1 ADVANCE for Executive Insight
1 ADVANCE for Executive Insight
1 ADVANCE for Executive Insight
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1 <strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong>
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<strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong><br />
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7/26/12 1:38 PM
CONTENTS<br />
EXECUTIVE INSIGHT ı volume 3 ı no. 7-8<br />
Hit Your Mark<br />
Cost containment is a constant area of discussion but most providers,<br />
especially not <strong>for</strong> profits, struggle with identifying and following through on<br />
cost savings initiatives. Provider cost savings opportunities are often overlooked<br />
and create per<strong>for</strong>mance gaps that are avoidable in an organization.<br />
By Phil Robinson<br />
17 CEO: Hiring a Consultant to<br />
Maximize Efficiency<br />
While most hospitals probably have the knowledge and insight<br />
to handle problems internally, they often don’t have the staff<br />
needed to deal with the situation.<br />
By Richard A. Gianello & Kathy Omachi<br />
21 COO: Facility Redesign to<br />
Improve Operational Efficiency<br />
In many markets, healthcare construction has come to a<br />
standstill. The still teetering economy, the uncertainty of<br />
healthcare re<strong>for</strong>m and problems accessing capital are among<br />
many reasons. See how one health system is staying<br />
competitive through strengthening its building assets.<br />
By Pamela Stoyanoff, MBA, CPA<br />
24 CFO: Productivity Improvements<br />
and Your Bottom Line<br />
In times of reimbursement uncertainty, an increased appetite<br />
<strong>for</strong> capital dollars and added government compliance reporting<br />
criteria means that executive jobs are not going to get any<br />
easier. Hospital leaders need to use technology in concert with<br />
human capital <strong>for</strong> long-term success.<br />
By Tim C. Lessing<br />
Features<br />
32 Error Reduction<br />
Strategies<br />
Lean processes, automation<br />
reduce errors and drive<br />
efficiencies in the clinical<br />
laboratory.<br />
By Ralph Dadoun, PhD<br />
36 The Pharmacist’s<br />
Expanding Role<br />
One CPO explains how the<br />
pharmacy is gaining greater<br />
influence at the hospital<br />
executive table.<br />
By Jill Hoffman<br />
38 The Not-So-Soft<br />
‘Soft’ Impacts<br />
of ICD-10<br />
Loss of productivity <strong>for</strong><br />
virtually everyone engaged<br />
in using the new code sets<br />
is viewed as one of the<br />
“soft” impacts that may be<br />
difficult to measure empirically,<br />
but will undoubtedly<br />
translate into significant<br />
financial shortfalls <strong>for</strong> many<br />
organizations. How can you<br />
minimize both?<br />
By Patrick McNeese<br />
Peer-reviewed article<br />
40 Diabetes: Client &<br />
Clinician Collaboration<br />
Diabetes management is a<br />
complex process, requiring<br />
collaboration between<br />
clients and healthcare<br />
professionals. A recent<br />
Adult Day Health Council<br />
(ADHC) Research Collaborative<br />
Diabetes Management<br />
38<br />
Study, <strong>for</strong> example, focused<br />
on intensive interdisciplinary<br />
care led by nurse case managers<br />
made a difference in<br />
the lives of clients.<br />
By Sandy Keefe, MSN, RN<br />
44 The Cloud Contract<br />
When moving to a cloud<br />
computing environment, the<br />
first step is to select a vendor.<br />
The next step is to negotiate<br />
the contract. Contract<br />
negotiation is like sausagemaking:<br />
You want the final<br />
product but you don’t want to<br />
see how it is made.<br />
By Chris Witt<br />
28 CIO: Can IT Yield Clinical Efficiencies?<br />
Clinical system implementations are complex and rushing<br />
through them can result in negative impacts. Ensure that the<br />
efficiency measures are clear and translate directly to the<br />
desired benefits.<br />
By Indranil (Neal) Ganguly, CHCIO, FHIMSS, FCHIME 32<br />
4 <strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong>
<strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong><br />
5
contents continued EXECUTIVE INSIGHT ı volume 3 ı no. 7-8<br />
Features<br />
48 Hospitals Utilize<br />
Just-In-Time”<br />
“<br />
Approach to Improve<br />
Supply Chain<br />
Two organizations utilized the JIT approach<br />
— not carrying extra inventory<br />
beyond what is needed to function over<br />
a specified period of time — and reduced<br />
costs while improving patient care.<br />
By Marc Hafer & Paula Lillard<br />
48<br />
Departments<br />
8 Editorial:<br />
Among Rocky Fiscal Outlooks,<br />
Solutions <strong>for</strong> Growth<br />
12 Healthcare IT:<br />
Choosing a Hosted Email Solution<br />
1 ExEcutivE insight: When July disaster 2012 | strikes www.advanceweb.com/e xecutivei nsight<br />
Online Content<br />
www.advanceweb.com/executiveinsight<br />
Features<br />
Mobile Apps<br />
<strong>for</strong> IT Savvy<br />
Healthcare<br />
Looking to stay connected while on the move?<br />
Now you have mobile healthcare apps that can<br />
help you stay on top of healthcare IT.<br />
Columns<br />
3 Healthcare’s Growing<br />
Demand <strong>for</strong> Flexible<br />
Mobile Apps<br />
5 Mobile Imaging<br />
7 mHealth Landscape<br />
www.advanceweb.com/executiveinsight<br />
n ASQ’s Eye on Quality<br />
n CHIME’s Healthcare IT<br />
n MGMA’s Directions in<br />
Group Practice Management<br />
n Dollars & Sense, sponsored<br />
by Soyring Consulting<br />
n <strong>Executive</strong> Perspectives <strong>for</strong> the<br />
Continuum of Care, sponsored<br />
by Status Solutions<br />
n Next Level of Leadership<br />
sponsored by Caliper<br />
A New<br />
of Healt<br />
Apps<br />
Here are devices and<br />
the cusp of becoming<br />
➤ Webcast: Strategies <strong>for</strong> healthcare sector. By M<br />
Improving Patient Safety<br />
University of Cali<strong>for</strong>nia San Francisco<br />
Medical Center implements<br />
since 2006, we’ve bee<br />
health online. of course<br />
key changes to make patient<br />
but the ehealth frenzy o<br />
safety a top priority. CMO Josh<br />
left webmd standing. F<br />
Adler, MD, explains.<br />
manage their health. mo<br />
it. that’s all changed. w<br />
➤ E-Edition: Mobile Apps <strong>for</strong><br />
the cloud, ubiquitous sm<br />
IT Savvy Healthcare<br />
all coming together to be<br />
Mobile apps are fast becoming<br />
<strong>for</strong>ms” <strong>for</strong> “apps” and th<br />
a must-have in the healthcare<br />
them. that health data is<br />
profession, changing how<br />
shared between them in<br />
healthcare providers operate. Our<br />
compilation of mobile app articles<br />
what this all means is<br />
will keep you up-to-date on ber new of devices and app<br />
technologies and changing used trends. by all types of play<br />
tor. and that use is sta<br />
three areas that are on<br />
➤ ACO Acumen: Accountable<br />
everyday big deal in he<br />
Care Organization Progress<br />
See why ACOs are no longer the<br />
“unicorns” in healthcare. Personal Data Tracki<br />
back in 2007, a new k<br />
was born in cali<strong>for</strong>nia<br />
➤ Elevating Supply Chain<br />
Value Analysis<br />
Make it an essential part of Matthew your Holt is the co-cha<br />
the health care blog, and h<br />
financial strategy.<br />
searcher, general <strong>for</strong>ecaster<br />
is a reporter <strong>for</strong> health 2.0 n<br />
health care blog.<br />
n Political Pulse<br />
sign up to become an insider<br />
n Finance & Investment<br />
n ACO Acumen,<br />
sponsored by AT&T<br />
n The Efficient Emergency<br />
Department, sponsored<br />
by Wellsoft Corp.<br />
Blogs<br />
n Politics of Healthcare<br />
n Boardroom Buzz<br />
Check back daily <strong>for</strong> news updates, blog discussions and product in<strong>for</strong>mation.<br />
12<br />
On the Web<br />
Looking <strong>for</strong> a new job? Now you can<br />
get job postings on Facebook and<br />
Twitter! Follow us at www.twitter.<br />
com/AdvanceHCAJobs and www.facebook.com/<strong>Executive</strong><strong>Insight</strong><br />
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Copyright 2010 by<br />
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<strong>Executive</strong> <strong>Insight</strong> delivers innovative strategies and solutions<br />
by and <strong>for</strong> healthcare executives to help them lead and succeed.<br />
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6 <strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong>
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editorial<br />
is published by Merion Matters<br />
Publishers of leading healthcare magazines since 1985<br />
Gearing Up &<br />
Saving Up <strong>for</strong> EHR<br />
PRESIDENT<br />
General MANAGER<br />
Publisher<br />
Editorial<br />
EDITOR<br />
MANAGING EDITOR<br />
WEB MANAGER<br />
Ann Wiest Kielinski<br />
W.M. “Woody” Kielinski<br />
Lynn Nace<br />
Adrianne O’Brien<br />
Jill Hoffman<br />
Jennifer Montone<br />
Does your organization have a mobility<br />
access strategy that provides its<br />
clinicians and patients with access to<br />
electronic medical records? In a May poll<br />
conducted by KPMG LLP on electronic<br />
health record (EHR) deployment by hospitals<br />
and health systems, about half the<br />
leaders surveyed said that they didn’t know.<br />
That surprised me a bit, but the good<br />
news is that 49 percent of business administrators<br />
at hospitals or health systems say<br />
they are more than halfway to completing<br />
full electronic health record (EHR) system<br />
deployment.<br />
Seesawing again, though, many hospital<br />
leaders have doubts about the level of<br />
funding their organizations have planned<br />
to support it, according to the KPMG poll.<br />
The survey found that 48 percent of<br />
health system business leaders said they<br />
are only somewhat com<strong>for</strong>table with the<br />
level of budgeting their organization has<br />
planned <strong>for</strong> EHR deployment. Nine percent<br />
said they weren’t com<strong>for</strong>table at all<br />
while 18 percent said they were unsure.<br />
Only 25 percent said they were very com<strong>for</strong>table.<br />
“There is a level of uneasiness as to<br />
whether there is adequate funding to complete<br />
these projects,” said Gary Anthony,<br />
principal with KPMG Healthcare. “In<br />
most organizations, EHR deployment will<br />
most likely be one of the most trans<strong>for</strong>mational<br />
projects that they’ve ever undertaken,<br />
as well as one of the largest investments<br />
outside of the construction of a new hospital<br />
they’ve ever made. Yet, many organizations<br />
view EHR as just an IT project and<br />
that may be why we are seeing multiple<br />
extensions to scope, timeline and budget.”<br />
In terms of resource strategies used to<br />
complete EHR deployment, 46 percent of<br />
hospital leaders indicated that they are using<br />
a multiple resource strategy. This was<br />
followed by leveraging existing staff (16<br />
percent), hiring new or additional staff<br />
(13 percent) and securing third party assistance<br />
(10 percent). If you’re unsure what<br />
resources your organization will use <strong>for</strong> deploying<br />
an EHR system, you’re note alone.<br />
Fifteen percent said they didn’t know.<br />
The issues surrounding implementing<br />
an EHR system are vast and complex, but<br />
Cheryl Parker, PhD, RN-BC, FHIMSS,<br />
gets back to basics in a web article titled<br />
“Avoiding the Domino Effect: Evaluating<br />
Workflows Be<strong>for</strong>e Adopting New Technology.”<br />
She writes that new healthcare<br />
technology implementations should never<br />
be made within the vacuum of a single department.<br />
The key is to remember that any<br />
process change has the potential to impact<br />
everyone from admitting staff to physicians<br />
and nurses to pharmacists, which is<br />
why every significant technology implementation<br />
must begin with enterprisewide<br />
planning and impact analyses.<br />
Sounds like a good place to start.<br />
Design<br />
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Administration<br />
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ACCOuNT ExecuTIVES<br />
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executiveinsight and enter “Domino Effect” in the keyword box.<br />
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8 <strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong>
WHO GOES OUT FOR<br />
HOSPITAL FOOD?<br />
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Editorial Advisory Board<br />
JOSHua ADLER, MD<br />
CMO, UCSF Medical Center<br />
San Francisco, CA<br />
ALLEN Butcher<br />
CFO, Camden Clark Memorial Hospital<br />
Parkersburg, WV<br />
EDMuND E. COLLINS, MBA, CPHIMS<br />
Vice President and CIO<br />
Martin Memorial Health Systems<br />
Stuart, FL<br />
FRANk CORVINO<br />
President and CEO<br />
Greenwich Hospital<br />
Greenwich, CT<br />
SuSAN L. DAVIS, EdD, RN<br />
President and CEO, St. Vincent’s Medical Center/St.<br />
Vincent’s Health Services<br />
Bridgeport, CT<br />
COLE EDMONSON, MS, RN, CHE, CNAA,BC<br />
Vice President of Patient Care Services and CNO<br />
Texas Health Presbyterian Hospital<br />
Dallas, TX<br />
NEAL GANGuly, CHCIO, FHIMSS<br />
Vice President and CIO<br />
CentraState Healthcare System<br />
Freehold, NJ<br />
Johnny Kuo<br />
COO, Gracie Square Hospital<br />
New York, NY<br />
Ed MARx<br />
Senior Vice President and CIO<br />
Texas Health Resources<br />
Arlington, TX<br />
Dan Morissette<br />
CFO, Stan<strong>for</strong>d Hospital & Clinics<br />
Palo Alto, CA<br />
Lynne MyERS<br />
COO, Meriter Health Systems<br />
Madison, WI<br />
LISA ROWEN, DNSc, RN, FAAN<br />
CNO and Senior Vice President of Patient Care<br />
Services, University of Maryland Medical Center<br />
Baltimore, MD<br />
AMIR DAN RuBIN<br />
President and CEO, Stan<strong>for</strong>d Hospitals and Clinics<br />
Stan<strong>for</strong>d, CA<br />
Sue SCHADE, FCHIME, FHIMSS<br />
Vice President and CIO<br />
Brigham and Women's/Faulkner Hospital<br />
Boston, MA<br />
CHRISTINE SchuSTER, MBA, RN<br />
President and CEO, Emerson Health System<br />
Concord, MA<br />
NANCy TEMPLIN, CPA<br />
CFO, All Children's Hospital,<br />
St. Petersburg, FL<br />
DEBORAH ZASTOCki,<br />
EdM, DNP, CNAA, NEA-BC, FACHE<br />
President and CEO, Chilton Memorial Hospital<br />
Pompton Plains, NJ<br />
Industry advisory board members<br />
