CEO SUMMARY: All laboratory managers and pathologists face the same challenge: do more testing with less money. This challenge is further complicated by the fact that there are inadequate numbers of trained laboratory professionals available to staff the nation’s laboratories. Now, early-adopter labs are turning to management methods developed outside of healthcare as a way to solve these problems and move laboratory operations to a higher level of performance and quality.
ONE-BY-ONE, a small handful of early-adopter laboratories are introducing management methods developed by manufacturing companies into their daily testing operations.
These management systems are designed to simultaneously: 1) maximize the quality of output; 2) reduce cost by maximizing the productivity of labor, equipment, and work processes; and 3) keep the lab focused on meeting the needs and expectations of its users (customers).
The most recognizable names for these management systems include ISO-9000, “Lean” management, and Six Sigma. They are the latest generation of management systems first developed during the 1970s and 1980s from the work of quality management gurus such as W. Edwards Deming, Joseph Juran, and Taiichi Ohno.
Pressures On Lab Managers
Lab administrators and pathologists face ongoing pressures to perform ever-greater volumes of lab tests at declining levels of reimbursement. At the same time, the growing shortage of trained medical technologists is forcing lab managers to think creatively about how they organize and operate their clinical laboratories.
Collectively, these pressures are motivating an ever-growing number of lab administrators to adopt and introduce management methods from manufacturers into their clinical laboratories. In Tampa, Florida, the laboratory division of BayCare Health System recently completed its first operational project that incorporated Lean manufacturing and Six Sigma methods.
“At BayCare, we have nine hospitals, seven laboratories (doing 4 million tests per year), and five LIS systems,” said Victor Hruszczyk, BayCare’s Vice President of Laboratory Services. “Like most multi-hospital systems, we want to fully realize all the potential economies of scale that come from lab consolidation and integration.
“Also, our health system is proud of the fact that there are ten ‘Top 100 Awards’ for quality management among our nine hospitals,” he added. “In fact, Morton Plant Hospital is the only hospital in the nation recognized as having achieved ‘Top 100’ status in all operational categories. Because of these management accomplishments, our administration is more receptive than most to applying proven quality management techniques to improve outcomes.”
The BayCare lab got into its Lean management/Six Sigma project after approaching Ortho-Clinical Diagnostics (OCD), a division of Johnson & Johnson Co., to ask for help in improving blood banking operations. “Because of OCD’s presence in the blood market, we felt they had expertise which could help get us to the next level of efficiency,” observed Hruszczyk.
“However, after a review of the project, OCD suggested that it might be more appropriate to tackle a lab operations improvement project in the chemistry section,” he explained. “This would allow us to teach the new management methods as part of the project implementation, thus creating a knowledge base among the laboratory staff that would support more ambitious lab improvement projects in later phases, including our system-wide blood banking services.”
The business relationship between BayCare Health System and Ortho-Clinical Diagnostics represents a different business model between vendor and customer. Like many healthcare suppliers, OCD is looking to add value in non-traditional ways. To support the sale of instruments, reagents, and other healthcare products, OCD introduced a management consulting service for its hospital system and laboratory customers.
Major Commitment To Quality
“Within Johnson & Johnson, there exists a corporate-wide commitment to implement the management methods of ‘Lean’ and Six Sigma,” said James Ellis, Director of Laboratory Consulting at Ortho-Clinical Diagnostics. “Management and staff at all levels are undergoing training in these methods. It was logical to extend this expertise to OCD customers. The BayCare chemistry laboratory project is a good example of this business service.”
BayCare was a beta lab site for the OCD consulting effort. OCD identified, in advance, the amount of money that could be saved if the project was implemented per plan. To maintain compliance with Medicare and other guidelines, the agreement was structured so that OCD did not identify, in advance, the specific operational changes it would implement to generate the projected savings.
“It was quite an experience to see the OCD people arrive for phase one of this project,” noted Hruszczyk. “A host of black belts and tool masters arrived, well-equipped with video cameras and stop watches. Some of the lab folks giggled a bit, but BayCare’s quality administrators already knew about black belts and were both impressed and excited at the opportunity to work first-hand with industry certified black belt quality specialists. This gave the OCD team heightened
credibility and morale in our lab soared from this point forward.”
The study phase lasted one week. The goal was to evaluate existing work flows in the chemistry department. This information was used to generate a “value stream map,” similar to a flow chart. “This map represented the current state of the lab,” noted Hruszczyk. “My first reaction was how fundamentally more advanced this approach was over the early quality methods many of us laboratorians used in the 1980s and early 1990s.
