid Services, yet the average life expectancy in the United States is shorter than that in many developed and developing nations. In a study of the healthcare systems of seven industrialized countries, the Commonwealth Fund ranked the U.S. healthcare system as the most costly, spending almost twice as much per capita than average.  How can this be?”

“The healthcare system in the United States is in shambles. Emergency departments are overflowing with the uninsured. There is a shortage of primary care providers driven by lifestyle and reimbursement pressures and a rush to specialize. The Affordable Care Act could extend health insurance coverage to 32 million uninsured U.S. citizens.  There are fears that there won’t be enough doctors to treat the newly insured because the United States could face a deficit of as many as 150,000 doctors in the next 15 years, according to the Association of American Medical Colleges. Like doctors, nurses have been working more overtime and take care of more and more patients, leading to the exit of experienced nurses from the profession because of burnout and exhaustion. Forty percent of practicing nurses are 50 years old or older. In the journal Health Affairs, Rother and Lavizzo-Mourey project that within the next 15 years, the U.S. nursing shortage will reach a shortfall of 260,000 registered nurses. Dedicated physicians and nurses are already working against impossible odds to achieve improbable results. How will care be provided to this expanding population of patients?  The answer is not by working harder.”

“The United States has more modern hospitals, more skilled physicians, more specialists, and more professional nurses than any other nation in the world. Most of the advances in healthcare technology, pharmacology, and medical science have originated in the United States. Applicants to medical schools in the United States compete with applicants from other nations seeking the world’s best medical education. The American Recovery and Reinvestment Act (ARRA) of 2009 allocated about $30 billion to develop a national health information technology (IT) infrastructure. Yet the expected return on investment in technology, unlike advances in pharmacology and medical science, has not been fully realized. In the book Curing Health Care: New Strategies for Quality Improvement, Dr. Donald Berwick and colleagues wrote, “[T]ens of billions of dollars have gone into IT systems in healthcare, . . . but patients and care providers have very little to show for it.”  The answer is not by spending more.”

“If working harder and spending more is not the answer, what is? Healthcare systems are full of waste and experience an enormous amount of variation and many preventable mistakes. Furthermore, constraints and bottlenecks need careful management to get the most value for the money spent. The ailments of healthcare today are comorbid. Hence a direct, concentrated triage of the system is needed.”

“Other afflicted industries have found effective remedies for similar challenges. While acknowledging the uniqueness of humans and the complexity of healthcare delivery, three industrially based methodologies have been applied successfully in healthcare systems worldwide to achieve dramatic results. These are:
1.      Lean—a systematic approach to eliminate waste
2.    Six Sigma—a rigorous, data-driven process to reduce variation and eradicate defects
3.    Constraints Management—a breakthrough methodology to focus efforts and manage a system’s bottlenecks and other constraints.”

And so this is the prelude for a series of postings I want to deliver on one of the most important problems facing our country today… to make healthcare more affordable.  As stated in the beginning of this posting, I will not be delving into the social and political aspects of this subject simply because this is a subject that equally impacts Republicans, Democrats and Independents all over this great country.  My focus will simply be one of relating, through the eyes of these authors, how we can improve the “state of the business” so to speak in the healthcare industry which is the primary reason this book was written.

Bob Sproull