Ken Perez<br />
Senior Vice President of Marketing<br />
and Director of Healthcare Policy<br />
MedeAnalytics<br />
Emeryville, CA<br />
www.medeanalytics.com<br />
Amy JEFFS<br />
Chief Operating Officer<br />
Status Solutions<br />
Charlottesville, VA<br />
www.statussolutions.com<br />
CASEy CRAM, MA<br />
Director of Marketing<br />
Talyst<br />
Bellevue, WA<br />
www.talyst.com<br />
10 <strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong>
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<strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong><br />
11
healthcare IT<br />
By Robert “Bob” Latz, PT, DPT, CHCIO<br />
Choosing the Right Vendor<br />
<strong>for</strong> a Hosted Email Solution<br />
One CIO shares his insights into selecting a cloud-based<br />
email vendor <strong>for</strong> your organization.<br />
In a recent survey of 97<br />
CHIME members, just shy<br />
of 10% are using a hosted<br />
Microsoft Exchange environment<br />
to meet their organizations’<br />
email needs. However,<br />
another 26 individuals (24%)<br />
share that they are considering<br />
moving to a hosted email<br />
environment <strong>for</strong> two reasons:<br />
1) the time spent on internal<br />
administration and maintenance; and 2) the cost<br />
of hardware and licensing <strong>for</strong> their environment.<br />
Our company, Select Rehabilitation, has nearly<br />
500 post-acute care locations in 32 states. For<br />
many of the same reasons as the survey responders,<br />
we are in the final stages of choosing a vendor<br />
<strong>for</strong> a hosted email solution. Above and beyond the<br />
cost and time considerations, we have two unique<br />
drivers <strong>for</strong> this change: 1) We have gone through<br />
several recent acquisitions and need to consolidate<br />
our email in one solution; and 2) We need to be<br />
flexible enough to incorporate near-future growth.<br />
Known Quantity<br />
Email is one of the low-hanging fruits in the<br />
cloud when looking at annual cost savings.<br />
We can remove unknown hardware costs <strong>for</strong> a<br />
known vendor cost, and we can remove or restructure<br />
network management costs <strong>for</strong> employee,<br />
licenses, patches and maintenance updates,<br />
to name a few. By moving to a cloud-based<br />
email environment, we trade unknowable management<br />
costs <strong>for</strong> a relatively<br />
known monthly cost.<br />
Email is also critical <strong>for</strong><br />
communication, so reliability<br />
and uptime is necessary.<br />
A cloud solution is a perfect<br />
answer. But which one is right<br />
<strong>for</strong> us?<br />
The Risks<br />
In follow-up discussions with<br />
some healthcare CIOs, we learned of several<br />
risks present in a hosted email environment:<br />
n Security concerns, including hosting of email<br />
offshore<br />
n Migration of existing data<br />
n Maintaining control of our data<br />
As we drew together all of our needs <strong>for</strong> this<br />
service, we paid particular attention to these<br />
risks. We asked each vendor to clarify their operating<br />
structure as well as their data migration<br />
and maintenance tools.<br />
RFP<br />
In order to understand the ROI <strong>for</strong> our situation,<br />
we put together an RFP and sent it out to seven<br />
vendors — including Google and Office 365. Two<br />
could not meet our time frame <strong>for</strong> going live or<br />
returning the RFP. Of the remaining five, we received<br />
pricing quotes ranging from roughly $100<br />
to $220 per user, per year. In most cases this in-<br />
Robert “Bob” Latz is corporate director of technology integration at Select Rehabilitation Inc. He is a member<br />
of CHIME, completed the CIO Boot Camp, and became a Certified HealthCare CIO. He is the Secretary of the<br />
Technology Special Interest Group of the American Physical Therapy Association and has presented on technology<br />
related topics at APTA conferences. He is a member of the NASL (National Association <strong>for</strong> Support of<br />
Long Term Care) Technology Committee.<br />
Email is one of the<br />
low-hanging fruits<br />
in the cloud when<br />
looking at annual<br />
cost savings. We<br />
can remove unknown<br />
hardware<br />
costs <strong>for</strong> a known<br />
vendor cost, and<br />
we can remove or<br />
restructure network<br />
management<br />
costs <strong>for</strong> employee,<br />
licenses,<br />
patches and maintenance<br />
updates.<br />
Healthcare IT is sponsored by<br />
the College of Health In<strong>for</strong>mation<br />
Management <strong>Executive</strong>s<br />
(CHIME). Contact CHIME at<br />
www.cio-chime.org.<br />
12 <strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong>
healthcare it<br />
cluded hot disaster recovery (DR)-type capability. Most vendors<br />
allow <strong>for</strong> pricing that is dependent upon the needs of various user<br />
groups. These various solutions can be mixed, creating a kind of hybrid<br />
solution that can drive down costs. For us, this means our end<br />
users — primarily clinicians with little time in front of the computer<br />
<strong>for</strong> emailing — have a lower-cost hosting solution than our senior<br />
management team, who are in front of the computer and on email<br />
several hours each day, even though both have encryption, eDiscovery<br />
and DR capabilities.<br />
Anyone considering this path quickly learns that the options boil<br />
down to this: Use Google, Office 365, or a vendor that hosts Exchange<br />
on their servers — or a combination of more than one host.<br />
Choices<br />
We learned that Google will not sign a business associate agreement<br />
(BAA). According to Google, like Verizon, they fall under a<br />
clause in the legislation that excludes them. We must consult our<br />
legal team, who is reviewing their explanation to see if we can safely<br />
proceed with this option without a BAA.<br />
We also discovered that Microsoft Office 365 is willing to sign a<br />
BAA, and their pricing is comparable to Google’s. They host only<br />
on servers in the U.S., and many of our users are very familiar with<br />
Exchange. Like Google, this is a multi-tenant environment.<br />
At least one vendor can host the exchange on dedicated servers,<br />
with the DR and backup on virtual servers. In the past, DR and<br />
backup resulted in a cost of 100% of production. Now this option is<br />
roughly 30-40% of production cost.<br />
At least two vendors said they could host email overseas, but only<br />
on servers in the European Union (EU) because the EU has security<br />
policies as high as or higher than the U.S. We are in the process of<br />
deciding if this is a risk we can tolerate, and at what cost saving, if any.<br />
Forging Ahead<br />
We have more to learn, and are still communicating with several vendors<br />
to clarify their services. Although it’s the middle of July and we<br />
haven’t even chosen a vendor, we expect to have a decision made and<br />
have our solution in production by the middle of August — by the time<br />
most of us are reading this article. That’s the power of the cloud.<br />
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<strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong><br />
13
14 <strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong>
cover story<br />
Finance alone can no longer be solely<br />
accountable <strong>for</strong> cost containment. In<br />
the last few decades, the complexity of<br />
healthcare has increased dramatically<br />
while the approach to cost management<br />
has continued to follow old rules<br />
with outdated attitudes about who is<br />
ultimately responsible.<br />
scott frymoyer/john ciuppa<br />
Hit<br />
Your<br />
Mark<br />
Three cost-containment<br />
factors will usher in better<br />
healthcare delivery.<br />
By Phil Robinson<br />
Corporate leadership teams are highly focused on several dynamics<br />
that are changing the healthcare landscape across<br />
the United States — the potential impacts of insurance and<br />
care delivery re<strong>for</strong>m, increasingly stringent clinical per<strong>for</strong>mance<br />
requirements, rapidly evolving physician/hospital partnering strategies<br />
and changing payment models, to name a few. For financial<br />
leaders, add to this list the pressure to maintain bond ratings, borrowing<br />
capacity and adequate cash flow to fund the seemingly unending<br />
demand <strong>for</strong> capital, as well as heightened emphasis on cost<br />
containment.<br />
Cost containment — and its accompaniment, productivity improvement<br />
— have been a continual battle, but many providers,<br />
especially not-<strong>for</strong>-profits, struggle with identifying and following<br />
through on cost-saving initiatives. Healthcare in the U.S. has<br />
grown increasingly complex but approaches to cost containment<br />
have not kept pace. Periodic cost reviews and reactive restructurings<br />
are common approaches, but they have been relied on much<br />
too often and are painful and disruptive to healthcare organizations.<br />
Given that legislative ef<strong>for</strong>ts are not focused on this, it is up<br />
to the industry to aggressively manage care delivery expense. As<br />
a healthcare provider faced with this challenge, how can you approach<br />
containing costs? Three important factors <strong>for</strong> better cost<br />
management should be considered.<br />
ACCOUNTABILITY<br />
Perhaps the most important point is that cost containment ef<strong>for</strong>ts<br />
will only succeed if embraced by all departments in a<br />
healthcare organization. Finance alone can no longer be solely<br />
accountable <strong>for</strong> cost containment. In the last few decades, the<br />
complexity of healthcare has increased dramatically while the<br />
approach to cost management has continued to follow old rules<br />
with outdated attitudes about who is ultimately responsible. No<br />
doubt, finance must provide the tools and systems to project,<br />
measure and report costs and cost savings, but clinical and administrative<br />
personnel are instrumental to this process. They<br />
know firsthand where waste and inefficiencies have developed,<br />
but in many cases, they have not been asked to play a role in<br />
weeding it out. Start by incentivizing and holding these employees<br />
accountable <strong>for</strong> identifying and achieving cost savings and<br />
productivity enhancements.<br />
<strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong><br />
15
cover STORY<br />
Hospitals and other providers need to quantify and<br />
understand the way costs are incurred <strong>for</strong> patient<br />
care and be aware of alternatives.<br />
COST TRANSPARENCY<br />
Much of the rapid escalation in healthcare costs<br />
can be attributed to providers’ lack of awareness<br />
as to the real costs of delivering patient care. To<br />
stay competitive, healthcare organizations need<br />
to streamline inefficient processes and fully understand<br />
resource requirements. Ultimately,<br />
the value proposition should maximize patient<br />
outcomes at the least cost. This goes way beyond<br />
having an accurate cost accounting system,<br />
although that is important. Cost transparency<br />
can be improved through proven techniques, including<br />
Activity Based Management (ABM) and<br />
Comparative Cost Effectiveness (CCE).<br />
Activity Based Management (ABM)<br />
ABM is an approach to cost management used<br />
across industries that aims to maximize valueadd<br />
activities while minimizing or eliminating<br />
non value-add activities. For healthcare, this<br />
means analyzing activities and related costs to<br />
ensure they contribute to quality patient care<br />
while eliminating or reducing non-supportive,<br />
unproductive costs. Instead of focusing on broad<br />
expense categories (i.e., what is spent), the focus<br />
is on activities that take place (i.e., what is done).<br />
ABM can be deployed in both administrative<br />
and clinical departments to identify where costs<br />
are excessive, ineffective or not well understood.<br />
Adoption of ABM in healthcare has been<br />
hindered by a general lack of understanding of<br />
the benefits along with misperceptions that it<br />
is more expensive and complex to deploy. Certainly<br />
it is more difficult to apply in the healthcare<br />
world, where patient care considerations<br />
generally trump cost considerations. However,<br />
the value of being able to better manage financial<br />
results far outweighs the ef<strong>for</strong>t of deployment.<br />
Comparative Cost Effectiveness (CCE)<br />
CCE is a cost evaluation technique that focuses<br />
on existing alternatives <strong>for</strong> care delivery. CCE<br />
is often used with episode of care costing, particularly<br />
with regard to the choice of clinical<br />
treatment plans <strong>for</strong> the more costly diagnoses/<br />
treatments/procedures. This approach fully considers<br />
the combined cost of care (including pharmaceuticals,<br />
devices, technology, physicians and<br />
hospital costs), and compares it to the outcomes<br />
achieved during the entire episode of patient<br />
care. As we face a future with bundled payments<br />
that will <strong>for</strong>ce us to look more deeply at costs as<br />
a function of cross-continuum care coordination,<br />
this kind of approach is becoming critical.<br />
Hospitals and other providers need to quantify<br />
and understand the way costs are incurred <strong>for</strong><br />
patient care and be aware of alternatives. CCE<br />
is a complex process requiring systems to generate<br />
the right analytical data as well as qualified<br />
personnel who can consolidate and interpret the<br />
data. Most healthcare providers are not set up<br />
to gather this data and manufacturers have been<br />
reluctant to provide such in<strong>for</strong>mation.<br />
Studies have shown that the most expensive<br />
alternatives do not necessarily provide the best<br />
clinical outcomes. Managed care companies are<br />
very focused on this reality. Interestingly, parts of<br />
Europe have been incorporating this analysis into<br />
their healthcare organizations <strong>for</strong> many years and<br />
consider it a major component of limiting healthcare<br />
spending; it has been accepted and embraced<br />
as a necessity. That contrasts to the U.S.,<br />
where the medical community here has not been<br />
