Hospital Need to Begin Their Lean Journey Now!

When you consider that 30-40 cents of every dollar spent on healthcare, or more than a half-trillion dollars annually, is spent on costs associated with unnecessary, inefficient and even unsafe care, it should come as no surprise that healthcare leaders are looking for fresh solutions.

In manufacturing, we have become convinced that Lean and Lean Six Sigma are the way to make things better, faster, and cheaper. Regardless of the method selected, many businesses around the world have realized the organizational value of utilizing Business Process Improvement Tools to improve quality, reduce costs, and improve response. They are the key to developing a flexible organization that is adaptable to the constantly changing environment that challenges all modern organizations. Finally, after decades of resistance to change and protocol the healthcare industry, particularly hospitals are ready to adopt these proven techniques to improve patient care in a cost effective number. Based on the cost profile above, the widespread adoption of these tools has the potential to create a sea-change of benefits to our citizens and our economy.

The question that many organization considering using Lean and/or Six Sigma have is how to begin? The key is to remember that Lean and Six Sigma utilize the idea of continuous improvement to achieve their goals. So in many ways it is like dieting the right way. The first piece of advice a dietician offers a weight-loss patient is to make small changes, and then to build on these until a full-scale, permanent life change is achieved. The same is true for hospitals and health systems considering a Lean and Six Sigma approach. These process improvement plans offer healthcare leaders a sound path to meet the goal of improved quality of care delivered at the lowest possible cost.

For most hospitals or health systems, process improvement generally starts out as targeted strikes and eventually rolls into a whole new way of operating. Kaizen events or Kaizen blitzes are used to garner some quick successes and gain creditability throughout the organization.

Small Changes Yield Encouraging Results

The following case studies are from Karen Minich-Pourshadi, for HealthLeaders Media

Every big change begins with a small step, and at North Ottawa Community Hospital, an 81-bed acute care facility located in Grand Haven, MI, the hospital was looking at a variety of inpatient, outpatient and support services to find ways to bolster margins while reducing cost and improving patients’ access to care. To that end, it affiliated with several organizations to help bolster its services and transform from a standalone hospital into a healthcare delivery system.

However, while the affiliations meant better patient care, NOCH’s billing and collections department had some process inefficiencies that had the potential to offset the progress. Moreover, some of the hospital’s processes would soon be in conflict with new laws regulating how payment information is kept.

“My staff was writing payment information down and keeping it at their desks—that isn’t allowed with the new laws. Also, sometimes that information would get misplaced and the payment wouldn’t get run. So, this was also a security effort; we knew we had to tighten things up,” said Mary Oomen, patient financial service manager at NOCH.

The main problem was that NOCH was still using dial-up credit card terminals in multiple locations and manually depositing checks at the bank. Its system lacked the ability to collect payments at any web-based computer in the hospital or at the new affiliate locations. In fact, one billing employee was still logging checks manually in an Excel spreadsheet, and another employee had to audit that log and physically bring the checks to the bank.

The collection process wasn’t any less manual either. Collection calls were made and payment information was taken over the phone. Then, the collections employee brought the information to the cash office, and it would be entered into a credit card terminal. If the card was rejected, the file would go back in to collections. If the card was accepted staff had to mail the patient a receipt for the transaction.

Kim Denhof, business manager for NOCH’s extended care services, says “just going to the bank, from start to finish, was 45 minutes every day and two people had to be involved in the process.” Moreover NOCH lacked the ability for patients to pay online, via debit card, or to set up recurring automated payments. In short, posting, reporting, and reconciliation processes were rife with inefficiency.

As with our diet scenario, NOCH recognized that this was an easy area to take a first step at improving process. The hospital added a patient payment and remote deposit software program from InstaMed, and saw a 44% boost in collections. Plus it saved 20 hours of staff time each week.

“The individual who was responsible for making the deposit before now does it remotely, and it’s freed them up to work in our accounts receivable and outstanding accounts issues,” said Denhof. Additionally, Oomen says patients who pay over the phone now receive a receipt via email instantaneously and they can complete the transaction while the patient is on the phone. They also can set up recurring payments with a debit card.

“[Automating] helped make our work more standardized throughout because we could offer this at the hospital and to our affiliates. It also helped eliminate a security risk for us, and the patients like it,” said Oomen.

Stage 2: Bigger Size + Bigger Efficiencies = Bigger Bucks

Four years ago, leaders at Phoebe Putney Memorial Hospital, a 443-bed facility in Albany, GA, took a look at their revenue management process. The hospital was processing 215,000-225,000 claims per year, yet it had only four auditors, two for inpatient and two for outpatient.

“We were able to audit about 10% of the claims annually. There just wasn’t enough time or personnel to even review the charts for charge accuracy,” explained Wendy Allen, director of revenue management for the hospital. “We would audit a chart if a payer needed something or if a patient requested it, but we didn’t have a formal process in place.”

In this instance, the solution was actually only the beginning for multiple process improvements. Like its counterparts at NOCH, Phoebe Putney added technology from MedAssets– new charge capture software which improved claims processes. Since adding the program, Phoebe Putney has been able to realize $12 million in net corrections by producing cleaner claims and processing each charge correctly on the first take.

Improving the charge capture process yielded some other important findings pointing to other hospital inefficiencies. The system was able to identify a situation where employees were stealing narcotics.

The staff would dispense medication from the system and charge it to a patient, but they weren’t providing the supporting documentation for the administration of the drugs. Without the software the limited number of auditors wouldn’t have been able to track the number of instances this activity took place and then work with their pharmacy to verify patient orders.

“This program helped us fix that and our processes,” explains Allen. “It also helped us look at and correct some compliance issues,” she says.

Phoebe Putney has been able to identify consistent coding mistakes and work with and train coders to avoid these errors. Moreover, the system also revealed that the labor and delivery department was processing patients incorrectly.

“If a patient delivered at night or on the weekend they were likely not going to pay for it because the staff wasn’t charging for it. We had a breakdown in communication between staff members. So, we implemented a new process to correct that, and then our charge capture software helped us determine if the new process was being followed,” Allen explains.

Though the intent was to use charge capture software to improve the department’s own inefficiency and increase the bottom line, what the hospital found was that one process improvement leads to another.

NOCH and Phoebe Putney offer glimpses of how early-stage process improvements can yield results on a small scale. What happens when healthcare leaders embrace process improvement as an organizational philosophy and encourage Six Sigma or Lean to influence every aspect from billing to care delivery?

Next month we will show how several larger hospital improved both patient care and the bottom line. In July issue we will provide some healthcare specific tips to use on the journey to delivering better patient outcomes and better financial results for your organization.

Current Issues