utilizing continuous improvement and lean six sigma for effective cost-management in healthcare...
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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.
©2010 Broadlane, Inc.
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The various disciplines of cost management have advanced dramatically over the last several decades.
©2010 Broadlane, Inc.
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In general, healthcare has lagged in adoption of these principles.
©2010 Broadlane, Inc.
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We have leveraged our experience to develop health care supply chain best practice metrics.
©2010 Broadlane, Inc.
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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
©2010 Broadlane, Inc.
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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
©2010 Broadlane, Inc.
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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.
©2010 Broadlane, Inc.
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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
©2010 Broadlane, Inc.
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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
©2010 Broadlane, Inc.
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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.
©2010 Broadlane, Inc.
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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
©2010 Broadlane, Inc.
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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).
©2010 Broadlane, Inc.
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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