as supportive of including cost considerations in<br />
clinical decisions. Certainly medical device and<br />
pharmaceutical manufacturers are not wholly<br />
supportive — much of their focus is on preserving<br />
their own income. CCE focusing on episodes<br />
of care is needed to balance improved bottom<br />
line per<strong>for</strong>mance with the best clinical outcomes.<br />
LABOR MANAGEMENT<br />
Any discussion of cost containment in healthcare<br />
has to include the cost of labor. Labor costs<br />
are over 50% of revenues in most not-<strong>for</strong>-profit<br />
hospitals and are regularly over 80% of medical<br />
practice costs. Yet, <strong>for</strong>-profit hospital systems<br />
report labor cost averages of as low as 40% of<br />
revenues. Simple math reveals that a provider<br />
with $100 million of revenue would experience<br />
bottom line improvement of $1 million <strong>for</strong> every<br />
1% improvement in this ratio. As described earlier,<br />
accountability and activity-based management<br />
are key components of controlling labor<br />
costs. How is this done on a tactical level? Here<br />
16 <strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong>
are some practical things to consider:<br />
n Apply discipline and techniques that reduce labor costs and<br />
improve productivity.<br />
n Establish staffing metrics that align variable staffing with anticipated<br />
patient volume, then manage to them.<br />
n Benchmark both internally and externally.<br />
n Employ lower-cost clinical professionals without sacrificing quality.<br />
n Minimize the use of expensive contract labor and overtime.<br />
n Properly manage PTO, recognizing that it can easily represent 10%<br />
to 12% of labor costs.<br />
n Ensure that employee benefit plans are cost effective.<br />
n Take a service center approach <strong>for</strong> multi-location healthcare systems<br />
to avoid labor overhead redundancy and achieve consistent<br />
best practice across locations.<br />
n Hold managers accountable <strong>for</strong> labor cost control.<br />
n Invest in an effective electronic time and attendance system linked<br />
with labor management software, maximizing control of labor cost.<br />
Value-Driven System<br />
The healthcare industry must take the lead in addressing the cost<br />
escalation challenge. Fortunately, attitudes are changing. Tools<br />
are being developed to better manage and control costs. Innovation<br />
is happening in healthcare finance; physicians, medical<br />
device manufacturers and pharmaceutical companies are partnering<br />
to find new, cost-effective care alternatives. These new<br />
developments will allow organizations to systematically reduce<br />
costs while still being able to continually improve patient outcomes.<br />
A focus on these three keys to success in cost containment —<br />
cross-functional accountability, systematic cost management and<br />
cost transparency — will help the industry emerge from the current<br />
transition from a fee-<strong>for</strong>-service, volume-driven care delivery<br />
system to a value-driven, population health management system<br />
and will position it to usher in a better future <strong>for</strong> healthcare delivery<br />
and economics.<br />
Phil Robinson is a partner in Tatum’s Healthcare Practice. With over 30<br />
years of finance and accounting experience, Phil has served as CFO of<br />
several hospital and health systems. He has also worked in healthcare<br />
consulting, focusing on strategic planning, turnarounds and interim<br />
financial management.<br />
CEO Perspective<br />
Hiring a Consultant to<br />
Maximize Efficiency<br />
While most hospitals probably have the knowledge and insight to handle problems<br />
internally, they often don’t have the staff needed to deal with the situation.<br />
By Richard A. Gianello & Kathy Omachi<br />
Richard A. Gianello is president,<br />
HFS Consultants. Kathy<br />
Omachi is the board chair,<br />
Sierra Kings District Hospital.<br />
When a hospital is ailing financially, facing<br />
a sudden change in its chief executive<br />
leadership, or finds itself in<br />
a critical situation in areas such as reorganization,<br />
market share decline, management oversight,<br />
poor financial operational per<strong>for</strong>mance or<br />
financial reporting, hiring a consultant is often<br />
the answer to solve the problem efficiently and<br />
correctly.<br />
While most hospitals probably have the<br />
knowledge and insight to handle the problem<br />
internally, they often don’t have the staff needed<br />
to deal with the situation since most employees<br />
already have a full time job. Also, it might not<br />
be a good political move to handle the problem<br />
internally, because it may result in negative feedback<br />
from the community. An outside consultant<br />
can help to identify and address potential<br />
roadblocks, focus on the problem, bring an independent<br />
viewpoint and move <strong>for</strong>ward more<br />
quickly than if handled internally.<br />
In some cases, the situation is so dire that<br />
<strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong><br />
17
Match Needs with<br />
Consultant’s Expertise<br />
Talk to hospital CEOs and board chairs in the<br />
industry to obtain referrals <strong>for</strong> consulting companies<br />
to contact. Look <strong>for</strong> consultants with experience<br />
with similar organizations and issues.<br />
Avoid hiring generalists. Speak with comparable-size<br />
hospitals or facilities about their experiences<br />
with consultants. Be specific about your<br />
situation and the specific problems you need<br />
help with. Review the consultant’s backcEO<br />
Perspective<br />
Try to ascertain<br />
whether a candidate<br />
will remain<br />
with the position<br />
and see it through<br />
to completion.<br />
It will be a serious<br />
setback if you<br />
have to begin the<br />
search process all<br />
over again.<br />
a hospital would probably not survive without<br />
outside help. That was the scenario in 2009 when<br />
Sierra Kings District Hospital, a 49-bed district<br />
hospital outside Fresno, CA, which included<br />
five rural health clinics and growing emergency<br />
room services, was <strong>for</strong>ced to file <strong>for</strong> bankruptcy<br />
because of poor financial per<strong>for</strong>mance and<br />
mismanagement. The hospital’s finances had<br />
reached a point that they could not purchase<br />
bandages or other basic supplies.<br />
When the Board realized that their debt covenants<br />
were not being met, they were required<br />
to hire an outside consultant to assist with an<br />
operational assessment and improvement plan<br />
to get the hospital back in compliance with their<br />
debt covenants. However, it quickly became<br />
apparent that the existing CEO and CFO were<br />
not moving <strong>for</strong>ward quickly enough with implementing<br />
the improvement plan. For Sierra Kings<br />
District Hospital, an outside consultant was required<br />
who could bring in an inter-disciplinary<br />
team that included an interim CEO and CFO,<br />
specialists in revenue cycle, patient accounting,<br />
coding, reimbursement, labor and non-labor<br />
per<strong>for</strong>mance and rural health clinic operations.<br />
Over a 2-year period, this team successfully<br />
worked with the Sierra Kings District Hospital<br />
Board, physicians and staff to improve financial<br />
per<strong>for</strong>mance of the hospital and assisted the hospital’s<br />
bankruptcy attorney to achieve approval<br />
of the hospital’s bankruptcy plan. As a result, the<br />
team also assisted the Board in finding a longterm<br />
partner to manage the hospital and ensure<br />
that the hospital would be able to repay all debts<br />
at 100 cents on the dollar owed to its creditors.<br />
From the Sierra Kings situation, insight was<br />
gained by the Board regarding best practices <strong>for</strong><br />
hiring a healthcare consultant.<br />
Thinkstock/iStockphoto<br />
18 <strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong>
Choosing us <strong>for</strong> your<br />
complex challanges<br />
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Quest Diagnostics Hospital Services Specialized services <strong>for</strong> your complex challenges<br />
Visit www.questdiagnostics.com/hospitalservices or contact a Quest Diagnostics representative<br />
to discover more.<br />
Quest, Quest Diagnostics, the associated logo and all associated Quest Diagnostics marks are the trademarks of Quest Diagnostics.<br />
© 2012 Quest Diagnostics Incorporated All rights reserved.<br />
<strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong><br />
19
CEO Perspective<br />
If, as in the case of Sierra Kings District<br />
Hospital, finances are in a critical state,<br />
don’t abandon the idea of hiring a consultant<br />
because funding is tight.<br />
ground with similar work and references.<br />
Listen During Interview<br />
After explaining the problem and your expectations, listen and<br />
pay special attention to what candidates say during the interview<br />
process. Make sure they understand your situation and are able<br />
to explain solutions in ways you understand. Develop questions<br />
that will give you concrete in<strong>for</strong>mation on how the consultant<br />
will approach problems. Ask <strong>for</strong> details regarding their experience,<br />
how they’ve handled difficult situations and how what<br />
made them successful. Try to ascertain whether a candidate will<br />
remain with the position and see it through to completion. It will<br />
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Online Access<br />
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be a serious setback if you have to begin the search process all<br />
over again.<br />
Payment Terms<br />
If, as in the case of Sierra Kings District Hospital, finances are in a<br />
critical state, don’t abandon the idea of hiring a consultant because<br />
funding is tight. Even if it seems that the cost of a consultant might<br />
be out of reach, explain what the hospital can handle financially<br />
and in what areas the consultant is needed. Ask the consulting<br />
company if it’s possible to negotiate payment terms, such as a payment<br />
plan or other financial arrangement that defers a portion of<br />
the payments until operating per<strong>for</strong>mance is improved.<br />
Communicate with Staff<br />
View the hospital as a community that needs to be communicated<br />
with. Continually provide in<strong>for</strong>mation about the process.<br />
Have the board chair explain to the entire hospital staff, from<br />
those who work in housekeeping to doctors to the top administrators,<br />
why a consultant is needed. With staff that is going to<br />
be directly involved with the consultant, consider meeting oneon-one<br />
with them. In addition to talking to the staff, listen to its<br />
input. The goal is <strong>for</strong> the entire organization to be committed to<br />
the goals and objectives.<br />
Once the consultant is brought on board, have him or her meet<br />
very early on, if not immediately, with the entire hospital internal<br />
and external community, explain the situation, their vision <strong>for</strong><br />
improving operations and how they will have open and honest<br />
community future communication. This will help to offset any resistance<br />
from the staff or local community. A consultant who has<br />
direct contact with hospital community will be more successful<br />
than one who is out of sight and unavailable.<br />
Avoid Setting Consultant up For Failure<br />
Once you have consultants on board, be sure to understand their<br />
exact capabilities, set realistic goals and ask them to do only what is<br />
within their expertise. Clearly define the difficulties that your organization<br />
is facing and do not hide any in<strong>for</strong>mation. Make sure you<br />
provide sufficient time, resources and data to allow the consultant<br />
to be successful.<br />
Hiring a consultant can be a time-consuming and daunting task.<br />
Put as much time as needed into the selection process. Ultimately,<br />
your consultant needs to be someone who, along with his or her<br />
good references and expertise, is a person you can trust and will be<br />
able to work well with.<br />
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20 <strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong>
CoO Perspective<br />
Facility<br />
Redesign<br />
to Improve<br />
Operational<br />
Efficiency<br />
See how one health system<br />
is staying competitive through<br />
strengthening its building assets.<br />
By Pamela Stoyanoff, MBA, CPA<br />
In many markets, healthcare construction has<br />
come to a standstill. The still teetering economy,<br />
the uncertainty of healthcare re<strong>for</strong>m,<br />
problems accessing capital are among many reasons.<br />
But some health systems are moving <strong>for</strong>ward<br />
with the firm belief that core assets must<br />
not only be maintained, but strengthened, in<br />
order to compete effectively on whichever landscape<br />
is eventually painted. Methodist Health<br />
System is one such system.<br />
Methodist Health System is comprised of seven<br />
hospitals, with its corporate offices in Dallas.<br />
Just under $1 billion in net revenues, Methodist<br />
has a great deal of competition in its marketplace,<br />
and from several competitors who are significantly<br />
larger (Baylor, Texas Health Resources,<br />
HCA, Tenet, to name a few).<br />
kyle kielinski<br />
Pamela Stoyanoff, MBA,<br />
CPA, is executive vice<br />
president and chief operating<br />
officer, Methodist<br />
Health System in Dallas.<br />
Major Undertaking<br />
Four major projects are underway <strong>for</strong> the system,<br />
one at each of its four primary campuses.<br />
Its flagship facility has just begun construction<br />
on a new critical care and trauma tower.<br />
The new tower will be eight floors tall. As of<br />
this writing, four floors are completed, with the<br />
remaining shelled. The tower will house a new,<br />
larger ED, a new critical care unit and new<br />
<strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong><br />
21
CoO Perspective<br />
The theory of<br />
“build it and<br />
they will come”<br />
does not apply to<br />
healthcare construction.<br />
surgical suites. It will sit where a current medical<br />
