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HEALTHCARE OPERATIONS MANAGEMENT Association of University Programs in Health Administration Health Administration Press Editorial Board for Graduate Studies HEALT his book is about operations management and the strategic implementation of programs, techniques, and tools for reducing costs and improving quality. It not CD-ROM Inside only covers the basics of operations management, but also explains how operations T H and process improvement relate to contemporary healthcare trends such as evidence-based medicine and pay-for-performance. The book’s practical approach includes real-world CARE examples to illustrate concepts. Included CD-ROM The book explains and demonstrates the use of various software tools associated with problem solving and decision making, including Microsoft Excel and Project. A version of Arena OPERATI software is included in order to practice process modeling. Arena is a powerful simulation tool used by healthcare organizations to optimize patient flow, develop scheduling systems, and improve patient-care processes. Companion Website Visit ache.org/books/OpsManagement to access an extensive companion website that features various Excel templates, Arena models, tutorials, exercises, and PowerPoint O HEALTHCARE presentations for each chapter. NS MA Daniel McLaughlin, MHA, is director of the Center for Business Excellence in the Opus OPERATI ONS N College of Business at the University of St. Thomas, Minneapolis, MN. Previously, he was the executive director of the National Institute of Health Policy at the University of St. Thomas, AGE the CEO of Hennepin County Medical Center, and the director of a county health system. M Julie M. Hays, PhD, MBA, recently deceased, was an associate professor in the Opus MANAGEMENT College of Business at the University of St. Thomas. She was the 1998 recipient of the ENT Juran Fellowship awarded by the Juran Center for Leadership in Quality at the University of Minnesota. McLaughlin/ Hays Daniel B. McLaughlin Order No: 2102 Julie M. Hays HEALTHCARE OPERATIONS MANAGEMENT Association of University Programs in Health Administration Health Administration Press Editorial Board for Graduate Studies Sandra Potthoff, Ph.D., Chair University of Minnesota Simone Cummings, Ph.D. Washington University Sherril B. Gelmon, Dr.P.H., FACHE Portland State University Thomas E. Getzen, Ph.D. Temple University Barry Greene, Ph.D. University of Iowa Richard S. Kurz, Ph.D. St. Louis University Sarah B. Laditka, Ph.D. University of South Carolina Tim McBride, Ph.D. St. Louis University Stephen S. Mick, Ph.D. Virginia Commonwealth University Michael A. Morrisey, Ph.D. University of Alabama–Birmingham Dawn Oetjen, Ph.D. University of Central Florida Peter C. Olden, Ph.D. University of Scranton Lydia M. Reed AUPHA Sharon B. Schweikhart, Ph.D. The Ohio State University Nancy H. Shanks, Ph.D. Metropolitan State College of Denver HEALTHCARE OPERATIONS MANAGEMENT Daniel B. McLaughlin Julie M. Hays Health Administration Press, Chicago AUPHA Press, Washington, DC Your board, staff, or clients may also benefit from this book’s insight. For more infor- mation on quantity discounts, contact the Health Administration Press Marketing Man- ager at (312) 424-9470. This publication is intended to provide accurate and authoritative information in regard to the subject matter covered. It is sold, or otherwise provided, with the understanding that the publisher is not engaged in rendering professional services. If professional advice or other expert assistance is required, the services of a competent professional should be sought. The statements and opinions contained in this book are strictly those of the author(s) and do not represent the official positions of the American College of Healthcare Exec- utives, of the Foundation of the American College of Healthcare Executives, or of the Association of University Programs in Health Administration. Copyright © 2008 by the Foundation of the American College of Healthcare Execu- tives. Printed in the United States of America. All rights reserved. This book or parts thereof may not be reproduced in any form without written permission of the publisher. 1211100908 54321 Library of Congress Cataloging-in-Publication Data McLaughlin, Daniel B., 1945- Healthcare operations management / Daniel B. McLaughlin, Julie M. Hays. p. ; cm. Includes bibliographical references and index. ISBN-13: 978-1-56793-288-1 (alk. paper) ISBN-10: 1-56793-288-6 (alk. paper) 1. Medical care—Quality control. 2. Health services administration—Quality control. 3. Organizational effectiveness. 4. Total quality management. I. Hays, Julie M., 1954- II. Title. [DNLM: 1. Quality Assurance, Health Care—organization & administration. 2. Decision Support Techniques. 3. Efficiency, Organizational—standards. 