Focusing Internally:
An Operations
Improvement Effort
Tuesday, June 28, 2011
•
Chris Johnson, Essentia Health Sandstone
• Terry Mahar, M.S., R.N., Eide Bailly
• Allison O’Connor, M.B.A., Eide Bailly
www.eidebai lly.com
Purpose
•
Situation: The external environment continues to significantly
challenge hospital margins. Administrators are forced to focus
internally for opportunities to improve efficiency, add value and
improve quality
•
This session will focus on:
•
The process, advantages and opportunities for conducting an
operational assessment and how using industry benchmarks
can identify opportunities
•
A case study from Essentia Health Sandstone will demonstrate
how to translate specific operational assessment
recommendations into real cost savings and how to
incorporate benchmarks into a monthly reporting tool to track
progress
www.eidebai lly.com
Contents
•
Operational Change
•
The Need for Change
• Approaches
• Benchmarks
• Process Change
•
Case Study Approach Overview
•
Case Study Review
www.eidebai lly.com
The Need for Change
Industry trends are creating a need for health care organizations to change
the way they operate and to be more efficient and eliminate waste
Demand for
Quality
Increasing
Cost
Increasing
Demand
Increasing
Need for
Transparency
Increasing
Use of
Technology
www.eidebai lly.com
Need for
Change
Demand for Quality
Demand for
Quality
Increasing
Demand
•
US health care ranks 37th in
the world for quality
•
Medical errors account for
44,000 -98,000 deaths
•
Pay for performance and
national quality rankings will
have significant impact on
reimbursement
Increasing
Cost
Increasing
Need for
Transparency
Increasing
Use of
Technology
www.eidebai lly.com
Increasing Cost
Demand for
Quality
Increasing
Demand
•
US ranks 1st in the world for
highest cost of healthcare
•
The rising number of
uninsured are increasing the
cost of bad debt and charity
care
•
Expenses related to the
treatment of chronic
conditions continues to rise
Increasing
Cost
Increasing
Need for
Transparency
Increasing
Use of
Technology
www.eidebai lly.com
Increasing Demand
Demand for
Quality
Increasing
Cost
Increasing
Demand
Increasing
Need for
Transparency
•
Physician and nursing
workforce shortages continue
to plague rural communities
•
An aging population will
increase the demand and
utilization of facility resources
•
Increases in chronic illness
are requiring increased use of
preventative medicine
Increasing
Use of
Technology
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Increasing Need for Transparency
•
Demand for
Quality
Increasing
Cost
Increasing
Demand
Increasing
Need for
Transparency
Increasing
Use of
Technology
Consumers are demanding
increased product and pricing
transparency (e.g., cost and
quality data on physicians,
hospitals)
• With greater ―skin in the game‖,
consumers are taking a larger
role in making health care
decisions and requiring
information
• Pay for performance and
national quality rankings will
have significant impact on
reimbursement
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Increasing Use of Technology
Demand for
Quality
Increasing
Cost
Increasing
Demand
Increasing
Need for
Transparency
Increasing
Use of
Technology
•
HIT use is changing the way
health care information is
captured and delivered
•
Government incentives are
making HIT use an imperative
•
Processes are being
reviewed to capture the
efficiencies of the new HIT
standards
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Traditional Approaches to Operational
Improvement
1.
Across the organization cuts
•
A specific % reduction in every department
•
Decision makers feel this provides ―equal pain‖
However:
•
Punishes the high performing
departments/individuals
•
Poor performing departments may feel little or no
pain
•
Tends to be demoralizing
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Traditional Approach to Operational
Improvement (cont.)
2. Focus on High profile positions
• Usually higher salary positions
• Provides a short-term calming effect on subordinates
• Some financial impact with fewer staff reductions
• Does not properly reflect organizational needs
• May leave leadership voids in the organization
• Not many of these positions to cut—what happens
when future reductions are needed?
