What is the cost of poor service in hospital delivery systems?

Presently, slower deliveries from Pharmacy could result in a patient waiting longer for pain meds and slow delivery of blood samples to the lab could result in the need of a re-test… or even result in postponing a scheduled procedure.  This slower than “expected delivery” would negatively impact the hospital’s effective and efficient execution of their care plan for the patient.  However, how do you identify these negative impacts and associate a cost to them?

In Pursuit of Preventive Medicine

By Matthew Kopetsky

During grad school, I benefitted from the mentorship of one of healthcare’s masters of change, David Gustafson.  During his more than 40 years as a professor in the University of Wisconsin’s Industrial and Systems Engineering Department, he has directed the NIATx, CHESS, been the principal investigator of the TECC project, chaired the department, and found time to mentor, in addition to myself, two of my relatives.  I remember, during one of Gustafson’s guest lectures in a change management course, his account of the inspiration for the Network for the Improvement of Addiction Treatment (NIATx).  Instead of reading about addiction, he actually posed as an addict and actively pursued recovery, eventually checking himself in to rehab for several weeks.  The broken processes and unsupportive rehabilitation environment that he observed shocked him enough that he has dedicated decades of his life to improving them.

A few months ago, I accidently had my own Gustafson-esque inspirational experience as a consumer of healthcare.  It had been several years since my last physical and, as a healthcare consultant, I began to feel hypocritical not maintaining my own personal long-term health plan.  My intentions were noble – pursuing preventive medicine – however, the experience left me wondering why, despite my good health, that I even bothered.

Finding a PCP

A family friend Physician suggested that I pursue a Primary Care Physician (PCP) in my area who is known for being “great with young, healthy males.”  Unfortunately, due to my travel schedule, I’m only available for appointments on Fridays and he only saw patients Monday through Thursday.  So, since the Physician practiced within the network of a large medical teaching facility, the receptionist suggested that I see a Resident.  My appointment was made for the following Friday and I assumed that the all-important “referral” had just taken place.

Getting to the Appointment

Since I hadn’t received driving directions after making my appointment, I arrived (early) at the address listed on all of the pre-appointment paperwork that I had received in the mail and already filled out.  After many blank stares from the business office personnel who had sent me snail mail, I finally obtained the Resident’s number and learned that he was at an office on the other side of town.

The Appointment

Two hours after my appointment was supposed to occur, I was in an exam room with a Resident (and my boss was wondering why I still wasn’t back from my appointment).  The Resident asked me why I was there and, after I explained my desire to get a physical so that I could have peace-of-mind for another several years, he was shocked that I would get a physical in perfectly good health.  In response to being asked what I would like him to do, I suggested several things which I thought to be normal male physical protocol.

The Bill

Several months later, while enjoying my healthy peace-of-mind, I received my hospital bill for the charges which my insurance company deemed Patient Responsibility (~$200).  Then, a couple weeks later, I received the entire Physician Bill because my insurance company had denied the entire Physician balance, deeming the visit out of network (~$400).  So, after an inconvenient visit to a Physician for preventive reasons, I was left with a $600 bill and the quality of my health was exactly the same.  Unfortunately, most consumers don’t understand their insurance plan’s detailed Explanation of Benefits (EOB) well enough to know when charges are denied in error (in defense of consumers, I have had to review EOBs professionally and they can be very confusing).  Since I knew the referral for my care was legitimately from the office of my PCP, I pursued an appeal of the denied Physician charges.  After several phone calls, I was informed that I could either fax or mail a formal appeal of the denial decision to my insurance company (no e-mail since the process needed to be as difficult as possible).  After the fax number that I was provided didn’t work, I sent an old-fashioned letter and hoped that (in 4-6 weeks) my appeal would be honored (and my credit score wouldn’t be affected by my delinquent Physician balance).  Fortunately, the insurance company approved my appeal and paid nearly the entire ~$400 Physician balance.


What would Gustafson do?

“…hopefully by the time my loved ones need complex critical care, I will have solved enough of the simple issues that their healthcare experience will be more positive.”

Unfortunately, the healthcare industry hasn’t evolved into the most user friendly experience.  Even when consumers try to be proactive about their care, it is at the very least an inconvenience.  However, in my non-urgent care experience, there are many simple things that could have been handled differently which would have left me with a more positive experience.  The biggest positive outcome from my experience was a revitalizing reminder of what inspired me to enter the healthcare field – hopefully by the time my loved ones need complex critical care, I will have solved enough of the simple issues that their healthcare experience will be more positive.

