Embracing Math, Statistics, Lean, and Six Sigma Methods to Improve Financial Performance and Decision Making in the Revenue Cycle

Transcription

1 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

2 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

3 Lean Six Sigma Introduction

4 Craftsmen Era American Civil War : Eli Whitney Interchangeable Parts 1807: First Assembly Line 1850: American System of Manufacturing 1911: Frederick Taylor Scientific Management 1913: Henry Ford s Moving Production Line : World War I : Walter Shewhart SPC Sir Ronald Fischer DOE : World War II Shingo Deming, Juran, Ishakawa, Toyoda, Ohno 1960 Important Moments in The History of the Practical Use of Math and Statistics : If Japan Can, Why Can t We?

5 Basic Premise of Lean Product Service Product Goods & Services Bundle of Resources Business Customer Value Added Non Value Added Money Value > Price > Cost Value > Price > Cost The customer defines value

6 Areas of Waste (Non Value Added Activity) Organizational Design & Performance Management Flow Error Reduction

7 Flow-Lean Process Make Value 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 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

8 Error Reduction- Six Sigma Eliminate Errors Six Sigma 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 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

9 Organizational Design & Performance Management Align Organization 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 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

10 Case Study CHRISTUS Health

11 Cash Realization Typical Revenue Cycle Opportunities % Cash Realization Profiles 95.00% 90.00% 85.00% 80.00% 75.00% 70.00% HEI Sample Cust 1 HEI Sample Cust 2 Provider C Provider D 65.00% 60.00% NTC 30/30 NTC 60/60 NTC 90/90 NTC 120/120 NTC 150/120 NTC 180/120 NTC 210/120 NTC 240/120 The typical, traditional revenue cycle could realize an additional 4% to 12% of insured net revenue as cash. Your Insured Net Revenue * 4-12% =

12 Financial Results Est. Pmts AvgNTC January'2009 $ 17,701,361 16,161,629 February'2009 $ 16,580,166 15,317,944 March'2009 $ 18,178,300 16,289,630 April'2009 $ 18,282,348 16,306,203 May'2009 $ 18,161,497 16,206,396 June'2009 $ 19,173,940 17,113,487 July'2009 $ 17,009,926 15,068,234 August'2009 $ 17,742,497 15,883,893 September'2009 $ 17,942,657 15,949,211 October'2009 $ 17,675,808 15,703,922 November'2009 $ 16,701,948 14,880,351 Total $ 195,150, ,880,900 Variance with Pmts $ $ 1,539,732 $ $ 1,262,222 $ $ 1,888,670 $ $ 1,976,145 $ $ 1,955,101 $ $ 2,060,453 $ $ 1,941,692 $ $ 1,858,604 $ $ 1,993,446 $ $ 1,971,886 $ $ 1,821,597 $ $ 20,269,549 MAP Award Winning Organization Metrics Days in AR: 36 Point of Service Collections: 65.78% Cash Collected as % Adjusted NPR: % Bad Debt: 1.08% 9.3 % Operating Margin Increase by Implementing World Class Revenue Cycle

13 Lean Based Revenue Cycle Model 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 Capture and use the hearts, hands and minds of all associates

14 Comprehensive Scorecard

15 Jun '04 Jul '04 Aug '04 Sep '04 Oct '04 Nov '04 Dec '04 Jan '05 Feb '05 Mar '05 Apr '05 May '05 Jun '05 Jul '05 Aug '05 Sep '05 Oct '05 Nov '05 Dec '05 Jan '06 Feb '06 Mar '06 Apr '06 May '06 Jun '06 Jul '06 Aug '06 Sep '06 Oct '06 Nov '06 Dec '06 Jan '07 Feb '07 Mar '07 Apr ' Net Converted to Cash % Sustainable Change and Continuous Improvement Cash Leakage and Time of Service Collections 100% Net Conversion 95% 90% 85% System Conversion 80% 75% $600,000 $500,000 $400,000 $300,000 TOSC AND TOSC AS PERCENTAGE OF POTENTIAL BY DISCHARGE MONTH 100% 90% 80% 70% 60% 50% $200,000 $100,000 $- 40% 30% 20% 10% 0% TOSC $

16 Awards HFMA MAP Award High Performance in Revenue Cycle CHRISTUS St. Catherine s HFMA MAP Award High Performance in Revenue Cycle CHRISTUS Schumpert HFMA Patient Friendly Billing Project CHRISTUS St. John s 2007 North American Six Sigma Excellence Awards CHRISTUS Schumpert Best Lean Six Sigma Implementation 2006 Global Six Sigma Awards CHRISTUS Schumpert Best Lean Six Financial Services Project Best Innovation

17 Questions? Contact: Marj Green, President,