3. Ready, fire, aim!
• Cuts made based on a ―gut‖ feel
• No concrete reasoning behind the cuts
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Results of the Traditional Approach
•
Decisions are made at the administrative level
• Staff is told to implement the plan, resulting in the
following:
•
•
•
•
•
―It can’t be done.‖
―We are already overworked.‖
―They don’t know what we do.‖
―Patients will die.‖
―This is how we’ve always done it.‖
•
Staff threaten to quit
• Loss of the best talent due to the unknown
• Administration must increase salaries in order to
retain staff. This creates more expense versus less
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Updated Approach
•
•
Proper decisions and success can only occur by:
•
Use of benchmarks—internal and external
•
Review of current work processes
This results in:
•
Achieving the necessary financial goals
•
Creating a positive work environment
•
Work processes are streamlined
•
Staff understand the direction and goals
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Benchmarks
•
Benchmarks provide guidance as to the
recommended or normal staffing levels of
individual departments
•
Facility must maintain necessary statistical
information
•
Staff must understand the benchmark
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Benchmarks (cont.)
•
Benchmarks are not averages
• Benchmarks ARE best practices
“If you are „average‟ are you the best of the
worst, or worst of the best?”
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Keys to Productivity Management
•
Use of benchmark data
•
Managers need the right tools
• Facility trends (1-5 years)
• Graphs, tables, etc. (pictures tell a great story)
• External versus internal trends and benchmarks
• Accuracy is an important element
• Compare ―apples to apples‖
• Timeliness of the data is critical
• Can’t expect managers to know how to mine the
information (hours, units, patient days, etc.)
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Review of Work Processes
•
Processes established by management are often the
cause of the inefficiencies
• However, we tend to hold the staff accountable for
the inefficiencies, without allowing them the means to
become more efficient
•
Need to individualize to each department in each facility
• What types of patients on each unit?
• Where is the work done?
• How is the work done?
• Who is doing the work?
www.eidebai lly.com
Departmental Issues
•
Staff mix
•
Facility layout
•
Staffing patterns
•
Managing ―extra minutes‖
•
Miscellaneous
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Changing the Processes
•
NEVER accept ―this is the way it has always been
done‖
•
Challenge employees
• Ask ―why, why, why…‖
•
Eliminate organizational barriers
• Don’t overdirect, overobserve, overreport
• Reward flexibility
• Remove policy barriers
• Identify hidden agendas
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Changing the Processes
―Each
of us needs to be the change we want in the
world.‖ Gandhi
―Change
your thoughts and you change your world.‖
Norman Vincent Peale
―You
are the problem, the solution, and the resource.‖
LeLand Kaiser
―We
cannot be what we want to be by remaining what
we are.‖ Max DePree
―Whether
you think you can or think you can’t, you are
usually right.‖ Henry Ford
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Sandstone Essentia Health Case Study
Objectives
 Identify opportunities to improve processes
and work flows
 Identify opportunities to gain efficiencies
 Gain a clinical perspective on reviewing and
changing work processes
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Process Overview
The approach included the following three steps in order to identify opportunities
for increased reimbursement, cost savings and improved workflows:
Operational Analysis 3 Step Approach
Step 1:
Information and Data
Gathering
Step 2:
Onsite Visit
Step 3:
Communicate Findings
and Recommendations
Actions:
Review data and
information; staffing,
policies, metrics,
volumes and financials
Actions:
Conduct interviews with
administration and staff
regarding processes
Actions:
Provide
recommendations for
cost savings and process
improvement
Result:
Build and assess current
metrics and statistics
against industry
comparables
Result:
Build understanding and
assessment of current
state of operations
Result:
Implementable
recommendations to
achieve project
objectives
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22
Scope of Assessment
The assessment included an evaluation of the following areas of the hospital:
Senior Leadership
Physical Plant
HR
Quality
Activities
Social Services
Organization
Support
Business Office
Inf. Control / E.
Health / Training
Clinical
HIM
Safety / Security
Nursing: Med/Surg
& SB
ER
Health Care Center
Radiology
Organizational
Structure
Risk Management
Nutritional
Services
Housekeeping /
Laundry / Purchasing
Accounting
/ Finance
Urgent Care
Ambulance
IT
Maintenance
Surgery /
Anesthesia
/ Recovery
Therapy
Lab
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23
Benchmarks
Utilizing benchmarks can provide valuable targets for an assessment; however it
is only one part of an operational assessment.
•
Benchmarks used represent best practices from top
performing hospitals
• Benchmarks are attainable because they are taken from
facilities that have achieved them
• Benchmarks are targets and attainment varies by
department
Reviewing work flow processes and creating
implementation plans are just as important as the
“benchmark” in order to invoke change and improvement
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24
Department Rating Scale
Each department was rated using the following scale to indicate the level of opportunity
for improvement identified during the assessment process.
