CEO SUMMARY: After several years of intense effort to implement quality management systems and Six Sigma techniques throughout its organization, Sonora Quest Laboratories earned the Arizona Quality Program’s highest honor—the Governor’s Award for Quality. This is an accomplishment without precedent in the laboratory industry, either in the United States or internationally.
BY RECEIVING THE ARIZONA QUALITY PROGRAM’S “Governor’s Award for Quality”—the state’s highest quality honor—Sonora Quest Laboratories further bolsters the argument that it is one of the nation’s highest quality clinical laboratories.
It is also a singular achievement. Sonora Quest Laboratories (SQL) of Tempe, Arizona, is one of just six companies to have been so honored in Arizona. It is also the only healthcare provider in the history of the Arizona Quality Program to receive the “Governor’s Award.” Moreover, the last time an Arizona company won this award was four years ago, in 2001. SQL’s achievement was recognized on December 15, 2005, through the presentation of the Governor’s trophy at the State Quality Awards ceremony.
Sonora Quest’s achievement pro- vides an excellent case study of continuous quality improvement in action. In 2004, THE DARK REPORT was first to disclose to the lab industry that Sonora Quest Laboratories had been awarded the “Pioneer Award” by the Arizona Quality Program. In so doing, it was the first healthcare provider to earn that recognition in Arizona. (See TDR, September 20, 2004.)
Both awards recognize SQL’s commitment to continuous improvement and its rigorous deployment of quality management systems throughout its organization. The Arizona Quality Awards Program is based upon the same criteria used by the Baldrige Award program maintained through the U.S. Commerce Department.
Sonora Quest Is A JV
Sonora Quest Laboratories is a joint venture LLC between Banner Health, the largest healthcare system in the state of Arizona, and Quest Diagnostics Incorporated, the nation’s largest clinical laboratory company. SQL is also part of an integrated laboratory net- work that includes Laboratory Sciences of Arizona LLC (LSA), which manages seven hospital laboratories for Banner Health. SQL has grown 226% since 1998.
“The Governor’s Award for Quality recognizes organizations that achieve three milestones,” explained David A. Dexter, who serves as President and CEO at Sonora Quest Laboratories and Laboratory Sciences of Arizona, and is managing director for Quest Diagnostics in Arizona. “First, there must be mature and fully-deployed quality systems within the organization’s operations. Second, the organization must demonstrate a commitment to continuous improvement. Third, the organization must have achieved a sustained and significant record of performance.
“In the truest sense, this is not an award that is ‘won.’ It is an award that is ‘achieved.’ Sonora Quest Laboratories is the first lab in this country to achieve its state’s top honor for quality,” he observed.
Interest In Quality Systems
Growing numbers of laboratory directors and pathologists have become interested in using quality management systems such as Lean and Six Sigma in their laboratory organizations. For that reason, the experience and successes of SQL are highly instructive.
“We used Six Sigma to fundamentally reinvent our lab operations,” Dexter stated. “The process is conceptually simple: identify, quantify, and improve by simplifying work flow and work processes, eliminating waste and reducing cycle time.
“There are two fundamental keys to success with quality management initiatives,” he continued. “First, the ongoing commitment must come from the CEO level. Half-way or half-hearted efforts will not work.
“Six Sigma Quality requires embracing the philosophy that we continuously strive to achieve significantly higher levels of performance,” observed Dexter. “Once the philosophy is adopted and the process is implemented, the continuous improvement becomes systematic.
“The second key to success is an effective execution strategy. We develop a yearly business plan that acts as a roadmap to guide us toward our goals,” he noted. “Managers and supervisors contribute their tactical ideas and identify needed resources. Our yearly business plan is a vital roadmap. It becomes the shared vision that aligns the entire integrated laboratory organization be- hind a common mission.
Voice Of The Customer
“SQL’s entire execution plan is organized around the ‘Voice of the Customer’,” continued Dexter. “An employee incentive plan fuels the execution plan. Bonuses are linked to the achievement of each year’s goals. All of our employees participate in the bonus plan and are required to receive mandatory annual training on quality, customer satisfaction, safety, and compliance. Employee retention and training are critical to a quality laboratory operation.
“The lynchpin of the Six Sigma quality improvement process is metrics,” Dexter noted. “Within our lab, there are two guiding concepts. First, if you don’t measure it, you can’t man- age it. Second, if you measure it, people are much more likely to do it.
“That is why we measure all work processes and outcomes. These metrics give timely and accurate guidance as we strive to achieve best practice and world-class performance for every function. To verify our metrics, we use internal and external audits,” he said.
“When we audit our performance with customers, our primary Six Sigma quality improvement tool is the ‘Voice of the Customer’ survey,” observed Joyce Santis, Chief of Operations at SQL. “We identify and sustain our quality standards based on these surveys.
“We survey customer satisfaction and patient satisfaction every quarter,” added Santis. “Each year we survey all employees to measure how effective we are in terms of pay, perceived quality of our organization, and whether the employee has the tools and the authority needed to perform the job.”
Last May, in a presentation at the Executive War College in New Orleans, Louisiana, Santis shared how SQL used quality management methods and employee surveys to effect far-reaching change. In 1999, the voluntary turnover rate was 38% and only 33% of employees completed the employee survey. As quality systems were deployed in the organization, this situation changed. By 2004, the voluntary turnover rate had shrunk to just 10.5% and 98.8% of the lab’s 1,800 employees completed the employee survey.
Increasing Lab Value
“Six Sigma methodology provides a vehicle for remolding organizational culture and employee mindset, directly contributing to higher levels of service and customer satisfaction,” stated Dexter. “Our roadmap to the Governor’s Award positions us for pay-for- performance. We are using our quality initiative to increase the value of SQL’s services to payers, physicians, and patients.
“For example, health insurers typically look at laboratory testing as a commodity,” he continued. “Our strategy is to show insurers that we are not a commodity. Laboratory services carry a lot of value for insurers. With laboratory results impacting 70-80% of the diagnostic process, we offer tremendous value to our customers. We meet with each payer quarterly and present our metrics documenting our performance and improvement levels.”
“Our total commitment to quality is a way to set ourselves apart from the competition,” stated Jean Hammelev, Executive Director of Quality at SQL. “We use customer satisfaction surveys to measure our competitive differential. Over the past five years our competitive differential has been extremely high. It lends significant credibility to our value proposition in the Arizona service market.”
“The benefits of a total quality commitment strategy far outweigh the daunting challenges of implementing a quality improvement program,” advised Dexter. “They include net cost reductions, better TAT, improved overall service quality, and a significant reduction in employee turnover.
“A program like Six Sigma is tough to implement,” Dexter noted. “Every employee has to learn new ways to do things. There is always the temptation to go back to the old familiar way of doing things. This is where consistent, ongoing reinforcement from top-level management is critical. It essentially becomes a process of substituting ‘work-around’ for what works—at all levels. It reduces the overall complexity. As work processes become more efficient, they also become less stressful.”
Going For The Baldrige
Where does a successful story like this one go from here? “We’ll apply for the National Baldrige Award in 2007,” stated Dexter. “Although, it might be a long shot, we have the outcomes and performance results to be a contender. Our strategy for continuing our quality improvement journey will include externally benchmarking against companies outside the laboratory industry. We will also try to give back to the quality movement by having even more employees at LSA/SQL become state and national quality award examiners.”