What’s Your Improvement Mantra?

By Tom Best

Even if you’re not a football fan, you’ve probably heard phrases like these before:

  • Our team just needs to “get a win”, and we’ll turn this program around!
  • Let’s prepare for “one game at a time”, and in the long-run we’ll end up on top!

Successful coaches have used such phrases to make seemingly impossible goals feasible.  I’ve also found these two phrases helpful in guiding healthcare improvement efforts.

“Get a win”

While many projects require long-term effort to achieve sustained improvements, we sometimes undervalue the benefits of a short-term “win.”

I once worked with a hospital to increase the reliability of their med and lab specimen transportation system.  The bulk of items were transported via pneumatic tubes.  To the frustration of many, tubes were often unavailable.  Hoarding tubes at each care unit only seemed to make matters worse.  As a result, many had deemed this problem too difficult to fix. 

To start the project, our team decided that I set aside an afternoon to walk from unit to unit, releasing any stockpile of extra tubes back into the system (with help from unit management). 

As you might guess, I wasn’t too excited to build a reputation as the tube police.  But, you know what?  The effort served its purpose.  Although the improvements to tube availability were short-lived, a primary goal of our project became crystal clear to unit management after only one afternoon’s work. 

To sustain improvement, we implemented an annual education competency for all clinical staff on the proper usage of the tube system.  But the initial walkabout was just the “win” we needed to get improvement started.  It effectively communicated our long-term improvement goals, and demonstrated that we were going to address this problem directly.

“One game at a time”

Another project aimed to reduce the frequency of mislabeled lab specimens.  While the definition of a properly-labeled specimen was practically universal, each care unit had a different set of challenges impeding proper labeling.  It was next to impossible to recommend one solution for all units; previous efforts along these lines had not fixed the problems.

Our team decided that labeling procedures throughout the hospital should be addressed sequentially, group by group.  We first analyzed data to identify departments with a high percentage of mislabeled specimens.  We then started working with one department at a time.  We used a standard framework to guide our efforts (i.e. the SEIPS Model) but the details of the approach were dependent on the situational factors, such as the initial level of leadership engagement and the current state of the unit’s labeling process.  During these efforts, we shared our progress with the rest of the organization, highlighting the improvements that resulted in the areas we had visited.

There is a word of caution when applying the “one game at a time” mantra.  If misinterpreted, it can produce unsustainable improvements.  In our context, after moving to the next unit’s specimen labeling procedures, the team still needed to periodically circle-back with previously-visited units to ensure the problems were permanently fixed.  Revisiting an area can be done efficiently if standardized data collection and reporting mechanisms are in place.

In closing, “get a win” and “one game at a time” are just two mantras that apply across multiple industries. 

What other phrases guide your healthcare improvement work?

The power of a question

By Todd Schneider

Often in improvement work, we rely on Lean tools, Six Sigma methodologies, classic Industrial Engineering methods, etc.   However, perhaps we often overlook one of the most valuable skills of a change agent – Asking questions. 

Most often, improvement professionals are not the subject matter experts in the clinical or operational area in which they are improving.  This provides the perfect excuse to ask questions.  Sure, some questions are part of other tools or methodologies.  Obviously we ask questions when we apply the 5 Whys.  And it’s common to ask “what happens next?” when constructing a flowchart.  But do we ask the questions of “what if” or “why not” enough?  When done correctly, the questions asked are not so much for your learning, but instead to stimulate the group’s creativity and awareness.

 Several years ago, I was working with an organization that had been awarded a grant from the Robert Wood Johnson Foundation.  As part of the grant, the organization was provided technical assistance from the Institute for Healthcare Improvement (IHI).  One of the project teams was working to improve the care of the Acute Myocardial Infarction (AMI) patients, which typically present to the ER with chest pain.  At that time, there were two main goals the team was working to achieve: 1) Obtain an EKG within 5 minutes of arrival, and 2) Go to the Cath Lab and open the vessel within 90 minutes of arrival (commonly referred to as “Door to Balloon”).  We were reviewing this project with staff from IHI during a site visit.  During the discussion, Don Berwick, then President/CEO of IHI, asked a simple, yet important question.   “If I told you that a chest pain patient would arrive to the ER at 5:00 p.m. today, would you be able to meet the goals for Door to EKG and Door to Balloon?”  Almost immediately the team leader responded, “Yes, of course.”  Berwick responded, “Then go do it.  Get ready.  And if the patient doesn’t come at 5:00, keep waiting.  We know the patient will come.”