Rating
Rationale
There are no significant improvement suggestions that would enhance the patient
experience, create efficiencies and improve productivity, increase staff/physician
satisfaction or augment the efficiency after an EMR implementation
While there is nothing in the department inhibiting the functionality of the
department, opportunities have been identified that would enhance the patient
experience, create efficiencies and improve productivity, increase staff/physician
satisfaction or augment the efficiency after an EMR implementation
Significant issues or opportunities have been identified within the department that
are creating a detriment to the process flow or are out of line with policy and/or
desired behaviors. These issues need to be addressed in order to achieve the desired
results of a positive patient experience, efficient and productive organization,
satisfied staff/physicians and full realization of the investment of an EMR
While some of the observations may be inaccurate based on organizational policy
or guidelines, the observations are the opinions, observations and perception of
the staff, nurses and physicians and therefore relevant for the assessment
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25
Opportunity Evaluation
The following scale was used to evaluate and prioritize the opportunities:
Criteria
0
2
4
> Will not significantly reduce cost or increase revenue
0
2
4
> Will not significantly increase the efficiency of the facility
Improve Staff
Satisfaction
0
2
4
> Will not significantly improve staff / physician satisfaction
Improve Patient
Satisfaction
0
2
4
> Will not significantly improve patient satisfaction
> Improved patient satisfaction may be a residual effect of the
initiative
> Will significantly improve patient satisfaction
Improve Margin
Increase Efficiency
> Residual cost reduction or revenue enhancement may occur
> Will significantly reduce cost or increase revenue
> Residual efficiencies may occur as a result of the initiative
> Will significantly improve process efficiency
> Improved staff / physician satisfaction may be a residual effect of the
initiative
> Will significantly improve staff / physician satisfaction
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26
Essentia Health Sandstone
Results
www.eidebai lly.com
Hospital Nursing – 2010
•
18.82 hours per patient day
• Call off in low census days
• 3 RN’s, 2 NAR’s, 1 HUC scheduled daily
• Call In 4th nurse at 7 patients
• Staffing at census of 4 patients/day
• Low census at less than 3 patients
• Call offs after 1pm (minimal $ effect)
• Two nursing supervisors
• Surgical
• ER
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Hospital Nursing Productivity
Director/Controller Chris Johnson
Manager Heather O'Brien
LawsonDeptDesc (All)
Essentia Health Sandstone - Hospital Nursing
Productive and Total FTE's over Time
Total FTE’s
35
July: 29.6
May: 21.4
30
25
20
15
10
5
0
9
-09
-09
-09 -09 n-1 0 b-10 ar-10 p r-10 ay-10 n-1 0 ul-1 0 g-10 p-10 ct -10 v-10 c-10 n-1 1 b-11 ar-11 p r-11 ay-11
-09
l-0
Ju Au g Se p Oct Nov Dec
J
A
A
Ja
M
Ju
O
Ja
M
Fe
M
Au
Se
No
Fe
M
De
FTE Type
Productive
Total
Data
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Hospital Nursing - 2011
•
Goal of 9 hours per patient day
• Staffing at census level of 2 patients/day
• 2 RN’s (1 Floor,1 ER) and 1 HUC
• Call In as census mandates
• 1 aid and 1 nurse on call
• Call in when census reaches 6
• No low census with RN’s
• No nursing supervisors (positions closed)
• DON only administrative position
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Hospital Nursing Cost Savings
•
Average productive hours of 3,443 (July-October).
•
Average productive hours of 2,596 (November – May)
•
Equates to salary cost reduction of $25,000 per month
(excludes benefit savings).
•
Moving to 100% of benchmark would produce an
additional $33,000 in savings per month.
•
Minimum staffing requirements prevent attaining full
benchmark under low census situations.
