Andrew Miller's Business Checkup // Insights on Operational Effectiveness for Healthcare
Volume 28, June 2013
This monthly newsletter is designed specifically to help healthcare executives and business owners raise the bar within their organizations by providing insights on how to improve performance and maximize operational effectiveness and profitability.

Case Study

This case study was compiled from articles in various publications.

The Situation

Saint Goran's, a Swedish hospital that receives almost all of its funding from the government, was facing operational and financial challenges. Doctors and nurses were keeping a professional distance from each other, patient care was suffering and costs were spiraling out of control.

The Intervention

In 1999, the Stockholm County Council decided to bring in Capio, one of Europe's largest healthcare companies, to take over the day to day running of the hospital.

Capio quickly implemented a number of sound business practices. Doctors and nurses became employees of Capio and were formed into teams tasked with suggesting operational improvements. More time and resources were invested into preparing patients for admission and providing support after they were released. And the hospital began using Lean management to cut costs by harnessing innovation. Some of the implemented solutions were quite simple, like marking the spot on the floor where a defibrillator machine was located, while others were more complex, like discharging patients throughout the day instead of all at once.

The Results
Patient wait times were reduced by increasing throughput. Infection rates were reduced and the average length of stay was reduced to 4.5 days (in comparison, the average length of stay in Canada is 7.7 days).
About Andrew Miller

Andrew Miller is a consultant, writer and speaker who has helped world-class organizations accelerate results and improve the speed, performance and efficiency of their organizations. His healthcare clients include renowned hospitals, global healthcare suppliers, shared service organizations, group purchasing organizations, private clinics and government institutions.

Andrew provides value to his clients by using his experience from both the private and public sectors to help maximize their strategic and operational effectiveness.

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What insights can you draw from this case study and how might they be applied elsewhere?

We have other options

When you look at all of the other countries around the world with healthcare systems comparable in size and structure to Canada's, you can see that there are other options we need to consider. Yes, it wouldn't be easy to make doctors and nurses employees of a third-party hospital administrator, but if the results from elsewhere are tangible, we should at least consider it as a possibility here at home.

Lack of funds often forces innovation

Since shutting down the healthcare system is not an option, we need to innovate in order to make it work better. Individual hospitals are already looking for ways to improve their operations. We need governments and industry to partner with these healthcare providers to innovate at a system-wide level.

Healthcare needs to be run like a business

The current cost structure is simply not sustainable. We need a new approach based on core business principles. The focus should still be on patient care and safety, but we should think of those patients as customers. Decisions need to be made from a business perspective.


A Framework for Procuring Innovation

I have had many discussions lately with many healthcare leaders and all of us we have reached a tipping point in the healthcare system. You have heard me say this before, but it's worth mentioning again. If we want to fix the system, we need to innovate. The problem is that, apart from a few rare examples, we have not yet mastered the process of innovation adoption. This is the time to develop a framework for procuring and adopting innovation. Here are some key insights on how we can start that process.

  1. We need to ensure the objectives and goals of healthcare providers and suppliers are aligned.

Providers want to improve patient safety and reduce costs. And because of budgetary constraints, the lowest price often wins out. However, there is currently no effective, consistent method for evaluating innovation during the RFP process. Although most RFPs contain provisions for Value Adds and Alternate Proposals, it is very difficult for healthcare providers to properly assess and evaluate any new solution being proposed if it does not align with the specifications outlined in the RFP. Innovation adoption will only increase when we align the objectives of the healthcare providers and suppliers and make decisions based on those shared objectives. Right now, cost challenges and risk aversion are stopping this from happening.

  1. We need to free innovation from the current purchasing model and the metrics used to measure success.

The standard RFP process does not foster the adoption of innovation. In fact, it actually hinders it. The process is too structured and does not allow for enough collaboration because it is typically focused on meeting a set of specifications. It encourages comparison on price and pushes us towards commoditization.

We need to reconsider how we measure success for the buying organizations we employ. Just measuring cost savings and unit price is not enough. Here are some examples of what we should be measuring if we want to increase the adoption of innovation:

  • The adoption rate of innovation (how frequently is innovation being adopted)
  • The speed of adoption (how quickly is innovation being adopted)
  • What percentage of provider purchasing dollars are being spent on new technologies and innovations
  • Value for money (what is the long term impact on the healthcare system)
  1. We need to develop a consistent process for identifying, evaluating and adopting innovation that aligns the goals of providers and suppliers.

As I mentioned above, the standard RFP process stifles innovation. Providers do not have a mechanism for identifying and evaluating a solution that they didn't specifically ask for. So we need to develop one. This mechanism should take a strategic approach to purchasing with a focus on collaboration and solutions that have a system-wide impact.

Developing common evaluation criteria for healthcare providers to use when evaluating the impact of innovation would be an excellent first step. Below are some criteria to consider:

  • The impact the solution will have on patient care, infection rates, surgery times, readmission rates, patient lengths of stay, wait times for key procedures and other key indicators
  • The total cost of ownership
  • The time line for adoption
  • The resources providers would require to implement the changes
  1. We need a driving force to bring together all of the key stakeholders

Many different organizations and associations are already tackling the innovation and procurement challenge. The problem is that many of them are trying to do it on their own instead of collaborating with their peers. While different organizations have different agendas, there are common interests. If all these organizations pulled together, it would help advance the right ideas faster and more effectively.

Here is a list of the key stakeholders:

  • Healthcare providers (hospitals and other healthcare providers)
  • Industry suppliers
  • Provincial governments
  • Shared service organizations and group purchasing organizations
  • Community and rural care centres
  • Local and Regional health authorities and networks
  • Industry Associations

There are only a few organizations with the capability to bring all of these stakeholders together and get them all pulling in the right direction. We need this driving force.

There is a tremendous opportunity to increase the level and rate of innovation adoption. All we need is a process in place that gives providers the ability to evaluate solutions they did not specifically ask for and a forum for suppliers to showcase what they can provide and how it can benefit the system. The key question is, who will step up and drive us forward on this?

For more information on this topic, click here for the details of my free teleconference on how to increase the adoption of innovation in healthcare.

On Andrew MilleR


Recent news

The Conference Board of Canada recently released a report card grading the healthcare systems in each province. Congratulations to Ontario, B.C. and Alberta for receiving an 'A.' You can find more details here.

Read my latest article for the Ontario Hospital Association on how to achieve profitable growth in a changing healthcare industry.

Check out my blog, From Chaos to Order, where I post new articles, provocative ideas and other content regularly.

Upcoming Events
I am hosting a free teleconference on How to Increase the Adoption of Innovation in Healthcare. Click here to register and for more details.
My forthcoming book, Why Everything You Know About Operational Excellence is Far From Excellent, is due out early next year.
Recent videos
Check out my video series on Operational Excellence. These are short videos filled with tips to help your business run more effectively.

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© Andrew Miller. All rights reserved. 2013.