Embracing Math, Statistics, Lean, and Six Sigma Methods to ... · 1931: Walter Shewhart SPC 1945 -...

© 2013 Healthcare Excellence Institute, LLC

Embracing Math, Statistics, Lean, and Six Sigma Methods to Improve Financial Performance and

Decision Making in the Revenue Cycle

Presented By: Marj Green & Mischa Dick, President and Vice President, Healthcare Excellence Institute


Agenda

• Overview of Lean & Six Sigma

• Examples of Lean Six Sigma Application in a Revenue Cycle

• People & Organizational Design

• Process - Principles and Methods to Improve Process Outcomes

• Technology - Enabling the Process

• Performance Management – Delivering Continuous Improvement

• Questions


Lean Six Sigma Introduction


1500

1600

1700

1800

1900

1920

1930

1940

1950

1960

1970

1980

1913: Henry Ford’s Moving Production Line

1850: “American System of Manufacturing”

1914-1918: World War I

American Civil War

1939-1945: World War II

Craftsmen Era

1793: Eli Whitney Interchangeable Parts

1807: First Assembly Line

1911: Frederick Taylor Scientific Management

1935 - - Sir Ronald Fischer DOE

1931: Walter Shewhart SPC

1945 - - Shingo

1950 - -Deming, Juran, Ishakawa,

Toyoda, Ohno

1980: If Japan Can, Why Can’t

We? Important Moments in The History of

the Practical Use of Math and Statistics


Basic Premise of Lean

Business Customer

Product Goods & Services

Money

Value > Price > Cost

Product Service

Bundle of

Resources

Value Added

Non Value Added

Value > Price > Cost

The customer defines “value”


Areas of Waste (Non Value Added Activity)

Organizational Design &

Performance Management

Flow

Error Reduction


Flow-Lean Process

• Relentless focus on reduction of non value added activity or waste

• Pioneered and perfected by Toyota Motor Company

• Achieved by eliminating the 7 types of waste (ROTWIMP)

• Most successfully done via ‘Extreme Makeover Events’ or ‘Kaizen’ Events

Make Value Flow Lean Process

• 7 Types of Waste • Value Stream Mapping • Spaghetti Charts • Video Process Analysis • Visual Workplace • Setup Reduction • Poka Yoke • Capacity Analysis • Standard Work Processes • Work Management Models • 5S • Inter & Intra Work Area Layout • Predictive Maintenance • PSND

Make Value Flow


Error Reduction- Six Sigma

Process Maps FMEA Basic Statistics Design of Experiments Measurement System Assessment Components of Variance Blocking Least Squares Statistical Tolerancing Statistical Inv. Modeling Conjoint Analysis Cluster Analysis

Y = f(x) • Reduce variation • Cost reduce inputs Eliminate hidden business

• Relentless focus on eliminating errors and defects in the process

• Achieved by applying tools and statistical methods to eliminate errors

• Defects: Any deviation of process outcomes from a desired target

• Extensively used in the manufacturing industries

• Rapidly expanding into business processes

Eliminate Errors Six Sigma


Organizational Design & Performance Management

• Focus on aligning the organization with the process

• Use of High Performance

Work Teams • Creating Organizational Units

to allow unit of work flow without crossing of organizational boundaries

• Create Metrics / Scorecards /

Corrective Action Systems

Align Organization Organizational

Design & Performance Management

• Financial Basics • Failure Maps • Metrics Design • Metrics Alignment • Organizational Alignment Design • High Performance Work Teams • Hand-off Analysis • Goal and Boundary Design • Motivation • Communication Boards • MBF

Accountability & Responsibility

Design Performance Assessment


Case Study – CHRISTUS Health


Typical Revenue Cycle Opportunities

The typical, traditional revenue cycle could realize an additional 4% to 12% of insured net revenue as cash. Your Insured Net Revenue * 4-12% = _____________________