 The team did just that.  They figured out how to get the process right for that next patient.  That conversation was a pivotal turning point for this project team.  It helped them focus on how they could do it right once, and then figure out how to do that every time for every patient.  This organization went on to become an early leader in the care of the cardiac patient and several years later still referred to that moment as an important stimulus for their work.  It didn’t change their overall goal or even their general focus.  But it did re-frame the project, which allowed the team to look at the project from a different perspective.

By all means, we need to continue to use all the tools we have available, but we must not forget about the power of asking questions.  The questions may be simple; they don’t need to be complex or technical.  However, the questions should stimulate new ideas and help the team see the potential for new solutions. 

 Speaking of questions, have you asked a few today?

Single-Payer Healthcare – Part 1: Benefits
Reducing Waste in the Hospital Revenue Cycle

By Matthew Kopetsky

On 5-26-11, Vermont became the first state to sign a bill into law mandating the development of a statewide single-payer healthcare system.   In this two-part post, Tom Best and I will explore the potential implications of single-payer healthcare – both positive and negative.

Although the critical path in implementing Vermont’s new system (called Green Mountain Care) is estimated to be a minimum of six years, in my current world of hospital revenue cycle improvement, this development brings with it exciting implications for my good friend TIM WOOD:

T:  Transportation
Although most large payers today process claims and communicate with healthcare providers electronically, some small payers still require faxing, phone calls, or even mailing documents such as required medical records.  This inefficient means of communication could be eliminated and claims could instead be sent electronically to a single-payer.  Additionally, many payers rely on intermediary companies to produce Electronic Remittance Advice (ERA) files (835s).  These intermediaries provide 835s for numerous payers all in one bulk file and if delayed in processing payments, money from every payer could be delayed.  With one payer, there is less opportunity for variability in this process.  Finally, technical and procedural support could be much more readily available and in a closer physical proximity.  Healthcare providers would no longer have to work with out-of-state or even overseas support for claim processing issues.

I:  Inventory
By Little’s Law, a decrease in processing time will eventually result in an overall decrease in inventory in steady state.  If a single-payer is successful in achieving larger efficiency gains than individual payers are currently capable of, the volume of pending, Work In Process (WIP) claims will be reduced.  In practice, I have seen commercial payers averaging about 28 days from submission of a claim to actually paying it.  I have seen Medicare, however, average merely 19 days from submission to payment.  Whether Vermont is able to achieve these same processing times that have been achieved on the federal level is yet to be seen and will be explored further in the opposition article.

Payer Timely Filing Claim
Submission Deadline
Timely Filing Appeal
Submission Deadline
Aetna 180 days 365 days
Beech Street PPO 90 days 90 days
Beech Street W/C 90 days 90 days
Blue Cross Healthy Families 90 days 90 days
Blue Cross MCS 180 days 180 days
Blue Cross 90 days 90 days
Blue Cross Non-MCS 180 days 180 days
Blue Cross Out of State 180 days N/A
Blue Cross W/C 180 days N/A
Blue Shield 180 days 180 days
Brown & Toland 180 days N/A
Care Advantage 180 days N/A
Caremore 90 days 90 days
Champus-Tricare/Triwest 365 days N/A
Choicecare Humana PPO 365 days 365 days
Cigna 180 days 365 days
First Health/CCN N/A 180 days
Greatwest/One Health 90 days 90 days
Health Net 180 days 365 days
Hills Physicians 180 days 180 days
Interplan N/A 365 days
Kaiser 180 days 180 days
Multiplan 360 days 365 days
On Lok Senior 365 days 365 days
Pacificare Commercial 120 days N/A
Pacificare UHC EPO/POS 120 days 120 days
Pacificare UHC HMO 120 days 180 days
Pacificare UHC PPO 120 days 365 days
PHCS 360 days 365 days
PHCS PPO 90 days N/A
Physicians Foundation N/A 180 days
PMGSJ Follow Health Plan Follow Health Plan
SJMG 60 days N/A
SCCIPA 150 days N/A
SCAN 180 days 365 days
SCFHP Medicare Advantage 120 days N/A
Secure Horizons-UHC 120 days N/A
Three Rivers Provider Network N/A 180 days
UHC 180 days N/A
Valley Health Plan Commercial 180 days 180 days
Valley Health Plan Medi-Cal 90 days 90 days

M:  Motion
The hundreds of payers that compete in the current healthcare world each bring with them shockingly different technological capabilities, payment contracts, expected reimbursement amounts, and processing requirements.  As one example of the standardization that hospital billing and claim follow-up offices would benefit from, a list of timely filing requirements for many of the current California payers is included to the right.  The difficulty in tracking the statuses of thousands of claims as they approach the hundreds of different timely filing deadlines would be streamlined under a single-payer system and healthcare organizations will collect many claims which were previously written off.