office building resides, which will be demolished<br />
later this summer. The primary goal <strong>for</strong> this tower<br />
is to provide state-of-the-art facilities <strong>for</strong> the<br />
care of patients, especially those that are critical.<br />
By consolidating services related to critical care<br />
in one tower, efficiencies will be gained. Capacity<br />
will also be added to a facility that is struggling<br />
with lack of both ED and critical care beds.<br />
Design Considerations<br />
The flagship facility sits in a residential neighborhood,<br />
so maintaining positive community<br />
relations was key. We also wanted the overall<br />
design to focus on infection control/wellness,<br />
lighting and even stair locations in order to gain<br />
an edge against other local area competitors.<br />
Volatile organic compounds (VOC) and other<br />
hazardous compounds are contained in many<br />
construction materials and furnishings, posing a<br />
risk. But <strong>for</strong> infection control purposes, we prohibited<br />
all VOC-containing materials (e.g., lead,<br />
copper, cadmium-based materials). A number<br />
of VOC-free materials are available, including<br />
less-polluting paints, wood products, carpets,<br />
solvents, etc. Additionally, we are minimizing<br />
horizontal services and opting <strong>for</strong> antimicrobial<br />
surfaces wherever possible. And stairwells are<br />
being equipped with windows to encourage use<br />
and promote wellness.<br />
Maintaining positive community relations is<br />
a necessity <strong>for</strong> a hospital, especially in an ef<strong>for</strong>t<br />
to keep local admissions…local. Construction<br />
vehicles, noise levels, debris control are all challenges<br />
in a construction project and can create<br />
neighborhood dissention. In order to combat this<br />
throughout this project it was important to:<br />
1. Establish a written communication plan that<br />
will continuously update the local Chamber of<br />
Commerce as well as neighbors. Letters are sent to<br />
neighbors homes routinely to in<strong>for</strong>m them of what is<br />
next in the process, what issues that might pose etc.<br />
2. Participate in “green” ef<strong>for</strong>ts where possible. This<br />
design incorporates bike racks, inviting landscaping,<br />
special lighting designs, etc. to “decommercialize”<br />
the building and pose it as urban-friendly.<br />
Within the buildings themselves, innovation<br />
was key in order to improve patient access and<br />
overall care.<br />
Bullet Points<br />
The following are some items implemented during<br />
the planning process <strong>for</strong> each area of focus in<br />
order to improve throughput, efficiency, quality<br />
and patient satisfaction:<br />
Emergency Department<br />
n Ambulance flow completely separate<br />
from other traffic<br />
n Entire waiting room visible by receptionist<br />
n Utilization of a Team Triage methodology and<br />
one-way glass between triage and reception<br />
station to facilitate staff coverage<br />
n Positioning of access points so that staff can<br />
monitor without relying on cameras or leaving<br />
work area<br />
n Remote locking/unlocking capability <strong>for</strong> entry points<br />
n Universal rooms — triage rooms can function as<br />
ED rooms<br />
n Minimal built-in cabinetry <strong>for</strong> lower maintenance<br />
n Overall patient flow is clearly defined to place<br />
less reliance on signage<br />
Surgery (OR)<br />
n 750-square-feet minimum in all ORs<br />
n Power-operated OR doors<br />
n 10-feet ceilings to accommodate future<br />
equipment needs<br />
n Pre- and post-operative rooms are interchangeable<br />
n Direct access to central sterile right below ORs<br />
Critical Care Unit<br />
n Public elevator immediately adjacent to unit<br />
n Handwashing sink at entry to unit<br />
n Unit clerk space directly at entrance to unit <strong>for</strong><br />
immediate family greeting<br />
n Significant use of glass <strong>for</strong> greater daylight effects<br />
n Procedure room on the unit<br />
Changing with the Times<br />
The theory of “build it and they will come” does<br />
not apply to healthcare construction. Building<br />
an ineffective tower could discourage patients. A<br />
tower that promotes efficiency and a “soft” environment<br />
<strong>for</strong> patient care can make all the difference.<br />
Construction is expensive, and building decisions<br />
must be carefully considered and planned<br />
well. With hospitals now concerned about Valuebased<br />
purchasing, Medicare break-even plans,<br />
readmission strategies, etc., you cannot af<strong>for</strong>d to<br />
make a mistake by building ineffectively.<br />
To<br />
van<br />
in t<br />
22 <strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong>
Choosing us to help you<br />
manage lab costs<br />
It’s academic<br />
In today’s do-more-with-less landscape, managing costs is vital. We can help you achieve your<br />
objectives with solutions tailored to your needs while making your lab’s test menu more competitive.<br />
We offer resource-optimizing lab management, Six Sigma tools and programs that help you maximize<br />
employee retention. And, we bring the logistics efficiencies of the nation’s leading lab. To manage<br />
costs, improve patient care and build loyalties, put Quest Diagnostics to the test.<br />
watch a video on green hospital design, go to www.adceweb.com/executiveinsight<br />
and enter “green design”<br />
he keyword box.<br />
Quest Diagnostics Hospital Services Specialized services <strong>for</strong> your complex challenges<br />
Visit www.questdiagnostics.com/hospitalservices or contact a Quest Diagnostics representative<br />
to discover more.<br />
Quest, Quest Diagnostics, the associated logo and all associated Quest Diagnostics marks are the trademarks of Quest<br />
Diagnostics. © 2012 Quest Diagnostics Incorporated All rights reserved.<br />
<strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong><br />
23
CFO Perspective<br />
Productivity Improvements<br />
and Your Bottom Line<br />
Read how one hospital is catapulting itself into the future while<br />
maintaining a healthy financial picture. By Tim C. Lessing<br />
Tim C. Lessing is senior vice<br />
president and CFO of St.<br />
Tammany Parish Hospital,<br />
Covington, LA.<br />
As a 220-bed, not-<strong>for</strong>-profit community<br />
hospital with 1,600 associates providing<br />
the broadest range of inpatient and outpatient<br />
services in the region, St. Tammany Parish<br />
Hospital (STPH) maintains the balance between<br />
quality, cost and customer satisfaction, and remains<br />
one the most profitable hospitals in the<br />
region. Our success can be directly attributed to<br />
leadership strategies to improve productivity of<br />
physicians, staff and systems while improving<br />
the bottom line.<br />
Profitable Results<br />
The year 2011 was one of the most financially<br />
successful years in STPH history. STPH ended<br />
the year with a 10.8% Earnings Be<strong>for</strong>e Interest,<br />
Depreciation And Amortization (EBIDA), improved<br />
days in Accounts Receivable (AR) to 50<br />
and Days Cash on Hand (DCOH) at 201 days.<br />
STPH also had a very successful refunding of<br />
bonds and indebtedness, resulting in a $6.3M net<br />
savings in interest expense. And supply expense<br />
decreased by a net of 3.5%, while overall ex-<br />
thinkstock/stockbyte/ Wendy Hope<br />
24 <strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong>
<strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong><br />
25
CoO CFO Perspective<br />
Cash may be “king” but quality is “queen.” Every hospital administrator should<br />
have quality and satisfaction in the 97th percentile, but the challenge is to achieve<br />
this level of per<strong>for</strong>mance while maintaining a healthy bottom line.<br />
pense as a percent of net patient revenue remained consistent with<br />
the prior year’s per<strong>for</strong>mance.<br />
Technology<br />
STPH has embraced technology throughout the patient care delivery<br />
model and the entire revenue cycle, resulting in improved<br />
productivity and a stronger bottom line. Some highlights include<br />
2010 redesign of the pre-registration process, implementation of<br />
benefit verification and copay estimator software, elimination of<br />
duplication through autofill functions (asking the patient the same<br />
question multiple times) and automatic physician order <strong>for</strong>ward/<br />
verification.<br />
These gains are continued with concurrent coding process on<br />
the floor, single sign-on <strong>for</strong> physicians and staff, and an electronic<br />
health record storage device enabling remote access <strong>for</strong> physician<br />
— all serving to decrease Discharged Not Final Billed (DNFB) by<br />
2.1 days in 2011.<br />
Standardized Plat<strong>for</strong>m<br />
Physician integration comes in many shapes and sizes, but at<br />
STPH we believe that one size may not fit the requirements of all<br />
the physicians (staff and contracted). Nonetheless, a standardized<br />
system plat<strong>for</strong>m means physicians no longer have to access multiple<br />
applications, resulting in greater physician satisfaction and<br />
increased productive time.<br />
A standardized plat<strong>for</strong>m also eliminates multiple interfaces and<br />
the need <strong>for</strong> additional IT staffing support, since individual applications<br />
require upgrades that cause unexpected “Bolt On” applications<br />
to be upgraded as well. CPOE<br />
The potential benefits of Computerized Physician Order Entry<br />
(CPOE) include a reduction in medication errors, decreased time<br />
frame <strong>for</strong> order completion, improved adherence to core measures,<br />
patient-centered decision support systems at the point of<br />
care, error checking to prevent duplicated orders and an overall<br />
reduction in pharmacy cost.<br />
The implementation of CPOE systems is not without pitfalls resulting<br />
from changes in physician workflow and the need <strong>for</strong> careful<br />
integration and implementation by all of the members of the<br />
hospital system. A successful CPOE implementation necessitates<br />
physician involvement in all phases of the design and implementation<br />
process.<br />
The STPH medical staff is designing and building a customized<br />
CPOE system using the Siemens Soarian plat<strong>for</strong>m, which has the<br />
added benefit that our physicians are already all familiar with it. We<br />
have in place a physician order set design and development team<br />
using “Zynx” order sets to create evidence-based admission order<br />
content. Our physician order set content and validation team of<br />
representatives from across the STPH medical staff creates standardized<br />
orders sets that improve physician workflow efficiency<br />
and prevent problems associated with handwritten orders.<br />
Staffing <strong>for</strong> PATIENT Improvements<br />
Hospital operations depend on technology to improve staff utilization,<br />
resource consumption and improve patient satisfaction<br />
to contribute to the success of the hospital’s bottom line. Acuitybased<br />
staffing models have been around <strong>for</strong> a number of years,<br />
but the subjectivity of the patient’s severity has always been in<br />
question.<br />
Today, staffing models are driven by multiple matrices that allow<br />
staffing flexibility tied to patient acuity, patient risk factors and<br />
staff skill mix. Knowing how to manage these matrices can reduce<br />
hours per patient day (HPPD), improve staff satisfaction and make<br />
<strong>for</strong> a com<strong>for</strong>table, cost-effective patient stay. Cash may be “king”<br />
but quality is “queen.” Every hospital administrator should have<br />
quality and satisfaction in the 97th percentile, but the challenge is<br />
to achieve this level of per<strong>for</strong>mance while maintaining a healthy<br />
bottom line. At STPH we have been successful in maintaining that<br />
critical balance between cost and outcomes.<br />
Embracing Change<br />
As STPH looks ahead in times of reimbursement uncertainty, an<br />
increased appetite <strong>for</strong> capital dollars, and added government compliance<br />
reporting criteria means executive jobs are not going to get<br />
any easier. Doing more with less has always been the buzz phrase in<br />
our industry, but we need to use technology in concert with human<br />
capital to their fullest potential to continue our success long-term.<br />
Our commitment to embrace changes and improvements<br />
may make it harder <strong>for</strong> the grandmother who was born here to<br />
recognize us as the same hospital, but those advances are the<br />
reason her grandchildren will be proud to choose St. Tammany<br />
Parish Hospital as their community health system into the next<br />
generation.<br />
26 <strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong>
esults.<br />
<strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong><br />
27
CIO Perspective<br />
Can IT Yield Clinical Efficiencies?<br />
Clinical system implementations are complex and rushing through them can result in<br />
negative impacts. Ensure that the efficiency measures are clear and translate directly to<br />
the desired benefits. By Indranil (Neal) Ganguly, CHCIO, FHIMSS, FCHIME<br />
Neal Ganguly is vice president<br />
& CIO, CentraState<br />
Healthcare System, Freehold,<br />
NJ, and an <strong>Executive</strong><br />
<strong>Insight</strong> editorial advisory<br />
board member.<br />
The passing of the American Recovery and<br />
Reinvestment Act (ARRA) legislation<br />
created a major focus on the clinical application<br />
side of in<strong>for</strong>mation technology. From<br />
Medicare and Medicaid incentives <strong>for</strong> electronic<br />
health record deployment to the explosion of<br />
health in<strong>for</strong>mation exchanges (HIEs), clinical in<strong>for</strong>mation<br />
technology projects have dominated<br />
the HIT landscape over the last few years.<br />
Clearly, the rush to implement applications<br />
in order to qualify <strong>for</strong> federal incentive funds<br />
has been great <strong>for</strong> the vendor and consulting<br />
communities. Providers, however, face potential<br />
risks in terms of lost productivity and more,<br />
from rushed implementations. Extensive planning<br />