www.eidebai lly.com
Hospital Nursing Cost Savings
Hospital Med/Surg & ER
Benchmark
Hours
Pt. Days
Swing Bed
Respite
Transitional
ER Visits
Observation
Outpt. Treatments
Blood Admin
Total
9
4
4
4
2.2
9
1.7
4
Jul
Aug Sep
Oct
Nov Dec
Jan
Feb Mar
Apr
May
YTD
819
531
621
612
378
657
459
810
558
621
522 6,588
128
120
204
312
40
84
88
64
340
108
32 1,520
20
4
24
36
32
44
(64) 48
898
750
603
627
594
605
642
493
629
521
653 7,016
108
117
126
153
126
252
288
189
216
252
180 2,007
60
26
65
46
34
19
129
90
156
102
104
830
12
24
28
12
12
24
40
36
36
36
24
284
2,024 1,568 1,702 1,762 1,216 1,641 1,651 1,726 1,872 1,640 1,515 18,316
Actual Prod. Hrs
3,473 3,373 3,284 3,644 2,687 2,558 2,492 2,456 2,628 2,732 2,622 31,948
Variance
1,449 1,805 1,581 1,882 1,471
918
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842
730
756 1,091 1,107 13,631
Health Care Center - 2010
•
Staffing at 5.16 hours/resident day
•
Benchmark 3.85 hours/resident day
•
DON, 4 RN’s in administrative roles
• Station II Coordinator
• Station II Assistant Coordinator
• Station III Coordinator
• Station III Assistant Coordinator
•
No MDS Coordinator
•
DON primary role administrative
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Health Care Center FTEs
Director/Controller Jamie Paro
Manager Angela Landis
LawsonDeptDesc (All)
Essentia Health Sandstone - HCC Nursing
Productive and Total FTE's over Time
60
55
Total FTE’s
July: 57.7
50
May: 44.1
45
40
35
30
25
20
0
1
9
0
0
1
0
1
0
0
1
9
9
0
0
9
0
l-0 u g-0 e p-0 ct -09 ov-0 ec-09 an-1 e b-10 ar-1 p r-1 ay-1 un-1 ul-1 u g-1 e p-1 ct -10 ov-1 ec-10 an-1 e b-11 ar-1 p r-1 ay-1
Ju
J
A
A
O
J
M
J
O
J
M
A
S
N
F
M
A
S
N
F
M
D
D
FTE Type
Productive
Total
Data
www.eidebai lly.com
Health Care Center - 2011
•
Goal of staffing at 3.8 hours/patient day
•
DON involved with clinical and patients
•
2 administrative RN’s
• Staff Care Coordinator
• Resident Care Coordinator
•
One MDS Coordinator
•
DON will be licensed Administrator in 6 months
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Health Care Center Cost Savings
•
FTE Reduction of 11.2 since July.
•
Salary cost reduction of $23,000 per month (July
compared to May).
•
Delay in fully implementing benchmarks due to union
discussions – nearly complete.
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Radiology - 2010
•
One radiology manager
•
4 staff members
•
Overlap of schedules (up to 3 on floor)
•
On call after 6pm daily
•
Call coverage available <30 minutes away
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Radiology - 2011
•
No radiology manager (position closed)
•
4 staff members (one ―lead‖)
•
No overlap of schedules
•
24 hour coverage M-F
•
Call coverage only on weekends (16 hours)
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Lab - 2010
•
Lab supervisor (primarily managerial)
•
3 staff members (plus supervisor)
•
Many overlap hours (at least 3 staff weekdays)
•
Call coverage from 6pm weekdays
•
32 hours call on weekends
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Lab - 2011
•
No Lab supervisor (position closed)
•
2 staff members (including one ―Lead‖)
•
No overlap hours
•
16 hour coverage Saturday and Sunday
•
Call after 2:30 weekdays
•
2.0 FTE posted
•
Will eventually schedule like radiology
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Essentia Health Sandstone
Productivity
Director/Controller (All)
Manager (All)
LawsonDeptDesc (All)
Essentia Health Sandstone
Productive and Total FTE's over Time
200
Total FTE’s
190
July: 193.4
May: 161.6
180
170
160
150
140
130
0
1
9
0
0
1
0
1
-09
-09
-09
-09
-09 an-1 0 e b-10 ar-1 p r-1 ay-1 un-1 0 ul-1 u g-10 e p-10 ct -10 ov-10 c-10 an-1 1 e b-11 ar-1 p r-1 ay-1
l-0
Ju Au g Se p Oct Nov Dec
J
A
A
J
M
J
O
J
M
F
M
A
S
N
F
M
De
FTE Type
Productive
Total
Data
www.eidebai lly.com
Essentia Health Sandstone Cost
Savings
•
Average monthly salary cost of $680,000 per month
(July – October).
•
Average monthly salary cost of $612,000 per month
(November – May).
•
Cost reductions of $68,000 per month or $816,000 per
year.
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Additional Thoughts
•
Administrative focus on efficiency
•
Continued monitoring of results
•
Other areas of improvement
•
Employee moral
•
The phased-in approach vs 100%
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