4. Total Quality Management—methods. W 84.1 M4785h 2008] RA399.A1M374 2008 362.1068—dc22 2007036070 The paper used in this publication meets the minimum requirements of American National Standard for Information Sciences—Permanence of Paper for Printed Library Materials, ANSI Z39.48-1984. ™ Acquisitions editor: Janet Davis; Project manager: Ed Avis; Cover designer: Chris Underdown. Health Administration Press Association of University Programs A division of the Foundation in Health Administration of the American College of 2000 14th Street North Healthcare Executives Suite 780 One North Franklin Street, Suite 1700 Arlington, VA 22201 Chicago, IL 60606 (703) 894-0940 (312) 424-2800 To my wife, Sharon, and daughters, Kelly and Katie, for their love and support throughout my career. Dan McLaughlin To my family, Kevin, Jessica, Jake, and Abby, for their constant understanding and support. Julie Hays ••• During the final stages of the completion of this book, Julie Hays unexpectedly died. As Dr. Christopher Puto, Dean of the Opus College of Business at the University of St. Thomas, said, “Julie cared deeply about students and their learning experience, and she was an accomplished scholar who was well-respected by her peers.” This book is a final tribute to Julie’s accomplished career and is dedicated to her legacy. ACKNOWLEDGMENTS A number of people contributed to this work. Dan McLaughlin would like to thank his many colleagues at the University of St. Thomas Opus College of Business. Specifically, Dr. Ernest Owens provided guidance on the project management chapter and Dr. Michael Sheppeck assisted on the human resources implications of operations improvement. Former U.S. Senator Dave Durenberger, of the National Institute of Health Policy, provided an impetus for this book, as he strongly feels that system change in U.S. health- care must come from within—this is what much of this book is about. The outstanding professionals at Hennepin County Medical Center in Minneapolis, Minnesota, also provided much of the practical and realistic examples in this book. Finally, Dan McLaughlin would like to thank Profes- sor Vernon Weckwerth of the University of Minnesota, who inspired the author early in his career to be numerate in his management but also careful “not to focus on counting wing flaps if the bird can’t fly.” Julie Hays would like to thank her many colleagues at the University of St. Thomas Opus College of Business, especially Dr. Thomas Ressler, who greatly influenced the statistics review chapter of this text. The authors would also like to thank Rockwell Automation for per- mission to use Arena and for support of its application in healthcare. The reviewers were particularly helpful with edits, comments, and suggestions for additions. Janet Davis, acquisitions editor at Health Administration Press, was invaluable in guiding the authors through the complex process of pub- lishing in today’s multimedia world. BRIEF CONTENTS Preface . xvii Part I Introduction to Healthcare Operations . 1 1 The Challenge and the Opportunity . 2 2 History of Performance Improvement . 18 3 Evidence-Based Medicine and Pay-for-Performance . 50 Part II Setting Goals and Executing Strategy . 69 4 Strategy and the Balanced Scorecard . 70 5 Project Management . 100 Part III Performance Improvement Tools, Techniques, and Programs . 137 6 Tools for Problem Solving and Decision Making . 138 7 Using Data and Statistical Tools for Operations Improvement . 170 8 Quality Management: Focus on Six Sigma . 226 9 The Lean Enterprise . 260 10 Simulation . 282 Part IV Applications to Contemporary Healthcare Operations Issues . 311 11 Process Improvement and Patient Flow . 312 12 Scheduling and Capacity Management . 342 13 Supply Chain Management . 370 ix x Contents Part V Putting It All Together for Operational Excellence . 399 14 Holding the Gains . 400 Index . 421 About the Authors . 431 DETAILED CONTENTS Preface . xvii Part I Introduction to Healthcare Operations . 1 1 The Challenge and the Opportunity . 2 Introduction . 4 Purpose of this Book . 4 The Challenge . 5 The Opportunity . 8 A Systems Look at Healthcare . 9 An Integrating Framework for Operations Management in Healthcare . 12 Conclusion . 15 Discussion Questions . 15 References . 16 2 History of Performance Improvement . 18 Operations Management in Action . 20 Overview . 20 Background . 21 Knowledge-Based Management . 22 History of Scientific Management . 24 Quality . 29 Service Typologies . 41 Supply Chain Management . 43 Conclusion . 44 Discussion Questions . 46 References . 46 3 Evidence-Based Medicine and Pay-for-Performance . 50 Operations Management in Action . 52 Overview . 53 Evidence-Based Medicine . 54 Tools to Expand the Use of EBM . 58 Vincent Valley Hospital and Health System and P4P . 64 xi xii Detailed Contents Using EBM and Public Reporting to Advance Health Policy: A Proposal . 65 Conclusion . 66 Discussion Questions . 67 References . 67 Part II Setting Goals and Executing Strategy . 69 4 Strategy and the Balanced Scorecard . 70 Operations Management in Action . 72 Overview . 72 Moving Strategy to Execution . 73 The Balanced Scorecard in Healthcare . 77 Linking Balanced Scorecard Measures to Strategy . 87 Implementation of the Balanced Scorecard . 91 Conclusion . ..
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