and frontline engagement in the selection<br />
and implementation of IT projects can result in<br />
measurable benefits, but organizations must stay<br />
focused on true drivers <strong>for</strong> technology implementation<br />
in order to avoid “paper benefits.” The<br />
following are brief examples of clinical in<strong>for</strong>mation<br />
technology projects that were put in place to<br />
realize certain goals.<br />
Online nursing documentation templates<br />
and workflows implemented to reduce the<br />
time required to complete an admis-<br />
thinkstock/ iStockphoto<br />
28 <strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong>
delivered.<br />
Speed. Scalability. Reliability. Standardization. Connectivity. ROI.<br />
introducing the AU5800<br />
www.beckmancoulter.com/CLE2012<br />
© Copyright 2012 Beckman Coulter, Inc. Beckman Coulter, the stylized logo and AU are trademarks of Beckman Coulter, Inc. and are registered with the USPTO.<br />
B2011-12757-10 2012 CLE Print Ad_June_<strong>ADVANCE</strong>.indd 2<br />
<strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong> 6/15/12 1:4629<br />
PM
CIO Perspective<br />
Extensive planning in the selection and implementation<br />
of IT projects can result in measurable benefits,<br />
but organizations must stay focused on true<br />
drivers <strong>for</strong> technology implementation in order to<br />
avoid ‘paper benefits.’<br />
sion assessment. At the onset of a new clinical<br />
system implementation, the nursing staff identified<br />
issues with the time required to document<br />
an admission assessment. Time studies<br />
conducted to validate anecdotal observations<br />
showed that the average admission assessment<br />
took 45 minutes. Nursing leadership felt that<br />
improved technology should reduce this timeframe<br />
and established that objective as a project<br />
success metric.<br />
After working with IT staff and the vendor,<br />
the nursing team felt that the documentation<br />
time could be reduced by 15 minutes using<br />
the new system. A multidisciplinary team including<br />
IT, nursing, ancillary clinical areas and<br />
others met to review the assessment process.<br />
Problem lists were consolidated and streamlined.<br />
Documentation tools were revised and<br />
mobile carts were introduced to permit bedside<br />
documentation.<br />
The result of this work was a reduction in the<br />
average time to document an admission assessment<br />
from 45 minutes to 27 minutes. Certainly,<br />
the outcome was positive and the goal was attained,<br />
but did the hospital see value from this<br />
increased efficiency? The math shows us that<br />
if the hospital admits 100 patients per day on<br />
average, the annual time savings amounts to almost<br />
11,000 hours or nearly 5 full time equivalent<br />
positions.<br />
Un<strong>for</strong>tunately, this is ‘marketing math’ and<br />
often does not translate to the ability to reduce<br />
staffing levels since small time savings may be<br />
difficult to aggregate effectively. The lesson<br />
learned was to ensure that the true intended<br />
value of any measureable benefit is understood<br />
and that metrics are set appropriately.<br />
To be sure, the time savings had benefits in improved<br />
documentation and enhanced nursing<br />
satisfaction, but those are difficult to translate<br />
to hard value.<br />
Barcoded med administration implemented<br />
to improve patient safety and reduce<br />
documentation time. The introduction of barcoding<br />
to the medication administration process<br />
has clear benefits in terms of the reduction<br />
in avoidable medication errors. Additionally,<br />
vendors also made claims that their systems<br />
would improve nursing workflow and enhance<br />
medication charge capture.<br />
While the rationale <strong>for</strong> implementing this<br />
technology is grounded firmly in patient safety,<br />
the organization conducted audits of medication<br />
charges and found that nurses were often<br />
double documenting medications. Rather than<br />
doing all documentation online, some RNs were<br />
documenting on paper in real-time and going<br />
back later in the shift to document electronically.<br />
The audits found that the nurses documented<br />
100 percent on paper, but failed to complete<br />
the electronic documentation 3.7 percent of the<br />
time. Since the medication charges flow from the<br />
electronic documentation, the resulting gap was<br />
an obvious improvement opportunity.<br />
A new process was streamlined in that documentation<br />
would take place in real-time at the<br />
bedside. Mobile carts with computers and lockable<br />
medication drawers were introduced to<br />
enable nurses to bring the medication and documentation<br />
system to the bedside. Documentation<br />
at the bedside was a significant disruption to<br />
nursing workflow and initially slowed down the<br />
nursing staff. However, by working closely with<br />
nursing leadership, the use of barcoding was<br />
standardized and the result was better charge<br />
capture without loss of nursing productivity.<br />
Evaluating Workflows<br />
Incentives are an excellent inducement to implement<br />
or upgrade clinical systems. However,<br />
clinical system implementations are complex<br />
and rushing through them can ultimately result<br />
in negative impacts. Carefully consider what<br />
efficiencies your organization is attempting to<br />
achieve by implementing new technology. Ensure<br />
that the measures are clear and translate directly<br />
to the desired benefits as in the case of time<br />
savings and FTE reductions. Evaluate workflows<br />
and processes carefully to make changes that are<br />
aligned with the flow of the new system. Proper<br />
planning will provide strong and lasting benefits<br />
to the organization.<br />
30 <strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong>
“ Rapid clinical adoption of the Paragon HIS<br />
has led to better quality of care and helped<br />
us achieve Stage 1 meaningful use.”<br />
“ We made the right choice<br />
by going with Paragon.”<br />
To succeed and thrive in today’s healthcare<br />
marketplace, you need an in<strong>for</strong>mation system<br />
that can help you improve care and run more<br />
efficiently. The Paragon ® HIS has been named<br />
Best in KLAS <strong>for</strong> the community hospital <strong>for</strong><br />
6 years running. Fully integrated, user friendly,<br />
and with an average “go-live” of 14 months,<br />
it’s no wonder more and more institutions are<br />
selecting the Paragon HIS on their path to<br />
Stage 1 meaningful use and beyond.<br />
To learn why Sue and others have selected the<br />
Paragon HIS, visit www.mynewHIS.com<br />
Sue McCarty, RN, VP Administrator<br />
Chief Nurse <strong>Executive</strong><br />
OakBend Medical Center<br />
1 Source: 2006-2011 ‘Best in KLAS Awards: Software & Professional Services’, www.KLASresearch.com.<br />
© 2011 KLAS Enterprises, LLC. All rights reserved.<br />
© 2012 McKesson Corporation and/or one of its subsidiaries. All rights reserved. Paragon is a trademark of McKesson Corporation<br />
and/or one of its subsidiaries.<br />
<strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong><br />
31
clinical lab efficiency<br />
Error Reduction<br />
Strategies<br />
Lean processes, automation reduce errors and drive<br />
efficiencies in the clinical laboratory. By Ralph Dadoun, PhD<br />
Dr. Dadoun is vice president and<br />
chief financial officer, St. Mary’s<br />
Hospital, Montreal, Canada.<br />
Clinical laboratory medicine provides critical<br />
data that enable effective prevention,<br />
diagnosis, treatment and management of<br />
diseases. Laboratory medicine also can play an essential<br />
role in risk management, providing data to<br />
help prevent or mitigate avoidable adverse events,<br />
such as medication and dosing errors.<br />
Yet the clinical laboratory’s contributions<br />
remain largely unheralded by hospital administrators.<br />
Although lab data are responsible <strong>for</strong><br />
directly influencing 70% of diagnoses, 1 clinical<br />
laboratory operations remain a “best-kept secret,”<br />
averaging just 6-8% of a typical hospital<br />
total budget.<br />
<strong>Executive</strong>-level administrators would be wellserved<br />
to understand how strategic investments<br />
can help critical laboratory functions drive even<br />
greater levels of productivity, quality and efficiency,<br />
delivering favorable returns on investment<br />
(ROI) and service level improvements,<br />
while simultaneously reducing potential operational<br />
and patient care errors.<br />
The Total Testing Process<br />
To best appreciate the potential of the laboratory,<br />
it helps to refer to the three-phase framework<br />
that defines clinical lab operations, known as the<br />
Total Testing Process (TTP): 2<br />
The pre-analytic phase, where most of the<br />
process is conducted outside of the clinical lab,<br />
includes test selection and ordering, patient<br />
identification, specimen collection and transport<br />
to the lab, and specimen processing (the<br />
only step per<strong>for</strong>med in the lab) such as logging<br />
into computer, screening, centrifuging, etc.—all<br />
the necessary steps required to bring the specimen<br />
to the analyzer <strong>for</strong> the testing process.<br />
The analytic phase encompasses the actual<br />
specimen testing process, result review and verification,<br />
and quality control (QC) checks.<br />
In the post-analytic phase, general results and<br />
critical values are reported; interpretive consultative<br />
services are provided to clinicians and<br />
specimens are stored.<br />
Because most medical errors are attributed to<br />
faulty systems, processes or conditions that lead<br />
people to make mistakes or fail to prevent them, 3<br />
ef<strong>for</strong>ts to improve clinical lab operations typically<br />
prioritize optimizing the analytic phase first.<br />
At my hospital, the 316-bed St. Mary’s Hospital<br />
in Montreal, part of McGill University, we<br />
jeffrey leeser<br />
32 <strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong>
clinical lab efficiency<br />
<strong>Executive</strong>-level<br />
administrators<br />
would be wellserved<br />
to understand<br />
how strategic<br />
investments<br />
can help critical<br />
laboratory functions<br />
drive even<br />
greater levels of<br />
productivity, quality<br />
and efficiency,<br />
delivering favorable<br />
returns on<br />
investment (ROI)<br />
and service level<br />
improvements,<br />
while simultaneously<br />
reducing<br />
potential operational<br />
and patient<br />
care errors.<br />
FIG. 1 - EVOLUTION of productivity: PRIOR to lean and after automation<br />
Test Volume: Reported Results<br />
2,600,000<br />
2,200,000<br />
1,800,000<br />
1,400,000<br />
1,000,000<br />
Test Volume:<br />
Reported Results per<br />
Workload Hour<br />
began a Lean evaluation in the mid-1990s to<br />
streamline workflow and accommodate a dramatic<br />
volume increase resulting from the closure<br />
of several nearby hospitals.<br />
A workflow assessment mapped each step,<br />
identifying best practices and possible process<br />
changes. Only 12% of tests were conducted<br />
manually, while 88% ran on analyzers. We embraced<br />
the then-nascent “core lab” philosophy,<br />
reorganizing operations according to technological<br />
plat<strong>for</strong>m—automated or manual tests—<br />
rather than according to scientific discipline,<br />
such as biochemistry, hematology and immunology.<br />
The core lab approach helped eliminate<br />
testing redundancies and corresponding errors<br />
and set the stage <strong>for</strong> implementing an automated<br />
system.<br />
Reducing Errors,<br />
Enhancing Per<strong>for</strong>mance<br />
Working from a blueprint of modular systems<br />
from a manufacturer (Beckman Coulter), we began<br />
in 1997 to implement a completely integrated,<br />
robotic conveyor track system, ultimately becoming<br />
the first hospital in Canada to operate in<br />
a “total lab automation,” or TLA, environment.<br />
The U.S. CDC notes that high levels of lab<br />
automation successfully minimize errors, enabling<br />
lab clinicians to concentrate more directly<br />
on quality assurance and results interpretation.<br />
This is because most automated systems’ targeted<br />
accuracy and precision parameters during<br />
LEAN Only Stand-Alone Automation Connect to Chem. TLA<br />
74,661<br />
Whrs<br />
1,287,878RR<br />
47,027<br />
Whrs<br />
2,565,338RR<br />
Year 1 Year 2 Year 4 Year 6 Year 8 Year 9<br />
Worked<br />
Hours<br />
70,000<br />
60,000<br />
50,000<br />
40,000<br />
30,000<br />
17 LEAN 26 automation<br />
55 >200%<br />
specimen analysis significantly reduce both risks<br />
and rates of testing errors. 4<br />
In our experience, automation directly impacted<br />
error rates, reducing the number of manipulations—manual<br />
interactions with a given<br />
specimen—by 75% and documenting increases<br />
in catching and reporting previously undetected<br />
errors.<br />
After introducing Lean principles and automation,<br />
clinical lab productivity, which we measured<br />
as reportable results per worked hour,<br />
more than doubled. These improvements were<br />
accomplished through a 99% increase in volume<br />
and a 27% decrease in worked hours.<br />
Virtually all hospital systems in North America<br />
face shortages of trained laboratory technologists,<br />
which can hamper a clinical lab’s ability<br />
to deliver timely data and increases the risk of<br />
errors. Yet, our post-Lean, post-TLA environment<br />
showed increased per<strong>for</strong>mance levels despite<br />
losing 35% of our full-time employee (FTE)<br />
work<strong>for</strong>ce by attrition over time. We compared<br />
our laboratory to others in the 2010 CAP Q<br />
Probe, and the results show that we are in the<br />
top 5% in productivity (Reported results/Non<br />
Management staffing).<br />
Middleware Offers<br />
Additional Advantages<br />
Key to our successful TLA environment has<br />
been our Lab In<strong>for</strong>mation System (LIS) and particularly<br />
our “middleware” capability, which<br />
<strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong><br />
33
clinical lab efficiency<br />
FIG. 2 - OUTREACH program: volume of tests & revenue<br />
Test Volume: Reported Results<br />
3400<br />
3200<br />
3000<br />
