Six Sigma In Healthcare - A Road Less Travelled

Mount Carmel is a diverse healthcare system based in Columbus, Ohio. It has three acute care hospitals, an HMO, non-acute care services, such as home health, and a college of nursing. We're a Catholic, religiously sponsored organisation, and a member of Trinity Health, Novi, Michigan.

The crisis in health care

We all know there is a crisis in health care. It is multifaceted. There is a shortage of many healthcare workers; not just nurses, but also pharmacists, radiology technicians, surgical technicians, and so forth. As the population ages, we’re going to need more healthcare workers, but unfortunately we’re getting fewer. At the very least we need to improve things like throughputreduce rework, duplication, and inefficienciesso we can make better use of and have a higher productivity from the people that we now have, because we don’t have enough.

But there’s also another crisis in health care. One out of every five healthcare workers leave their organisation every year. This doesn’t speak very well of our industry or our leadership. That tells us that something’s wrong with what we’re doing in health care. A lot of it is because people are feeling so stressed. There’s so much rework. Our caregivers are feeling that there’s not enough time to deliver quality care, because they’re doing so much. As such, we explored Six Sigma as a possible solution.

Anticipating a financial challenge

A few years ago we were also having a challenging time financially. Mount Carmel, fortunately, has never lost money, but the year prior to introducing Six Sigma we made only $500,000 profit from operations. In that year we encountered four straight months of losses, until we turned it around. And we realised that although we turned around our financial situation the lines were going to cross over into red ink eventually. Our revenues were flat or just slightly rising, but expenses were rising dramatically. We were asking people to do more and more with less. If we continued that pressure again in the next year, it would be more and more and more with less and less and less. Their reward for being able to spin five plates would be that we would give them a sixth plate to spin. So something had to change. We had to make a fundamental change in the way we do business.

A generic, industry-wide problem

But the industry also has a problem. The Institute of Medicine reported that as many as 98,000 deaths a year occur in health systems across the country because of mistakes made in hospitals. It’s the fifth leading cause of death, more than from highway accidents, breast cancer, or AIDS, and 7,000 more than deaths from workplace injuries. So we have a fundamental problem. We have processes that are flawed in health care and we need to improve those.

Traditional quality management methods don’t take us far enough

We had been using Continuous Quality Improvement (CQI) and Total Quality Management (TQM) techniques and were getting results but we felt that we needed something more. We were at a crossroads. Do we try to accelerate our TQM program or do we try something new? We concluded that what we were doing hadn’t prevented the situation we were in. We decided to do something different.

Considering Six Sigma

In early 2000 we started to investigate Six Sigma but weren’t able to find a hospital that was doing it. We assumed there must be a few but we didn’t find any. Then I read a statement from Jack Welch that Six Sigma was the most important initiative that GE had ever undertaken, that it is part of the genetic code of their future leadership. We thought, Wow. This is a pretty successful company. This is the CEO of the century. Let’s try it. Let’s be one of the first in health care to do Six Sigma. Then we thought, That will take some courage.

Sir Winston Churchill said, Courage is the virtue that makes so many other virtues possible. And certainly courage seemed necessary in our desire to improve the business and practice of health care. So we gathered our courage and began our Six Sigma journey in July 2000.

Getting started with Six Sigma

Our first step was to find a partner to deliver the needed training and infrastructure that was necessary to begin a Six Sigma initialisation. We found a company that met our needs. They understood, had the experience, and had the right sensitivity to the type of leadership that we have at Mount Carmel. So we engaged them and developed a start-up plan. Figure 1, on the next page, is a schematic of our timeline.

The first year was Six Sigma Guide training. We trained twenty Guides in our first wave and twenty-four in our second wave. Our investment was $650,000 and we had a $946,000 return.

In the second year we added Assistant Guide (Green Belt) training and, eleven months into the year, we had $4 million in savings. Some other savings are going to come in and we think we’ll end the year around $6 million.

This year (the third) we have a stretch goal of $10 million. We think that is achievable. Our entitlement is probably in the $20 million range. (If you take fortyfour Guides, five projects per year, and $100,000 per project, it works out to $22 million. And if you add some of the Assistant Guides, it’s probably somewhere around $25 million.) So we think a $10 million goal is certainly achievable.

Improving the focus

Around January or February of 2002 we decided to improve our focus. We wanted to move from a very diverse portfolio of projects to having focused themes. We asked our people, What are the things that keep you up at night? What do you worry about? What are the major opportunities? Following are seven themes that they came up with. This is what we’re going to start to work on now and move ahead with:

