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
Craftsmen Era 1500 1600 American Civil War 1700 1800 1900 1793: 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 1914-1918: World War I 1920 1931: Walter Shewhart SPC 1930 1935 - - Sir Ronald Fischer DOE 1939-1945: World War II 1940 1950 1945 - - Shingo 1950 - -Deming, Juran, Ishakawa, Toyoda, Ohno 1960 Important Moments in The History of the Practical Use of Math and Statistics 1970 1980 1980: If Japan Can, Why Can t We?
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
Areas of Waste (Non Value Added Activity) Organizational Design & Performance Management Flow Error Reduction
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
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
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
Case Study CHRISTUS Health
Cash Realization Typical Revenue Cycle Opportunities 100.00% 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% =
Financial Results Est. Pmts @ Pmts120 2009 AvgNTC120 2004 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 $ 195,150,448 174,880,900 Variance with Pmts120 2009 $ $ 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: 104.55% Bad Debt: 1.08% 9.3 % Operating Margin Increase by Implementing World Class Revenue Cycle
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
Comprehensive Scorecard
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 '07 2007-7 2007-8 2007-9 2007-10 2007-11 2007-12 2008-1 2008-2 2008-3 2008-4 2008-5 2008-6 2008-7 2008-8 2008-9 2008-10 2008-11 2008-12 2009-1 2009-2 2009-3 2009-4 2009-5 2009-6 2009-7 2009-8 2009-9 2009-10 2009-11 2009-12 2010-1 2010-2 2010-3 2010-4 2010-5 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 $
Awards 2011 2010 2009 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
Questions? Contact: Marj Green, President, marj.green@healthcare-consulting.org