2800<br />
2600<br />
2400<br />
2200<br />
2000<br />
1800<br />
1600<br />
1400<br />
1200<br />
1000<br />
$2,642,724<br />
$4,468,418<br />
Year 5 Year 6 Year 7 Year 8<br />
Based on Medicare Fee Schedule<br />
per<strong>for</strong>ms centralized, real-time monitoring of all instruments operating<br />
in the lab. The middleware system also per<strong>for</strong>ms autovalidation,<br />
eliminating the need <strong>for</strong> manual processes and the errors<br />
associated with it, by insuring that all test results pass through the<br />
same vigorous algorithmic process be<strong>for</strong>e being released.<br />
Among the most important features is the critical values notification,<br />
which alerts lab operators to outliers. Critical values are an<br />
important patient safety indicator, as they represent a potentially<br />
life-threatening pathophysiologic state that requires immediate<br />
intervention. If the sample needs to be rerun, this happens automatically<br />
as middleware rules trigger the test order and TLA<br />
carries out the processing. The lab operator can then notify the<br />
physician.<br />
In 2010, St. Mary’s laboratories enrolled in a CAP Q-track survey<br />
(Quality Assurance Benchmarking by CAP) on critical values<br />
reporting and we were rated on the top 5% with a reporting rate<br />
of 100%. 5 This means that all critical values were transmitted to<br />
the physicians within one hour <strong>for</strong> inpatients and outpatients. The<br />
study was carried over one year and 96 hospitals participated.<br />
TAT Improvements Also Improve Care<br />
In the post-analytic phase, we’ve focused on improving turnaround<br />
times (TATs) and enhancing communication, particularly with the<br />
emergency department, where prompt, predictable data reporting<br />
is especially critical. In 2008, the cost of avoidable medical errors<br />
to the U.S. healthcare system was estimated at nearly $20 billion, 6<br />
and diagnostic errors were cited in as many as one-half of all malpractice<br />
claims involving emergency room care. 7<br />
At St. Mary’s, the clinical lab has actively worked with ER and<br />
oncology clinicians to better understand their requirements. As<br />
a result of our automation system and ongoing communication<br />
through regular meetings, lab turnaround times (TATs) have improved<br />
by more than 50%, and delivery time variability has been<br />
drastically reduced. We measured TAT <strong>for</strong> stat chemistry tests,<br />
and results were delivered 90% of the time in 33 minutes or less.<br />
Better processing efficiency improved physician satisfaction levels,<br />
and greater collaboration with the lab in patient care delivery.<br />
Sustained Returns <strong>for</strong> Modest Investments<br />
Financially, investments to create St. Marys’ TLA environment<br />
have been very modest, and with very favorable ROI. Over a sixyear<br />
period, NPV was $1.54 million and IRR was 35%, with a payback<br />
period of approximately three years. The useful life of the<br />
automation system was estimated at 10+ years; St. Marys’ automation<br />
system is in its 14th year. There has also been a 60% growth in<br />
our lab outreach business, which generates additional revenues by<br />
providing laboratory services beyond our hospital.<br />
Implementing TLA and Lean processes have eliminated the<br />
vast majority of errors associated with the analytical phase of lab<br />
operations, enabling us to now focus on the pre-analytic phase,<br />
where the highest incidence of errors have been well documented<br />
to occur. 8 To date, a thorough process review (Lean approach) of<br />
blood collection has been completed, and an ongoing training program<br />
<strong>for</strong> phlebotomists and nurses is already in place. We are now<br />
looking at the feasibility to implement, hospitalwide, a barcoded<br />
wrist band <strong>for</strong> patients coupled with hand-held devices <strong>for</strong> patient<br />
identification. Conserving a small portion of the returns realized<br />
from our TLA investment and reinvesting it to reduce pre-analytic<br />
errors is a sound move that will yield considerable returns over the<br />
longer term in improved patient care, reduction of medical errors,<br />
and decreased cost care.<br />
As a hospital CFO as well as <strong>for</strong>mer lab director, I have seen the<br />
operational, financial and patient care benefits realized from investing<br />
in clinical lab operations. The advantages of implementing<br />
Lean processes and a TLA environment have quickly paid <strong>for</strong> the<br />
system and yielded even greater longer-term returns, and I believe<br />
other hospitals can experience similar favorable outcomes when<br />
executives give this sometimes small but always critical department<br />
the attention and investment support to accomplish these<br />
goals. These results may not be typical, as laboratory requirements<br />
differ.<br />
References<br />
1. Boowe J. 2003<br />
2. Lewin Group 2008<br />
3. US Institutes of Medicine, To Err is Human <strong>Executive</strong> Brief, Nov 1999<br />
4. Lewin Group 2008<br />
5. CAP – QPROBES - 2010<br />
6. Hospital Finance News, Aug. 9, 2010<br />
7. Dark Daily Newsletter, Sept. 7, 2011<br />
8. Plebani – 2006<br />
34 <strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong>
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35
pharmacy<br />
The Pharmacist’s<br />
Expanding Role<br />
One CPO explains how the pharmacy is gaining greater<br />
influence at the hospital executive table. By Jill Hoffman<br />
Jill Hoffman is managing editor<br />
at <strong>Executive</strong> <strong>Insight</strong>.<br />
When Gary Johnson, chief pharmacy<br />
officer, University of Kentucky Medical<br />
Center, headed to Atlanta’s Mercer<br />
University School of Pharmacy in the mid-1990s,<br />
he planned to return to his hometown and open<br />
a small pharmacy. But interning at Emory University<br />
hospital opened his eyes to the world of<br />
hospital pharmacy management — a place he<br />
wanted to be.<br />
After obtaining his master’s degree in business<br />
administration and completing a general<br />
practice residency and a specialty in pharmacy<br />
administration, he took a position as assistant<br />
director of pharmacy at the University of Kansas<br />
Medical Center. There, Johnson worked with an<br />
individual who had been pharmacy director <strong>for</strong><br />
about 30 years, whom he describes as “an icon<br />
in hospital pharmacy administration.” Johnson<br />
eventually left to become corporate director of<br />
pharmacy in Fort Wayne, IN, where he oversaw<br />
pharmacy operations <strong>for</strong> Parkview Health<br />
System’s seven hospitals. But preferring the university<br />
setting, he moved on to be pharmacy director<br />
at the University of Virginia. And he took<br />
the helm as chief pharmacy officer (CPO) at the<br />
University of Kentucky in September 2011.<br />
Increasing Influence<br />
Over the years, the hospital pharmacy department<br />
has increasingly made its way to the executive<br />
table, Johnson says, thanks to a shift in<br />
perceptions about the pharmacy’s role in healthcare.<br />
No longer does the pharmacy just dole out<br />
Jeffrey Leeser<br />
36 <strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong>
kyle kielinski<br />
drugs, it manages, at the University of Kentucky,<br />
50 percent of the organization’s expense budget,<br />
$100 million in supplies and labor costs and<br />
some 300,000 medication drug doses a month.<br />
It was in the mid-2000s when Johnson noticed<br />
more CPO positions emerging at institutions<br />
such as The Cleveland Clinic and UPMC. At the<br />
time, he was serving as pharmacy director at the<br />
University of Virginia, and reporting to a vice<br />
president responsible <strong>for</strong> the pharmacy, laboratory<br />
and radiology.<br />
“The problem was Pharmacy was two levels<br />
away from the senior executive table,” Johnson<br />
says. “That VP to whom I reported then reported<br />
to the chief operating officer, who reported to the<br />
CEO. Politically, it’s difficult to secure resources,<br />
it’s difficult to move your agenda <strong>for</strong>ward when<br />
you are that far removed from the CEO.” But now,<br />
at the University of Kentucky, Johnson has a direct<br />
report to the CEO: “It allows me to be part of<br />
the strategic planning of the organization.”<br />
One way the hospital<br />
pharmacy<br />
can play a pivotal<br />
role in a healthcare<br />
organization’s<br />
operations<br />
is by saving money<br />
<strong>for</strong> the health<br />
system by working<br />
with senior<br />
leadership to craft<br />
a business model<br />
that optimizes<br />
its expenses and<br />
maximizes safety<br />
<strong>for</strong> patients, Johnson<br />
says.<br />
Technology and Safety<br />
One way the hospital pharmacy can play a pivotal<br />
role in a healthcare organization’s operations<br />
is by saving money <strong>for</strong> the health system<br />
by working with senior leadership to craft a<br />
business model that optimizes its expenses and<br />
maximizes safety <strong>for</strong> patients, Johnson says.<br />
“Pharmacy is in the greatest position to control<br />
costs because we can affect physicians and the<br />
drugs they choose to prescribe, which is the largest<br />
expense <strong>for</strong> hospitals,” he says.<br />
The pharmacy can streamline operations, increase<br />
safety and reduce medication errors with<br />
the help of technology. For Johnson, this is where<br />
Talyst Inc. comes in. He says the company’s<br />
hardware/software inventory management solutions,<br />
in particular bar coding, make the pharmacy<br />
safer. “We use technology to put bar codes<br />
on all of our drugs,” Johnson explains. “When we<br />
process a physician order, the electronic order<br />
creates a pending action that requires pharmacy<br />
staff to remove the drug from inventory, located<br />
on the shelves or in the carousel [automated dispensing<br />
machine], and then we use a handheld<br />
scanner. When we scan that drug, assuming it<br />
matches that pending electronic order, the drug<br />
is released and we dispense it to the floor. If it<br />
isn’t the correct drug, an error code will not allow<br />
us to proceed.”<br />
The process extends beyond the pharmacy<br />
and to the patient bedside. An example: A papharmacy<br />
tient is prescribed several medications to take at<br />
9 a.m. The nurse comes into the patient hospital<br />
room with separately packaged medications in<br />
small containers with bar codes on them. “So not<br />
only in the pharmacy are we scanning that drug<br />
to ensure that we’re giving the right drug to the<br />
nurse, the nurse also scans that drug, and then<br />
she reaches over and scans a wristband on the<br />
patient to make sure the patient is receiving the<br />
drug that was ordered.”<br />
Future<br />
Johnson believes the hospital pharmacy holds<br />
the keys to a health system’s success — from a<br />
safety and a financial perspective. Solutions such<br />
as Talyst are making this a reality. The University<br />
of Virginia has seen fewer medication errors<br />
since the system was installed, and pharmacists<br />
are rounding with physicians in specialized areas<br />
such as oncology to make recommendations as<br />
to the best drugs to use.<br />
“The CEOs and the senior leaders are under<br />
incredible pressure to get control of costs, and<br />
the one place where they can do that is with<br />
Pharmacy,” Johnson says. “We can leverage this<br />
technology to control the inventory. We can leverage<br />
the technology to decrease medication<br />
errors, and we can use the pharmacists to help<br />
the physicians select cost-effective drugs and<br />
drugs that have the best outcomes.”<br />
<strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong><br />
37
evenue cycle management<br />
The Not-So-Soft<br />
‘Soft’ Impacts<br />
of ICD-10<br />
The time to baseline processes is now.<br />
By Patrick McNeese<br />
Now that the decision on the ICD-10 compliance date has<br />
been announced, it’s a good time to take a step back from<br />
mapping, translating and evaluating codes and look at some<br />
of the so-called “soft” impacts associated with the ICD-10 trans<strong>for</strong>mation.<br />
Prepare <strong>for</strong> Productivity Loss<br />
Loss of productivity <strong>for</strong> virtually everyone engaged in using the<br />
new code sets is viewed as one of the “soft” impacts that may be<br />
difficult to measure empirically, but will undoubtedly translate into<br />
significant financial shortfalls <strong>for</strong> many organizations.<br />
In 1999, Australia transited to ICD-10 and experienced a<br />
productivity loss higher than 25 percent that did not return to<br />
pre-transition levels <strong>for</strong> more than a year. Canada experienced<br />
increased productivity losses following their transition in 2004<br />
and never returned to pre-transition levels. I am not a seer or<br />
an expert but the general consensus is that the U.S healthcare<br />
space will experience similar productivity losses exacerbated by<br />
being the first nation to incorporate ICD-10 into reimbursement<br />
methodologies.<br />
An overall loss of more than 25 percent that extends beyond a<br />
year does not sound “soft” to me at all; rather it appears as be a proverbial<br />
ICD-10 “elephant in the room” that needs to be addressed.<br />
Organizations should be baselining processes now. ICD-10 impacts<br />
may be completed and the productivity warnings issued.<br />
Understand the operational areas where productivity may be most<br />
impacted and measure current productivity levels. How long does<br />
it take <strong>for</strong> an experienced coder to complete a claim submission<br />
on a simple procedure? How long <strong>for</strong> an inpatient stay?<br />
Remember that the simplest claim submission under ICD-<br />
10 looks like a medium complexity submissions in ICD-9. As<br />
painful as it is to think about that, there will be<br />
more than 300 ways to code a diabetes claim.<br />
How long does it take <strong>for</strong> a talented claims examiner<br />
to evaluate a simple suspended claim?<br />
Patrick McNeese is business solution manager and<br />
ICD-10 practice lead, DST Health Solutions LLC.<br />
38 <strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong>
evenue cycle management<br />
