The Three Silent Killers of Productivity and Profits

Healthcare reform seems inevitable. Every hospital will have to find an estimated $2.5 million a year in savings to help pay for the changes.

Ask any healthcare executive, they know that something is killing productivity and profits, but it’s hard to put a finger on the culprit. While many people look for someone to blame, the problem is rarely a person; invariably it’s the process.

In any business, there are three silent killers of productivity and profitability:

•Delays
•Defects
•Deviation

Delays:
Hospital clinicians know that door-to-balloon time and similar turnaround times affect patient mortality, but so do things like discharge, bed/ICU cleaning, lab, x-ray, transportation and so on. Sluggish processes throughout the hospital cause defects and delays in diagnosis and treatment of patients that result in adverse patient outcomes.

Most hospital processes and workspace layouts grow up in an ad-hoc fashion over time. They involve too many workarounds and rework loops. Bad layouts result in unnecessary movement of patients, doctors, nurses and materials. And all processes suffer from too many unnecessary delays between steps.

The 3-57 Rule: In any hospital, employees are only working on the patient, product or service for 3 minutes out of every hour, leaving 57 minutes of delay. To this most managers will say: “But my people are busy!” Yes they are, but the patient, purchase order or payment going through the process isn’t. It’s idle 95 percent of the time.

The 15-2-20 Rule: For every 15 minutes per hour you reduce those 57 minutes of delay, you will double productivity and increase profit margins by 20 percent. Since it’s usually easy to eliminate these delays using the tools of Lean, it’s possible to boost productivity two-four-eight fold and profit margins by 20-40-80-100 percent.

Defects:
Like it or not, every process produces defects. A profitable hospital can still suffer from a 3 percent error rate across sales, marketing, ordering, fulfillment, invoicing, patient care and so on. Those defects are costing you a third of total revenues.

Defects are killing your productivity, profitability and patients.

Every hospital has a “Fix-it Factory” that corrects mistakes and errors in treatment, billing and so on. Isn’t it time to eliminate those mistakes and errors?

The 4-50 Rule:
Defects aren’t spread all over a hospital like butter on bread. They are more like mold growing in one corner or another. Four percent of your business processes (one step out of every 25) cause over 50 percent of the mistakes, errors, hitches, glitches, waste and rework. Simple tools like control charts and pareto charts can help laser focus improvement efforts on the four percent causing the bulk of the problem. A SWAT team of employees can usually figure out the root causes in a matter of hours.

Deviation:
Some processes take too long or cost too much (e.g., patient wait time in the Emergency Department). This is a form of deviation-variation from a patient’s target value of zero wait time. Variation in lab work results in false positives and negatives. Deviation results in waste and rework that devour profits and productivity and result in poor patient outcomes.

Simple tools like control charts and histograms can diagnose problems with unnecessary deviation. SWAT teams of employees can quickly identify the root causes of these kinds of problems and implement countermeasures to reduce or eliminate the problem.

Once these problems are solved, productivity and profitability begin to flow easily. Lean Six Sigma plugs the leaks in your cash flow. And, best of all, it helps to distinguish your hospital in the marketplace. Customers appreciate fast, affordable, flawless healthcare, and they will tell their friends.

The 3×2 Rule:

Reducing delays, defects and deviation will triple growth and double profits.

Best of all, you don’t have to fix everything in your hospital. To maximize results and minimize costs, you only have to focus on the few key places causing most of the delay, defects and deviation which result in most of the lost profit and productivity.

To eliminate unnecessary delays, you will need value stream maps and spaghetti diagrams. To reduce or eliminate defects and deviation you will need control charts, pareto charts, histograms and Ishikawa diagrams.