“We had seven primary goals for this lab operations improvement project,” he noted. “1) to identify and implement opportunities for cost reduction; 2) to simultaneously improve the quality of lab test results; 3) to improve work flow from specimen arrival to storage; 4) to minimize the need for movement within the laboratory; 5) to shift and concentrate labor on activities which add maximum value; 6) to minimize lab renovation costs (that became a big issue); and 7)to teach the laboratory team how to understand and apply the tools of Lean thinking and Six Sigma.
“The study phase is designed to identify the ‘current state’ of the lab operation,” said Hruszczyk. “Further, we were introduced to an important Japanese word: muda, which means waste. These management methods are constantly focused on identifying sources of muda—waste—then eliminating them to lower costs and improve quality.”
“During this project, we learned to identify seven sources of waste in the lab (see table on page 14),” he recalled. “For example, take the category of unnecessary motion. The video cameras identified that, twice every night, our chemistry techs had to leave their instruments, walk down a hall, fetch controls from a refrigerator, then return to run those controls on the instrument,” he explained.
“OCD’s team made the obvious recommendation ‘why don’t you simply put a refrigerator close to the instruments!’ Simple enough and an obvious win for us,” added Hruszczyk, “but until the Lean thinking approach, it had escaped our notice.
“Another source of waste was our existing quality control procedures,” he continued. “Pre-project, we were doing about 220,000 quality control (QC) comparison tests per year. That will shrink to 64,000 tests per year as we implement all the identified improvements, a 70% reduction. And remember, even as we better utilize QC testing, quality of our overall testing is improving.”
“We also looked at turnaround time,” he noted. “OCD compared our metrics with their data base. We had a reasonable TAT of 32.6 minutes for the overall emergency department testing,” declared Hruszczyk. “Our hospital standard was 90% attainment of a 60-minute cut-off, which we met quite frequently. After deliberation, J&J encouraged us to establish a new best practice of 95% compliance with a 45-minute cut-off.”
Concept of Six Sigma
Hruszczyk stated that Lean thinking methods must be matched with Six Sigma techniques. “Six Sigma is a concept that says your goal is to achieve work processes that run at less than 3.4 defects per million. This is a startling metric. Six Sigma allows you to look at events within your value stream and understand where improvements can occur. Once you implement improvements, Six Sigma allows you to measure and quantify the impact of those improvements.
“It’s a tool that makes management much more precise for the entire lab staff,” noted Hruszczyk. “It’s a scientific method that uses statistics to evaluate the process and measure outcomes,” he continued. “For my management purposes, this analysis of the lab now allows me to assess operations from the 30,000 foot-level, then drill down to any desired level of detail.”
Concept Is Validated
Part of OCD’s initial assessment included a SWOT analysis (Strengths, Weaknesses, Opportunities, Threats),” stated Hruszczyk. “On the strength side, it showed that our lab was already quite efficient and we were client/customer focused. On the weakness side, our basic pre-analytic work processes could stand improvement, our lab layout needed renovation, and we were under-utilizing our LIS (Cerner).”
Labor productivity at BayCare’s lab division was greatly boosted as a result of applying Lean/Six Sigma management principles. “With the shortage of trained medical technologists, the positive impact of this improvement project on lab labor was significant,” observed Hruszczyk. “We studied how the proposed renovations would affect workflow during both day and evening shifts.
“Our goal was to insure that we achieved a $300,000 annual savings from the different improvements after implementation,” he said. “Proposed changes would reduce the existing staff of 16 medical technologists by five, or 31%. These changes would immediately boost yearly productivity per med tech FTE from 86,000 tests to 125,000. Those med techs freed from the chemistry department would be used in other areas of the lab.
“Our staff understood from the start that that these changes were not eliminating people, but giving them the opportunity to make a greater contribution to the lab while allowing us to bring more tests into the main lab,” recalled Hruszczyk. “Across the nation, 65% of the medical technologists are older than 45 and recruiting additional technical staff in the Tampa Bay area is very difficult. With specimen volume steadily increasing, we need all these people to process the work and continue to expand the menu of testing services we offer our physicians.”
Upon completion, the chemistry project generated direct annual savings that came very close to OCD’s original projections. “We achieved 90% of those objectives,” said Hruszczyk. “However, there were unanticipated expenses involving construction costs to the older building which houses the lab. These were necessary to support the work flow redesign. If these construction costs are added in, we achieved about 45% of the original estimate.
“There are lots of unmeasurable benefits as well,” he continued. “Our performance improvements in chemistry department service and turnaround times now allow us to meet the needs of chemistry test users without the need for satellite laboratories. We’ve also been able to reassign the medical technologists freed by this chemistry work flow redesign project into other areas of the laboratory. That’s allowed us to boost productivity and add more testing services.
“Overall, we’ve definitely learned a lot from this first quality management project,” concluded Hruszczyk. “There is a place in the laboratory for ‘Lean’ and Six Sigma methods. These are good management tools that we will continue to use.”