Remember that the simplest claim submission<br />
under ICD-10 looks like a medium<br />
complexity submissions in ICD-<br />
9. As painful as it is to think about that,<br />
there will be more than 300 ways to<br />
code a diabetes claim.<br />
How about a complex one?<br />
Eliminate Bottlenecks<br />
What are the bottlenecks in the processes today? Is it technology?<br />
Is it workflow? Is it personnel? Look at everything that is happening<br />
today with the idea that it is going to take 25 percent more resource<br />
allocation to do it tomorrow. Can 25 percent be found in<br />
the process today? Can it be re-engineered to be more efficient?<br />
Could that technology purchase you postponed because Return on<br />
Investment was dubious now be more effectively deployed? Productivity<br />
losses under ICD-10 are assumed and they will be real.<br />
Talk to your vendors. They have been living in the ICD-10 world<br />
<strong>for</strong> quite a while and may have cost-effective products or services<br />
available to mitigate the losses.<br />
Don’t Forget Training<br />
It has been estimated that a coding professional will require more<br />
than 50 hours of ICD-10 training to be effective in the new world.<br />
Multiply that training by 50 percent if they will be doing inpatient<br />
services. Start awareness training now. Evaluate the benefits of<br />
training a core team of coders today and have them duplicate claim<br />
submission in ICD-10. This will obviously add to overhead but a<br />
productivity loss of 2-3 percent while employees become com<strong>for</strong>table<br />
in the new world will pay off once compliance is real.<br />
All the known costs associated with ICD-10 will pale under the<br />
productivity losses that will be incurred if organizations do not<br />
understand current processes and look at any possible avenues <strong>for</strong><br />
productivity increases today to soften the blow tomorrow.<br />
Your hospital may have been<br />
selected to take part in CDC’s<br />
new National Hospital<br />
Care Survey (NHCS).<br />
Participation in the survey will include completion of<br />
a short, self-administered facility questionnaire and<br />
electronic submission of Uni<strong>for</strong>m Bill (UB)-04 data<br />
(administrative claims) to a secure site on a recurring basis.<br />
Health In<strong>for</strong>mation Management professional staff<br />
members are eligible <strong>for</strong> free continuing education credits<br />
after completion of an on-line training about participating<br />
in NHCS.<br />
“The National Hospital Care Survey (NHCS) is a new<br />
survey that will gather critical in<strong>for</strong>mation on<br />
important issues facing our health care system from a<br />
wide variety of sources across hospital settings. Your<br />
participation in this survey is vital in order to gather<br />
the in<strong>for</strong>mation needed to make our health care system<br />
even better and more safe than it is now. Thank<br />
you in advance <strong>for</strong> your participation.”<br />
Thomas R. Frieden, MD, MPH<br />
Director, Centers <strong>for</strong> Disease Control and Prevention<br />
National Hospital<br />
Care Survey<br />
For more in<strong>for</strong>mation, visit<br />
www.cdc.gov/nchs/nhcs.htm<br />
National Hospital<br />
Care Survey<br />
<strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong><br />
39
DIABETES<br />
Sandy Keefe is a frequent contributor<br />
to <strong>ADVANCE</strong> <strong>for</strong> Nurses.<br />
peer<br />
reviewed<br />
PR<br />
Diabetes:<br />
Client & Clinician<br />
Collaboration<br />
A structured care plan establishes the foundation <strong>for</strong><br />
diabetes management. By Sandy Keefe, MSN, RN<br />
Diabetes management is a complex process,<br />
requiring collaboration between clients<br />
and healthcare professionals. When<br />
those clients face significant obstacles in their<br />
lives, disease management becomes even more<br />
challenging.<br />
A recently Adult Day Health Council (ADHC)<br />
Research Collaborative Diabetes Management<br />
Study, <strong>for</strong> example, focused on intensive interdisciplinary<br />
care led by nurse case managers<br />
made a difference in the lives of clients from 10<br />
Adult Day Health Care Centers in New York<br />
City, upstate New York and Buffalo.<br />
The centers serve primarily low-income individuals<br />
with low health literacy and significantly<br />
restricted access to healthcare. The year-long<br />
study of 104 clients focused on the ABCs of diabetes<br />
management: A1c blood tests that identified<br />
blood glucose control, blood pressure control<br />
and cholesterol management.<br />
“These are complex clients with multiple<br />
comorbidities. Similar cohorts of Medicare recipients<br />
who have five or more chronic illnesses<br />
experience as many 10 hospitalizations per year.<br />
[But] clients who attend the ADHC medical<br />
model have a much lower rate of hospitalization,<br />
despite a large percent also being afflicted<br />
advance<br />
40 <strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong>
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41
DIABETES<br />
The nursing case<br />
management approach<br />
has paid<br />
off handsomely.<br />
At each 3-month<br />
assessment, at<br />
least 60 percent of<br />
the clients demonstrated<br />
a statistically<br />
significant<br />
decrease in A1c<br />
levels, and only 25<br />
needed additional<br />
improvements.<br />
with cognitive impairment or depression,” explained<br />
Kathleen Falk, MSC, FNP, assistant professor<br />
at New York City College of Technology<br />
and chairperson of the ADHC study.<br />
“It’s important to identify how we can best use<br />
our nursing resources to help them stay in the<br />
community with support,” Falk emphasized. “To<br />
control their A1c levels is a very significant accomplishment.”<br />
Easy as A-B-C<br />
A structured care plan established the foundation<br />
<strong>for</strong> individualized diabetes management.<br />
“While a nurse could easily become sidetracked<br />
by a hypertensive crisis that requires immediate<br />
intervention, <strong>for</strong> example, the ABCs of<br />
the care plan cues the nurse to look at the whole<br />
picture after the crisis is resolved,” Falk said.<br />
“People don’t generally die of diabetes — they<br />
die from cardiovascular events. The care plan affirms<br />
the value of nursing care coordination in<br />
bringing together the diabetes team with a conference<br />
call.”<br />
Falk emphasized the importance of identifying<br />
barriers to treatment, rather than labeling clients<br />
as noncompliant. “We have an interdisciplinary<br />
team <strong>for</strong> a reason, and a client’s barriers to care<br />
can go unaddressed if the nurse doesn’t make<br />
appropriate referrals,” she said. “We were able to<br />
make headway by providing the nurses with education<br />
about identifying and managing depression,<br />
helping them understand that depression<br />
presents differently in the elderly, or that culture<br />
plays a role in how depression is expressed.<br />
“Once we suspect depression, we further assess<br />
with symptom rating scales and make referrals<br />
to team disciplines such as social workers,<br />
psychologists, and psychiatrists.”<br />
The nursing case management approach has<br />
paid off handsomely. At each 3-month assessment,<br />
at least 60 percent of the clients demonstrated<br />
a statistically significant decrease in A1c<br />
levels, and only 25 needed additional improvements.<br />
Data analysis demonstrated the effectiveness<br />
<strong>for</strong> the group as a whole.<br />
Population Management<br />
Lory Dahlhauser, RN, CDE, a diabetes case manager<br />
at Kaiser Permanente’s Stockton, CA medical<br />
offices, described the three-level population management<br />
model that her health maintenance organization<br />
has adopted <strong>for</strong> members with diabetes.<br />
“Level 1 members are newly diagnosed and attend<br />
classes while their primary doctor manages<br />
their diabetes,” she said. “Level 2 patients have<br />
high A1c levels (above 8.5 percent) and receive<br />
telephonic assistance from RN or RD care managers<br />
<strong>for</strong> 6 months to a year to lower their A1c<br />
levels, blood pressure and cholesterol.<br />
“All members with type 1 diabetes, members<br />
in renal failure and on dialysis, pregnant women,<br />
children with diabetes, and members on insulin<br />
pumps from our office are referred to me <strong>for</strong><br />
case management.”<br />
When she receives a new referral, Dahlhauser<br />
calls the member directly to set up an initial appointment.<br />
“I establish right away that we’re going to work<br />
together to keep them safe and their disease under<br />
good control,” she said. “I personalize the approach<br />
to target an A1c at a certain level, without<br />
incidents of hypoglycemia.<br />
“The rule of thumb is 7 percent, but members<br />
who are older, have complications or experience<br />
significant hypoglycemia, may be encouraged to<br />
keep their A1c target closer to 8 percent.”<br />
Dahlhauser makes good use of the Kaiser Permanente<br />
website and the Internet <strong>for</strong> two-way<br />
communication with members.<br />
“I have a lot of patients who e-mail me, and<br />
42 <strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong>
DIABETES<br />
that works well since I’m on the computer constantly,” she said.<br />
“Once I’m on their provider list, they can send me messages and<br />
ask questions.<br />
“A member may send me blood glucose results, <strong>for</strong> example, and<br />
I can review them and make an immediate change in insulin dosage.<br />
Insulin pump companies also sponsor a web-based computer<br />
program that allows me to use the member’s password, review<br />
blood glucose trends and then email instructions.”<br />
Telephonic Case Management<br />
Jody Pankow, BSN, RN, diabetes case manager at Physicians Plus<br />
Insurance Corporation, Madison, WI, recently transitioned to telephonic<br />
case management from her previous role as a diabetes<br />
educator in an ambulatory care center.<br />
“I’ve been reviewing the files on members who received diabetes<br />
case management over the past year, and found some real successes,”<br />
she said. “A lot of members started out with an A1c greater<br />
than 8.5 percent, 9 percent or even 10 percent but are now down<br />
in the 7 percent range.”<br />
Seasoned diabetes case managers understand the importance of<br />
identifying the knowledge level, learning readiness and self-efficacy<br />
beliefs that drive different individuals who have diabetes.<br />
“The first group is made up of people who need a little extra<br />
motivation from someone who isn’t their physician or healthcare<br />
provider,” Pankow said. “They need someone to say, ‘You can do<br />
this’ and then they will take the bull by the horns, institute healthy<br />
lifestyle changes, improve their blood glucose levels and sustain<br />
their goal A1c over time.”<br />
The second group needs more consistent follow-up from their<br />
case managers.<br />
“These are the members who start at 8 percent, go up to 9 or 10,<br />
drop down again and see-saw back and <strong>for</strong>th,” Pankow said. “They<br />
do well with constant reminders, rein<strong>for</strong>cement and someone to<br />
hold them accountable. As soon as you say, ‘OK, you’re doing good!<br />
Let’s touch base again in a month,’ they go off track.”<br />
The third group does best in a collaborative relationship with the<br />
diabetes case manager.<br />
“These members tell me, ‘I know what to do, I just need to do it!’”<br />
Pankow said. “I work with them to identify issues and barriers to<br />
effective glucose control. Together, we explore telephonically and<br />
come up with strategies that work <strong>for</strong> the individual.”<br />
Staff members at Physicians Plus are in the process of obtaining<br />
accreditation <strong>for</strong> the diabetes case management program from the<br />
National Committee <strong>for</strong> Quality Assurance, NCQA. “We track<br />
HEDIS data about patient outcomes, including the A1c values,”<br />
Pankow said.<br />
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43
cloud contract<br />
The Cloud<br />
Contract<br />
Key elements <strong>for</strong> executing a<br />
move to the public cloud are<br />
outlined. By Chris Witt<br />
Similarities exist in a cloud contract as with<br />
other contracts you have negotiated; if you currently<br />
employ data center co-location or managed<br />
services, you will see many parallels with<br />
cloud services, <strong>for</strong> example. What follows are<br />
observations I have assembled while working<br />
with many clients. You should engage your corporate<br />
council early in the process, as they will<br />
prove to be invaluable.<br />
Key Areas of Consideration<br />
HIPAA – This might seem like an obvious area,<br />
but it requires some specific attention. Due to<br />
the nature of cloud computing, it can be difficult<br />
to know where your data is and who has access<br />
to it. Ultimately, you are on the hook to secure<br />
the data and be able to audit access. You want to<br />
ensure your vendor will facilitate this logging.<br />
Chris Witt is president and cofounder<br />
of WAKE TSI.<br />
There are clearly pros and cons of using<br />
public cloud computing in the delivery<br />
of healthcare computing services. Somewhere<br />
in the process you will select a vendor who<br />
best aligns with your strategy. The next step in<br />
this vendor relationship is to negotiate the contract.<br />
Contract negotiation is like sausage making:<br />
You want the final product but you don’t<br />
want to see how it is made.<br />
Force Majeure – Most standard contract language<br />
makes it far too easy <strong>for</strong> a vendor to declare<br />
Force Majeure. I would not recommend that a client<br />
go into anything less than a Tier 3 data center.<br />
It should take a catastrophic local event to bring<br />
down the data center. Also, your cloud instances<br />
are portable and should be replicated. A primary<br />
reason you move to the cloud is <strong>for</strong> the inherent<br />
resiliency. If you are not leveraging this, why not?<br />
Services – Make sure the contract clearly spells<br />
out the required services provided by the vendor<br />
