Four Ways to Improve Financial Capacity in Health Care
An interview with Marlon Borbon, partner at Virginia Mason Institute
In your work with clients, what do you see as the key to improving financial capacity?
MB: I’ve done a lot of work with cross-functional teams in North America and Europe. Traditionally, when business leaders aim to improve their organizations’ financial health, they look at revenue and cost. When they look at cost, they tend to find the highest cost drivers and start there. Unfortunately, salary and wages naturally fall in that bucket and thereby become a target of reduction initiatives, at times leading to decisions with adverse implications. What many don’t recognize is that the waste built in the current system is causing the unnecessary financial burden.
Prior to joining Virginia Mason, I mainly viewed the ROI of improvement initiatives in terms of hard savings or revenue. I would ask, “What can this initiative help us achieve in savings or revenue?” and “How can this improvement work help the company’s bottom line?”
The way we approach this thinking at Virginia Mason widened my perspective. More than ever, I’m consistently realizing the value of our lean management method and in focusing more on eliminating waste instead of just plain cost reduction. If you reduce waste in your system, you’ll ultimately reduce cost. I now ask, “What are the wastes in the system?” and “How can the elimination of these wastes help in improving customer experience?”
What are the most valuable ways you have seen the utilization of a lean management method improve financial capacity in health care?
MB: In my experience with clients, deploying a lean management method has had the biggest impact in four areas: 1. reducing lead time, 2. eliminating quality defects, 3. enhancing inventory management and — most importantly — 4. improving staff morale.
How has reducing lead time resulted in better financial health?
MB: Waiting to receive necessary care may have detrimental effects on a patient’s condition. When you focus on eliminating waste, you can improve a clinician’s capacity to provide patient care and therefore improve access to care. To put it another way, from the perspective of the patient, when you can save the amount of time your staff members spend on a process, you can improve capacity and therefore reduce how long a patient has to wait. And if you eliminate the wait, you can also eliminate the potential complications that a patient might experience while he or she waits for treatment.
To take just one example with a past client, a patient with a rotator cuff repair was referred to physical therapy after surgery. No physical therapists were available at that time, so the patient had to wait two weeks to get in. By the time he saw a physical therapist, he had a very stiff shoulder and was in unremitting pain. Unfortunately, despite multiple attempts to loosen his shoulder, the therapy team had to send the patient back to the surgeon, where he underwent anesthesia so the surgeon could physically manipulate his shoulder and restore his range of motion. If the physical therapy team had seen him sooner, giving him the appropriate treatment, the second surgical procedure could have been prevented and the patient would have recovered much sooner.
After this incident, I worked with the team to set a new goal: to see patients who had undergone rotator cuff repair within 24 hours of referral. Using lean concepts, the team identified one of the root causes as a lack of staff capacity to see patients. We asked, “What is deferrable work, and what is non-deferrable work?” We also reflected on another question: “If a staff member has deferrable work, can we pull that resource to work with a surgical patient right away?” The team ended up implementing a new process to be sure that a patient with a rotator cuff repair didn’t have to wait for therapy. Some of the therapists had to adjust their comfort levels so they could be pulled on short notice to work in less familiar areas using clearly defined standard work — an inpatient therapist working in an outpatient clinic, for instance. But when the team began seeing rotator cuff repair patients when they needed to be seen, patient satisfaction improved, and the organization saved on the potential costs of follow-up surgery, more extensive physical therapy and possible litigation. They also prevented discretionary business [patients who can choose their providers] from going to competitors for treatment.
It is important to note that the team achieved its goal of seeing the patients sooner without needing to hire more people. Through their work, they reached consensus on how to best reallocate their resources to meet the patients’ needs. By creating “staffing on demand,” they were able to provide the right treatment, to the right patient, at the right time and in the right way.
“When you’re eliminating defects in the process, you’re also reducing risk management issues, which has an effect on malpractice premiums, certification issues and compliance to regulatory standards. In surgery, for example, if you don’t have a good system to prevent wrong-site surgeries, you could end up with very costly restitutions. It’s a domino effect.”
– Marlon Borbon
Did you need to start canceling appointments with patients who had less urgent needs?
MB: No. We just needed to get creative about working with these patients differently. One way we did this was by analyzing the treatment plans of patients with overly chronic conditions whose improvement had plateaued. The team worked together, using lean methods and evidence-based medicine, to develop new courses of treatment for them. For certain patients, we were able to schedule a clinic visit once a week with different prescribed exercises at home instead of unnecessarily having them come to the clinic three times a week for several weeks.
It was about understanding our patients’ needs and providing the right care. We kept asking our team, “Who needs the care right away? Who doesn’t?” We discussed the differences between a surgical patient, a patient with acute lower back pain and a patient who had strained his neck. Patients have different levels of need. We asked, “Who would be helped by healing at home appropriately before we see them, and who might be hurt by waiting?”
How have lean processes helped you find ways to eliminate quality defects?