W:  Waiting
For healthcare organizations, following-up on claims pending hundreds of different payers (each with different contracts and requirements) is very time consuming.  A single-payer could maintain a single source of the statuses of all of an organization’s pending claims.  The availability of online claim statuses could greatly reduce the need to follow-up on claims and one day it could even become unnecessary.  However, this process change, while greatly simplifying hospital processes, places a much greater burden on the single-payer entity (Tom will explore this further in Part 2).

O:  Over-processing
With many payer contracts requiring different levels of detail for payment of a claim, excessive amounts of detail are often also provided unnecessarily to the less stringent payers.  For instance, a complete 100+ page medical record may be provided to a payer when only a small section of the record was actually required to process the claim.  This excessive work could be avoided because organizations would only have a single contract to adhere to.

O:  Over-production
Since tracking payers’ receipt of claims sent both electronically and hardcopy can be difficult, many claims are sent to a payer more than once before payment is actually received.  A single-payer will hopefully greatly improve this process.

Upstream from the revenue cycle, doctors would no longer be incentivized to issue unnecessary medical tests/treatment and overall cost of care will hopefully subside.  However, Vermont’s plans to curb preventative medicine and the legal ramifications of medical malpractice remain to be seen.

D:  Defects
Complex payer requirements, coupled with the ever changing world of procedure codes (ICD-10 will replace ICD-9 in the US on 10/1/13), can result in claims being billed to payers incorrectly.  Incorrect claims, and hence the need to send corrected ones, will hopefully be greatly reduced with a single-payer.

This article is continued in Part 2 – Opposition:  Don’t Scrap Multi-Payer Healthcare – Redesign it!

Single-Payer Healthcare – Part 2: Opposition
Don’t Scrap Multi-Payer Healthcare – Redesign it!

By Tom Best

A major difference between single- and multi-payer insurance is the level of choice.  The single-payer system significantly limits the health insurance options for individuals and companies.

I’m not saying anything new here.  Many of us acknowledge this difference.  Some of us are comfortable with sacrificing choice on this manner if that sacrifice leads to the better care for society and stalls or stops the rise of healthcare costs.

I emphasize the “if” in the previous paragraph.  In my opinion, that “if” is unrealistic:  I believe healthcare costs to society will not decrease and care will not improve by switching to a single-payer system.  A redesigned version of the multi-payer system has a better chance of achieving those goals.  TIM WOOD chimed in with some support:

T:  Transportation
The private and public development of useful digital networks for sharing health information between providers and payers is already occurring in our multi-payer system.  A single-payer umbrella would only help the adoption process if it (1) improved the results and/or (2) expedited the design and implementation when its valuable to do so.

  1. If any single-payer oversees the implementation of the networks, it will (at best) only introduce additional communication requirements between the entity’s oversight body and the developers.  At worst, the overseers will take some of the developers’ losses as their own (and redirect those losses onto taxpayers), stifle developer competition before the market determines the best option, and thus reduce the quality of the networks in the long run.
  2. Instead of expediting the adoption of the networks by eliminating the payers who aren’t on-board, I agree with an indirect approach:  a third-party regulator incentivizes the current multitude of providers to utilize these networks.

I:  Inventory
There are no guarantees that a single-payer system will reduce processing time or total WIP.  On the other hand, if the single-payer creates a bottleneck in claims processing (e.g. an approval checkpoint with limited capacity to quickly manage a large volume of claims), overall processing time may actually increase over the multi-payer model.  High processing variability would still be likely, since the volume of claims through a single-payer would require division of responsibility within the single-payer’s umbrella to address them quickly (e.g. state-level or city-level microcosms of the overall entity).

The leaders in a multi-payer system will find ways to reduce their own process inefficiencies if the market rewards them for doing so.  A single-payer system will only extend the current “top-down” incentives (e.g. P4P), and the rewards and punishments from these new incentives may or may not be necessary or realized in a less-regulated market.  Even a small payer may be able to process a particularly complex type of claim more quickly and effectively than a large payer, and thus capture enough of this market segment to remain viable as a company and benefit society with its superior service.

M:  Motion
To me, Motion is a reference to the activities of those completing the work, and Transportation references the movement of the work itself.  Both a single and multi-payer system will have similar potential for wasted Motion, since the single-payer would need a very large operating budget to satisfy the total demand of the multi-payer system.

In addition, true reductions in Motion waste will require a careful analysis in either payer system.  One way in which a governing regulator could be beneficial in this model is to provide a central network for expertise in addressing wasted Motion in this office environment.  Industrial engineers trained in Human Factors would be a good fit for this role.

W:  Waiting
In addition to the WIP arguments above, there are other reasons why Waiting (in its general sense) will increase in a single-payer system.  Without competition from other payers, it’s less likely that the single-payer can sustain a burning platform for improvement.  While the initial leadership of a single-payer system may be motivated to eliminate the current problems with claims processing, the lack of a third party also trying their best to make profit in the industry will make it very difficult for successive leaders to maintain the same level of effort and incentives towards substantial improvement.  As a result, society would have to wait a long time for these changes, especially if those changes were initiated only by a select few at the top of the single-payer’s long hierarchy.

O:  Overprocessing
The tendency in a single-payer system may be to eliminate some necessary variation in the claims processing work system, in favor of the simplicity and feasibility of “over-standardization” and a “single contract” like my colleague Matthew mentions.  If the single payer does eliminate necessary process variation, it may result in a simplified process, but the process might impose potentially unnecessary actions on a given claim (e.g. double-checks) just to satisfy the requirements of all the different original types of claims.  These unnecessary actions are (to me) the same as overprocessing.

O:  Overproduction
In a broad sense, overproduction is providing products or services where they are not needed or desired by customers.  In this sense, overproduction helps us define the universal coverage that may or may not be mandated by a single-payer system.  In my novice opinion, there are a variety of strong arguments for and against mandated, universal coverage, and it’s likely that a carefully designed compromise is the solution with the least waste.  Either way, it seems feasible to incorporate this compromise in a multi-payer system.

D:  Defects
Let’s step back from insurance claims processing and consider how we prevent defects in general.  There are three categories of defect detection (in order of their strength):  auto-correction, auto-shut-down, and warnings. 

It is difficult to develop a truly practical auto-correction solution, but such development arguably has a higher chance for success in an organizational structure with competition.  Even if the single-payer system manages to keep competition intact, they will likely increase the current level of supervision of those who develop the ideas, and decrease the means (e.g. $) for the competitors to test their ideas.  In summary, the single-payer can only further stifle the current pace of progress toward error-reduction in our already regulated multi-payer system.

Also read Part 1 – Benefits: Reducing Waste in the Hospital Revenue Cycle.



By Matthew Kopetsky and Tom Best

A single-payer system may succeed in simplifying the revenue cycle from a provider/hospital’s perspective by refocusing the need for process improvement and standardization on the single-payer itself.  However, the long-term success of either single-payer healthcare or multi-payer healthcare will depend on the ability to eliminate waste and pursue continuous incremental improvement.  If our nation’s healthcare can establish and sustain this burning desire for improvement in a single-payer, it may be successful.  If not, the spirit of competition that only a multi-payer healthcare system can bring may be required.

EHRs: More cost effective than your iPhone

By Matthew Kopetsky

In the 1-19-11 Time Magazine article, “Are Electronic Health Systems Cost Effective? Not So Much,” Alice Park provides a slew of reasons why not to jump on the Electronic Health Record (EHR) bandwagon. Park references 53 EHR reviews conducted by Dr. Aziz Sheikh at the University of Edinburgh which supposedly provide “little or weak evidence to support the massive investment that policy makers have made in electronic systems such as electronic health records” and rather supports home-grown health record technology.

Articles such as these can be scary news to healthcare consumers amid a federal stimulus package investing $19.2 billion in EHR implementation. I wonder sometimes, however, if hospitals and physicians hear enough of the right reasons to implement an expensive EHR system. While the long-term benefits of EHRs (continuity of care and universal web-based access to personal health records) may be years away, many short term benefits can be achieved by emphasizing the following.