and pre-negotiate the optional services. The<br />
contract should also cover implementation and<br />
the roles and responsibilities of each party. Do<br />
they include backup? Archiving? What happens<br />
if you need a restore?<br />
Service Level Agreement (SLA) – This is where<br />
you document your expectations. The SLA<br />
components should directly relate to the<br />
tom whalen<br />
44 <strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong>
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And of course the Fall Educational Conference will offer an<br />
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More events at the Sheraton Wild Horse Pass Resort & Spa<br />
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45
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46 <strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong>
equirements you put together earlier in<br />
the process. There should be no surprises;<br />
these are items you should have been discussing<br />
all along with your vendor. If the<br />
vendor cannot provide an SLA you are<br />
com<strong>for</strong>table with, find a new one.<br />
cloud contract<br />
in. Your ultimate goal is to protect the organization<br />
in case there is a problem. But remember,<br />
the contract is only a piece of paper<br />
and should be one component of your<br />
overall continuity strategy. Pay attention to<br />
the details and enjoy the sausage.<br />
Penalties – This is where it gets a little<br />
dicey. Generally, clients never think they<br />
are punitive enough and vendors think<br />
they are excessive. To be fair, penalties are<br />
not there to ensure reimbursement of any<br />
costs due to not meeting an SLA. They are<br />
a deterrent to encourage the vendor to do<br />
the right thing.<br />
Breach – You need to determine the<br />
situations you could potentially be put in<br />
where you would want to end the contract<br />
prior to the end of the term. This<br />
will include various egregious actions by<br />
the vendor but also should include the inability<br />
to maintain SLAs. Penalties are not<br />
going to cover all your losses. You should<br />
include language <strong>for</strong> breaking the contract<br />
if a vendor has a number of SLA failures<br />
during a period of time, such as three<br />
events in a single month.<br />
Termination – Just as you carefully plan<br />
how you are going to migrate your computing<br />
services to the cloud, you need to<br />
pay just as much attention to how you<br />
would get them back in case you part<br />
ways with the vendor. Chances are if you<br />
are parting ways, it is not amicable. The<br />
contract should be specific on what the<br />
vendor and client responsibilities are and<br />
specify timelines <strong>for</strong> critical activities. Another<br />
area you may want to consider is<br />
change of ownership or a bankruptcy. If<br />
the vendor is acquired or goes bankrupt,<br />
what are your rights? I address this by encouraging<br />
the vendor to give the client a<br />
termination option. This is especially important<br />
if you dislike the new ownership.<br />
Plan <strong>for</strong> Protection<br />
There are numerous items that make up a<br />
good contract, many of which are basic and<br />
not included here. While negotiating the<br />
contract, you need to keep visualizing the<br />
worst possible situations you could be put<br />
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47
supply chain improvements<br />
Hospitals Utilize “Just-In-Time”<br />
Approach to Improve Supply Chain<br />
Two organizations utilized the JIT approach — not carrying extra inventory beyond what is<br />
needed to function over a specified period of time — and reduced costs while improving<br />
patient care. By Marc Hafer & Paula Lillard<br />
Paula Lillard is a senior consultant<br />
at Simpler Consulting and<br />
brings more than 30 years of<br />
leadership experience in manufacturing,<br />
production control and<br />
human resource development.<br />
Her experience in Lean began<br />
with Toyota Motor Manufacturing.<br />
Paula has led executive-level<br />
per<strong>for</strong>mance appraisals, training<br />
and development assessments<br />
and succession planning, as well<br />
as new plant construction and<br />
improvements in manufacturing<br />
and materials management.<br />
Marc Hafer is chief executive<br />
officer of Simpler Consulting<br />
and brings years of leadership<br />
experience in sales, marketing,<br />
product development, strategic<br />
planning and general management<br />
with him. His experience<br />
in Lean Trans<strong>for</strong>mation ranges<br />
from manufacturing companies,<br />
public sector institutions, and<br />
healthcare systems both in the<br />
United States and internationally.<br />
As the state of healthcare in America continues<br />
to evolve, hospital leaders are faced<br />
with the challenge of balancing the budget<br />
without compromising — but rather consistently<br />
improving — the quality of care. Many hospitals<br />
are adopting a Lean culture with its innovative<br />
methodologies to not only improve the patient<br />
experience but also reduce costs.<br />
One such methodology is the Just-In-Time<br />
(JIT) Lean approach to materials management.<br />
JIT is a systematic supply chain management<br />
method to assist healthcare organizations with<br />
sourcing, sizing and replenishing supplies, including<br />
pharmaceuticals, resulting in reduced<br />
inventory by ordering — and utilizing — only<br />
what is needed when it’s needed.<br />
Lean management is an approach that changes<br />
the culture of an organization to enable the<br />
true per<strong>for</strong>mance potential of a business (like<br />
a hospital) or processes (like patient care pathways)<br />
to be realized. A Lean culture employs a<br />
way of thinking and a set of fundamental problem<br />
solving tools that help employees to see and<br />
eliminate waste.<br />
Any process, whether it is treating patients<br />
or materials management, is susceptible to<br />
the following eight common <strong>for</strong>ms of waste<br />
that are often roadblocks to delivering value<br />
to the patient:<br />
n overproducing,<br />
n waiting,<br />
n transportation,<br />
n inventory,<br />
n unnecessary motions,<br />
n processing waste,<br />
n defects<br />
n unused human potential.<br />
jeff leeser<br />
48 <strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong>
I need to improve care, efficiency and cost.<br />
Challenged with an inefficient and costly manual inventory management system, South Georgia Medical Center<br />
engaged CareFusion to implement Pyxis ® automated supply management systems in the OR. This move has helped<br />
the hospital trans<strong>for</strong>m workflow and improve adherence to select regulatory requirements, and continues to<br />
generate a positive ROI year after year. That’s the CareFusion difference.<br />
Join us at AHRMM, booth 701 to learn more, or visit us at carefusion.com/southgeorgiamc.<br />
Pyxis ®<br />
© 2012 CareFusion Corporation or one of its subsidiaries. All rights reserved. Pyxis, CareFusion and the CareFusion<br />
logo are trademarks or registered trademarks of CareFusion Corporation or one of its subsidiaries. DI402<br />
<strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong> 49
supply chain improvements<br />
Lean healthcare organizations empower their<br />
members (physicians, nurses, administrative<br />
staff, etc.) on the front lines by teaching them<br />
how to identify wasteful process steps, followed<br />
by problem solving in their routine daily work<br />
or on project teams to remove waste and create<br />
added value <strong>for</strong> their patients.<br />
It is important to explain that while the JIT<br />
supply chain is recognized as an effective Lean<br />
tool, it does not come without a serious commitment<br />
to process improvement and thoughtful,<br />
data-driven preparation. By definition, organizations<br />
utilizing the JIT approach do not carry extra<br />
inventory beyond what is needed to function<br />
over a specified, minimum period of time. Incorrect<br />
application of JIT may result in a hospital<br />
experiencing a materials shortage in the event of<br />
a surge in demand.<br />
To protect its patients, hospitals must consider<br />
external factors that could impact its ability to<br />
meet demand <strong>for</strong> critical inventory, such as vaccines.<br />
A proper analysis is needed to uncover external<br />
factors that might cause a spike in demand<br />
<strong>for</strong> materials or a break in the supply chain, thus<br />
compromising patient care. Examples include a<br />
natural disaster, passage of new legislation that<br />
hinders on-time delivery of imported goods, or<br />
other transportation interruptions. Based on the<br />
level of risk each situation presents, hospitals<br />
must determine how to adjust their stock levels,<br />
order quantities and replenishment cycles, while<br />
ensuring the supply chain is protected with a<br />
first, second, and sometimes third source should<br />
a supplier’s availability of materials change when<br />
the order is processed.<br />
How Hospitals Saved Money<br />
Some organizations, such as New York City<br />
Health and Hospitals Corporation and Denver<br />
Health, successfully implemented JIT materials<br />
management by properly weighing risks<br />
versus value. Both hospitals have experienced<br />
significant savings while increasing quality patient<br />
care.<br />
New York City Health and Hospitals Corporation<br />
(HHC), a $5.4 billion public health system<br />
and the largest municipal healthcare system in<br />
the U.S., had storage rooms holding more than<br />
$10.2 million in supplies. Typical of overstocks<br />
created by batch ordering in bulk quantities,<br />
some of these materials expired be<strong>for</strong>e use resulting<br />
in waste.<br />
As one example of how JIT was applied to<br />
HHC reduced the<br />
cost of gloves by<br />
almost $4 million<br />
per year. It cut<br />
down on the varieties<br />
stocked from<br />
20 varieties to<br />
just two, enabling<br />
HHC to negotiate<br />
the price of<br />
the 132,000 cases<br />
it used each year<br />
from $58 to $28<br />
per case.<br />
revamp its supply chain, HHC reduced the<br />
cost of gloves by almost $4 million per year.<br />
It cut down on the varieties stocked (different<br />
colors and thickness) from 20 varieties to just<br />
two, enabling HHC to negotiate the price of the<br />
132,000 cases it used each year from $58 to $28<br />
per case. Now supplies arrive, as needed — 5<br />
days a week — slashing gloves inventory by<br />
50 percent and providing an annual savings of<br />
nearly $4 million.<br />
Denver Health, a 500 bed hospital and Level<br />
1 trauma center, provides more than $2.1 billion<br />
in care <strong>for</strong> the uninsured even as government aid<br />
<strong>for</strong> public hospitals has dropped by $18 million.<br />
Be<strong>for</strong>e utilizing the JIT supply chain approach,<br />
Denver Health’s surgical patients who received<br />
tube feedings were automatically brought four to<br />
five cans of nutritional <strong>for</strong>mula into their room<br />
each day. When a patient was discharged, the<br />
unused <strong>for</strong>mula, which costs $1.22 per can, was<br />
thrown away, resulting in waste and expense to<br />
both hospital and patient.<br />
Denver Health used JIT principles to design<br />
a system to minimize costs of <strong>for</strong>mula: identifying<br />
a new area on the floor where cans were<br />
stored and designing a replenishment system to<br />
ensure availability and freshness. This allows the<br />
nurse to easily retrieve a can from the designated<br />
area and deliver it to the patient as needed versus<br />
wasting unused cans and ordering unnecessary<br />
can deliveries. Since adopting this new delivery<br />
system, approximately $10,000 of nutritional<br />
<strong>for</strong>mula has been saved. Through Lean supply<br />
chain management and other Lean applications<br />
system-wide, Denver Health has saved in excess<br />
of $150 million over the past 6 years — all while<br />
improving patient care.<br />
The JIT materials management approach has<br />
proven to assist Denver Health and HHC in realizing<br />
true cost savings while increasing efficient<br />
patient care. Both organizations have affected<br />
cultural change by valuing the critical importance<br />
of removing waste and trans<strong>for</strong>ming the<br />
entire supply chain — sourcing decisions, quality<br />
sourcing, order quantities, inventory levels, replenishment<br />
cycles, transportation methods and<br />
marketplace conditions — all driven by value in<br />
the eyes of their patients.<br />
By reflecting on how JIT and Lean can assist<br />
healthcare leaders in reducing waste, improving<br />
quality and lowering costs at their organizations,<br />
the bottom line has a better chance at receiving a<br />
clean bill of health.<br />
50 <strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong>
The Key to<br />
Breakthroughs<br />
in Patient Care<br />
InterSystems HealthShare is a strategic<br />
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of new functionality, and provides<br />
insights based on real-time active analytics.<br />
Across a hospital system, or a community,<br />
or a nation.<br />
InterSystems.com/Key3EIN<br />
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51
How do you want to move <strong>for</strong>ward today?<br />
To break away from the pack in the current health care environment,<br />
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That’s where VHA comes in. VHA LYNX is the definitive business intelligence<br />
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of VHA advisors, you’ll make better, more in<strong>for</strong>med decisions to drastically<br />
reduce costs and significantly improve the overall supply chain per<strong>for</strong>mance<br />
of your hospital.<br />
Move <strong>for</strong>ward with VHA LYNX and discover essential cost reduction opportunities<br />
across your organization today. We’ve done it <strong>for</strong> others. We can do it <strong>for</strong> you.<br />
For more in<strong>for</strong>mation, contact us at VHALYNX@vha.com or 800.437.3293.<br />
Cost Reduction | Margin Improvement | Quality Improvement<br />
52 <strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong>