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

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