MB: One example that really made a significant financial impact happened with another therapy team who was dealing with inappropriate referrals. The team was finding that a significant number of their patients, mostly capitated, had been referred for services but didn’t actually need treatment. When the team analyzed their data, they found it was because of an open electronic referral system wherein the physicians could freely pick an order set that was pre-checked with therapy orders.
So the team collaborated with the physicians to go through all the order sets. With physician buy-in, they created a process in which only those patients who met the criteria based on evidence-based care would qualify for a referral to therapy.
The impact was significant. Almost all of the inappropriate referrals were eliminated — about 20% of total volume — thereby freeing clinicians to provide the care to patients that truly needed it, getting them up to full function much faster.
And how does this connect to costs?
MB: When you’re eliminating defects in the process, you’re also reducing risk management issues, which has an effect on malpractice premiums, certification issues and compliance to regulatory standards. In surgery, for example, if you don’t have a good system to prevent wrong-site surgeries, you could end up with very costly restitutions. It’s a domino effect.
Defects also affect HIPAA compliance. If you don’t have reliable processes with built-in quality checks, confidential patient information could be inadvertently sent to the wrong providers. Organizations are required to disclose these HIPAA breaches, which often carry expensive fines and could compromise an organization’s reputation.
Bad processes can also result in defects such as inappropriate service charges. These type of errors carry heavy consequences and need to be corrected immediately. Several years ago, I worked with a client who had just experienced a RAC audit. Their documentation process was done in batches and not in flow, so for years, their bills had been going out before the documentation had been completed. In the eyes of the auditors, this constituted a fraudulent practice. The fine, which was applied retroactively, was so substantial that the client ended up giving back all the money they’d been reimbursed by Medicare for three years. After this experience, the client implemented a lean mistake-proofing process to prevent the same costly mistakes from reoccurring.
“When they investigated the process, they found that the physicians were not charging for supplies because the process was too cumbersome. The physicians and the team developed a more streamlined process to capture these charges appropriately, which contributed to better financial health.”
– Marlon Borbon
How does better inventory management contribute to the bottom line?
MB: I think of inventory as idle cash that could be used somewhere else. Organizations that use lean methods to remove excess, expired or obsolete materials can achieve better cash flow. One example that stands out involved a client who successfully removed excess inventory in an orthopedic casting room. Before the team started, the staff said they felt that everything was generally OK in the room and could probably use an assessment. There were only three cupboards, but they were deep cupboards. The team removed everything and applied the principles of 5S (sort, simplify, sweep, standardize and self-discipline). To their surprise, they found over $4,000 in excess or expired materials in this very small space. They were so inspired by this small project that they decided to do it for the whole clinic. They discovered that some of their DMEs [durable medical equipment] were unknowingly being dispensed without charging for them — $100,000 of uncharged DMEs, in fact. When they investigated the process, they found that the physicians were not charging for supplies because the process was too cumbersome. The physicians and the team developed a more streamlined process to capture these charges appropriately, which contributed to better financial health.
Another client did some great work in an inpatient setting, where the organization was struggling to keep up with space availability for patients and storage, and they thought they needed to relocate to a bigger area to accommodate their perceived space demands. They were using one patient room for storage and another department’s space for patient overflow. Some of their equipment had been in the same locations for more than 20 years, so they couldn’t even imagine putting it anywhere else. After using 5S, they learned to think about their storage differently, removing unneeded items and creating logical spaces for the rest of the equipment. Instead of keeping all equipment in one spot, they analyzed their flow and identified more logical locations for highly used items. They freed up not just a single-bed space to see patients, but a double room. They increased their bed capacity, spent less time searching for supplies and didn’t need to relocate after all.
How does improving staff morale affect the bottom line?
MB: No one went to nursing school to say, “Now I’m going to document all day” or to medical school to say, “Finally I get to spend hours every day filling out forms.” They want to be with patients. We can improve staff morale by working with these clinicians to reduce non-value-added steps in their work and allow them to focus on the very core of their professions, the patient.
With one of my clients, the staff in a clinical unit had to go to 14 different places in their EHR to do all the documentation for each patient. So much staff time was spent on documentation that they lost the capacity to see up to two patients each day. The team analyzed how the staff were using the EHR. The leaders asked, “What is really needed to be documented, and what is simply nice to know? What is the bare minimum needed to note about the patient?”
Some team members were worried that they would eliminate too much, so I challenged them to remove as much as they could. Then, if it turned out that staff were looking for something that wasn’t there, they could add it back in. They did a great job of removing the documentation fields they didn’t need, and almost nothing needed to be added back in. The team reduced the number of steps by 87 percent, cutting the documentation time thereby allowing staff to spend more time on value-added work. Their morale significantly improved because it was their passion to spend more time with patients, and their lean work enabled them to do what they love doing.
If morale is up, the turnover is reduced — and so are recruiting and training costs. An engaged, stable work force is better for patients and good for the bottom line.
Health care organizations are there to serve patients, but in order to do that, leaders need to ensure that they are financially viable so that they can continue to fulfill their mission. As I know from my years of improvement work, using a lean management system is an excellent platform to get there.
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