HEALTHCARE OPERATIONS MANAGEMENT
Bob Castleman
CPIM, CIRM, CSCP, C.P.M.
HEALTHCARE OPERATIONS MANAGEMENT
• HEALTHCARE OVERVIEW
• HEALTHCARE ISSUES
• OPERATIONS MANAGEMENT IN HOSPITALS
• LINKING WITH HOSPITALS
HOSPITAL OPERATIONS MANAGEMENT
• Healthcare is the most changing and the most regulated industry today.
• You must know operations management.
• Quality is critical throughout the process.
HEALTHCARE - OVERVIEW
• Pre-1940s, healthcare was provided in the home. Hospitals were a “place to die”.
• Hospitals then became centralized in city centers and the population came to the hospital.
• Today’s healthcare is:– moving with the population– creating clinics: hospital / freestanding, surgical / non-
surgical, usually specialized and dispersed– Seeing primary hospitals sought for critical care,
major surgery and “no pay” patients
OVERVIEW - US HOSPITALS (2005)
• 5000 Hospitals (5900 in 1981)• 850,000 Beds (1million in 1981)• 4,500,000 Employees
– 26% are nurses
• $500 Billion Revenue
OVERVIEW – Key Resources
• New FACILITIES are getting smaller, specialized, and dispersed.
• There is a growing shortage of SKILLED EMPLOYEES.
• TECHNOLOGY is advancing rapidly – CT, MRI, Robotics, EMR (electronic medical records).
• INFORMATION SYSTEMS infrastructure is a growing focus.
ISSUES IN HEALTHCARE
• SHRINKING REVENUE Reimbursement has shifted from
Retrospective (cost plus) to Prospective (set fee for a diagnosis – DRG)
ISSUES IN HEALTHCARE
REVENUE– P4P: Pay for Performance – incentive for better
outcomes– EBM: Evidence Based Medicine – scientific
validation of procedures– Bundling: payments (hospital and physician share)– Gain sharing: hospital and physician share savings– “Never Events”: will not be reimbursed for
“avoidable errors
ISSUES - Resources
• There is a shortage of DOCTORS– Many Americans do not have a primary
physician – especially in rural areas and compounded by loss of insurance
– A shortage of 50K physicians by 2010– A shortage of 200K physicians by 2020
ISSUES - Resources
• There is a shortage of NURSES– In 2005, 115K were needed– 2004 - 2014, an additional 1.2 million nurses
will be needed– By 2020, the shortage may be one million – More nurses are leaving the profession than
are entering– Nursing schools are turning away qualified
applicants due to a lack of instructors
ISSUES - Other
• COSTS OF ADVANCING TECHNOLOGY – expensive technology is now the expectation of the patient, physician, employee, …
• GOVERNMENT & OVERSIGHT REPORTING – “8 indicators which must be reported for each patient”
ISSUES - Operations
• MANAGING DECENTRALIZED FACILITIES – women’s, urology, spinal, bariatric, minor medical, etc.
• RESOURCE TRACKING AND MANAGEMENT – Capital equipment location and utilization– Consumable inventory location and amount
ISSUES - Operations
• IMPROVE OPERATIONAL EFFICIENCY– Flows: caregiver, support, lab, physician,
housekeeping, visitors– Processes - routings– Scheduling – resource utilization– Wait Times – ED, at resources
OPERATIONS MANAGEMENT IN HOSPITALS
• Growing focus on Hospital Management• Terms being taught are “APICS friendly”
– Materials management– Supply chain management– CPFR– S&OP– Process / value stream mapping– “De-bottlenecking”– LEAN / JIT / 6 sigma / DMAIC
OPERATIONS MANAGEMENT IN HOSPITALS
• Local Examples (from interviews) – Managing limited resources – surgeons/ORs– Managing inventories in a distributed structure –
clinics– Employee education of cost / revenue and process
improvement – consumable charges– Resource utilization – scheduling clinic surgery suites– Reduced product variety for price leveraging – stents– Process flow and improvement - reduce wait times in
the ED (emergency department)
LINKING WITH HOSPITALS
• Healthcare’s self-perception: people’s lives and health, “we’re different”
• Trends, issues and drivers
• Roles and environment – administration, physician, nurse, support
• Terminology, operations and processes
• Make contact with a friend (of a friend, of a friend, …)
LINKING WITH HOSPITALS
• TERMS– Exchange cart: inventory stocked on a cart for a
specific work center for a defined period of time. A replacement cart is delivered and replaces the cart in place (orthopedic floor exchanged twice weekly).
– Par: inventory location and targeted product mix / quantities for a fixed location
– Case management / manager: a diagnosis (hip replacement, heart catherization, child birth) has process steps to follow, monitored by a manager – a routing with timelines (for selected patients)
LINKING - Terms
• Service line – a grouping of closely related product lines (orthopedic, women’s services, …)
• Diagnostic Related Group (DRG) – standardized reimbursement charges reimbursed for a medical condition and related “codes”
• Charge Description Master (CDM) – price list for material or service charged to the patient
LINKNG - Terms
• Prospective payment – reimbursement amount for treatment or illness classifications regardless of costs incurred
• Evidence Based Medicine – scientific validation of proven result
• JCAHO (Joint Commission on Accreditation of Hospital Operations) a key auditing group on hospital processes, operations and documentation. Can dictate corrective action and de-certifying hospital for lack of correction
OPERATIONS MANAGEMENT IN HEALTHCARE
• American Hospital Association (AHA)– aha.org
• Association of Healthcare Resources and Materials Management (AHRMM)– ahrmm.org
• Health Industry Group Purchasing Association (HIGPA)– higpa.org
• Institute of Supply Management (ISM)– ism.org
• A plethora of local and regional organizations
OPERATIONS MANAGEMENT IN HEALTHCARE
• References:– American Hospital Association web-site– Hospitals & Health Networks, American Hospital Association– Interviews by Bob Castleman (various)– Langebeer, James R. II,, Health Care Operations Management,
Sudbury, MA., Jones and Bartlett Publishing– Materials Management In Health Care, American Hospital
Association– MX: Business Strategies for Medical Technology Executives,
Canon Communications, LLC
HEALTHCARE OPERATIONS MANAGEMENT
• Bob Castleman
• CPIM, CIRM, CSCP, C.P.M., CMfgT
• 901 854 0198
• 901 277 6684