60.00%

65.00%

70.00%

75.00%

80.00%

85.00%

90.00%

95.00%

100.00%

NTC 30/30 NTC 60/60 NTC 90/90 NTC120/120

NTC150/120

NTC180/120

NTC210/120

NTC240/120

Cas

h R

eal

izat

ion

Cash Realization Profiles

HEI Sample Cust 1

HEI Sample Cust 2

Provider C

Provider D


Financial Results

Pmts120 2009

Est. Pmts @

AvgNTC120

2004

Variance with

Pmts120 2009

January'2009 17,701,361$ 16,161,629$ 1,539,732$

February'2009 16,580,166$ 15,317,944$ 1,262,222$

March'2009 18,178,300$ 16,289,630$ 1,888,670$

April'2009 18,282,348$ 16,306,203$ 1,976,145$

May'2009 18,161,497$ 16,206,396$ 1,955,101$

June'2009 19,173,940$ 17,113,487$ 2,060,453$

July'2009 17,009,926$ 15,068,234$ 1,941,692$

August'2009 17,742,497$ 15,883,893$ 1,858,604$

September'2009 17,942,657$ 15,949,211$ 1,993,446$

October'2009 17,675,808$ 15,703,922$ 1,971,886$

November'2009 16,701,948$ 14,880,351$ 1,821,597$

Total 195,150,448$ 174,880,900$ 20,269,549$

9.3 % Operating Margin Increase by Implementing World Class Revenue Cycle

MAP Award Winning Organization Metrics •Days in AR: 36 •Point of Service Collections: 65.78% •Cash Collected as % Adjusted NPR: 104.55% •Bad Debt: 1.08%


Lean Based Revenue Cycle Model

Capture and use the hearts, hands and minds of all associates

Model Based on Toyota Principles & Methods

• Make Work Flow

• Eliminate Errors (Don’t Take, Don’t Make, Don’t Pass)

• Measure for Improvement vs. to look good

• Put Everyone to Work on Improvement, Every Day

• Portable

• Sustainable


Comprehensive Scorecard

14


Sustainable Change and Continuous Improvement Cash Leakage and Time of Service Collections

15

75%

80%

85%

90%

95%

100%

Jun

'04

Jul '

04

Au

g '0

4

Sep

'04

Oct

'04

No

v '0

4

De

c '0

4

Jan

'05

Feb

'05

Mar

'05

Ap

r '0

5

May

'05

Jun

'05

Jul '

05

Au

g '0

5

Sep

'05

Oct

'05

No

v '0

5

De

c '0

5

Jan

'06

Feb

'06

Mar

'06

Ap

r '0

6

May

'06

Jun

'06

Jul '

06

Au

g '0

6

Sep

'06

Oct

'06

No

v '0

6

De

c '0

6

Jan

'07

Feb

'07

Mar

'07

Ap

r '0

7

20

07

-7

20

07

-8

20

07

-9

20

07

-10

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-11

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07

-12

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08

-1

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-5

Ne

t C

on

vert

ed

to

Cas

h %

Net Conversion

System Conversion

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

$-

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

TOSC AND TOSC AS PERCENTAGE OF POTENTIAL BY DISCHARGE MONTH

TOSC $


Awards

16

Best Innovation

2007 North American Six Sigma Excellence Awards

CHRISTUS Schumpert

Best Lean Six Sigma Implementation Best Lean Six Financial Services Project

HFMA

Patient Friendly Billing

Project

CHRISTUS St. John’s

2006 Global Six Sigma Awards

CHRISTUS Schumpert

HFMA MAP Award

High Performance in

Revenue Cycle

CHRISTUS Schumpert

2011

HFMA MAP Award

High Performance in

Revenue Cycle

CHRISTUS St. Catherine’s

2010

2009


17

Questions? Contact:

Marj Green, President, [email protected]

Embracing Math, Statistics, Lean, and Six Sigma Methods to ... · 1931: Walter Shewhart SPC 1945 -...

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