1. Diagnostic throughput. Throughput is probably our most important theme. Operating rooms, for example, don’t operate at 100% capacity. The target in health care is 70%. We’re running at about 57%. We are turning away surgeries at all three of our campuses because we don’t have the capacity, yet we are only running at 57%. Surgical procedures are being performed just a little over half the time that the operating rooms are available. That’s not good. We also have a group of orthopedic surgeons who, because they can’t get operating room time, are building an orthopedic hospital that’s going to compete with us. If we could improve the throughput, not only would we have better patient satisfaction, better physician satisfaction, and greater revenues, we could also stop a potential competitor from doing something because they can’t access our operating rooms. The same thing is happening in the CT scan, cardiac catherisation, and emergency departments. Mount Carmel has, in one of its hospitals, the busiest emergency department in the state of Ohio. We also have the biggest diversion rate, meaning we turn more squads away from coming to the emergency room. We need to improve our throughput. So we desperately want Six Sigma to help us with that.
2. Bad debt. In February 2002, when we started this, we had $24 million in bad debt, about 2.6% of our revenues. This is not charity care; these are people who can afford to pay and just choose not to. And we have inefficient processes and procedures. So we have developed a very interesting design of experiments to streamline the way we process bills and reduce bad debt.
3. Managed care denials. From July 2001 to February 2002 we had about $5 million in insurance denials. Sometimes it’s paperwork we didn’t process the right way. These people had good care in our facility. We just didn’t get paid because we had flawed processes in the way we sent bills/forms to the insurance companies; a big opportunity for improvement exists here.
4. Improved charge accuracy. Our chief financial officer estimates that 10% to 20% of the services we provided are not charged for and, therefore, we are not getting paid for them. Add all of this up and there’s about $100 million worth of entitlement sitting on the table. If Six Sigma helps us to get half or even a quarter of that, it is definitely worth it.
5. Administrative length of stay. Most of our reimbursement is fixed. If we can reduce the length of stay, it helps throughput and improves revenue.
6. Care continuum business projects. We have a home health business, a hospice program, and an ambulance company. There are improvement opportunities here that we are working on, too.
7. Recruit and retain. There are improvement opportunities in recruitment and retention of people, so that we reduce our turnover.

Terminology that fits our purpose and culture

Our logo features the s3 symbol. That’s for our three S’sSoulful Six Sigma. Caregivers aren’t inspired by war-like terminology, so we embrace the soulful (honor every soul with loving service), not the fearful; we infuse rather than deploy; and we have Guides rather than Black Belts.

Quality of work life

There’s a Dilbert cartoon that I like. The dialogue says: This job has taken my dignity, my self-esteem, my creativity, and my precious time on this earth. You’ve taken all I have; there’s nothing left to give. And of course, the boss responds, The blood drive is next week. This year it’s mandatory and a three-pint minimum. Our people in health care feel like that; they feel that they’re being bled. They feel that we keep asking for more and more and providing less and less. We have 8,000 employees and 1,200 physicians in our system. We need our people to be inspired. Using Six Sigma for process improvement is one part, but we also need processes that build and maintain a caring and cared-for workforce.

Looking at turnover

We surveyed our people, asking Why do people stay or not stay at Mount Carmel? We learned that it is the quality of relationships that are the drivers. The number one reason people stay at Mount Carmel is the quality of the relationship they have with their supervisor. The number two reason is the relationship they have with the people they work with. So if we’re looking at retention and trying to reduce turnover, relationships are very important.

A refocus of leadership

What makes a great leader? The answers that some of us MBA types may give is: You have to achieve market share. And you have to have a vision for the future, and articulate that vision. And maybe we’ll include all kinds of other MBA language.

We asked our people, What do you want in a leader? What characteristics do you want in somebody you report to? They wanted someone:

• who tells me the truth
• who keeps promises
• with integrity
• who I can trust
• with courage and who’s authentic
• who doesn’t hide behind their title or their office or their corporate mask.

We all have our corporate persona and our corporate face. Yet people like real people, authentic people, people who show love in the workplace. We all want more love in our lives, and given we spend a lot of time at work, we must get it there. Those are the kinds of people that our people said they want to work for. So we put those two together. This is what people want in a leader and having a great relationship with your leader is the number one reason you stay at Mount Carmel.

We are embarking on a very aggressive leadership development program called A Journey to Higher Ground. It is based on work by Lance Secretan, who is devoting his life to reawakening spirit and values in the workplace. One of the major aspects of this program is leadership development. We go away on week-long retreats where we reawaken those kinds of values I just talked about. It’s a life-changing experience. We refresh those values that are already in people. We also are creating an environment within Mount Carmel so that when people come back, inspired, the way we’re working has been changed so that our people can maintain their inspiration. And that includes Six Sigma, and changing our work processes.

Six Sigma results

I mentioned earlier that turnover in our industry is a little over 20%. In Columbus, it’s even a little higher than that because it is a very competitive market. You can get a job in any system. We’re all begging for people. And a lot of people jump from one system in Columbus to another just to get recruiting bonuses.

In Columbus, our turnover rate in July 2000 (annualifed) was 24%. Because of some of the changes we’ve made, the next July it was down to 16%. And in June 2002, it was annualised at 13%. In the last four or five months, it’s been about 11%. So we more than cut in half the turnover rate in our organisation.

It’s estimated by people in our industry that a turnover in health care costs about $50,000. This includes the cost of recruiting bonuses and human resource expenses, and the year or two it takes to train people and to get them used to the way the surgeons work at this place and learn their way around the organisations. So cutting turnover in half results in major savings.

We’ve had an 709% increase in net operating income ($23.1 million) and a 144% increase in net income ($35.1 million). We’ve had an 8.7% increase in patient revenues ($494 million).

We’re very proud of our ability to grow something we call our Community Benefit Ministry. We had a RV outfitted as a doctor’s office on wheels. It goes to the people, to thirty placessoup kitchens, shelters, senior citizen centerswhere we provide free primary care to anyone who comes in. You often hear in healthcare management today, If there’s no margin, there’s no mission. Well, caring for people is our mission. By improving our processes, improving quality, and improving patient satisfaction, we will improve the bottom line and have more funds to do things like this. We increased Community Benefit Ministry funding from $33.6 million in FY 2001 to $41.8 million in FY 2002.

The reason for these improvements is Six Sigma and our leadership development. It includes improving the processes so that people enjoy the work they’re doing more, and caregivers can spend more time giving care, touching patients, and being with patients. That’s why they went into this line of work to begin with. That’s what they want to be and that’s what they want to do. Six Sigma is helping us to do this better.