Printer Friendly

A benchmark strategy.

Today, the health care arena is one of the most rapidly changing economic sectors in the United States. Physicians, hospitals, and insurers are forging unique relationships that have resulted in new delivery vehicles; health care mergers, acquisitions, and affiliations have begun linking small, independent providers into powerful systems. Managed care principles and risk contracting arrangements now blanket large and medium-sized cities. Although managed care cost containment efforts predominate, quality initiatives have recently gained momentum.

Because of their bureaucratic organizational infrastructure and bloated cost structure, individual hospitals, as well as larger health care systems, are often forced to dramatically reduce expenses to compete in today's environment of managed care and cost containment. Falling revenue in the form of decreased occupancy rates, and the specter of increased competition have provided a "burning platform" for many hospital CEOs. Often the most immediate response to such a scenario is to downsize and slash costs evenly throughout the organization. Unfortunately, this approach has most often led to ineffective resource utilization, unhappy customers, and financial disappointments.

Often employed as a preferred alternative to a broad-based program of layoffs and closures, operational reengineering as a business strategy is not a new concept. Traditionally, large manufacturing and service corporations have utilized reengineering principles to improve quality and decrease cost through enhanced efficiency, and streamlined operations and production processes. Certainly, operational reengineering techniques are transferable to a hospital environment.

Departments such as radiology, laboratory, and emergency care may benefit from streamlined work flow and production initiatives, purchasing discounts, and more efficient labor deployment.

However, hospitals and other health care providers, are not identical to traditional service businesses because of their unique focus on medical care. So-called clinical reengineering involves the continuum of care associated with a given Diagnosis-Related Group (DRG) or diagnosis. Patient-centered care is emphasized, and a multidisciplinary approach is used during the redesign effort. The care and treatment of the individual patient is examined through the eyes of clinicians in order to develop streamlined, quality-based, cost-effective clinical pathways, and efficient health care operational processes.

A clinical reengineering model developed by William M. Mercer's Healthcare Provider Consulting Practice divides the process into four phase - mobilization, assessment, redesign, and implementation. This model emphasizes redesign in the context of community and population-based health care initiatives. An overview of this process can be seen in Figure 1. Where appropriate, specific reference will be made to reengineering experiences at three institutions: a large hospital system in a medium-sized Virginia city, (the Virginia Project); a medium-sized hospital system in a suburb of a large Midwestern city (the Michigan Project); and a small community hospital in Pennsylvania (the Pennsylvania Project).

Each phase is a discrete period with a beginning, an end, and expected deliverables. Although internal reengineering initiatives are occasionally observed, most hospitals recognize the need for an unbiased third-party facilitator, who can negotiate political minefields and provide the experience and expertise required for a successful outcome. Experienced nurse and physician consultants are valuable ombudsmen and facilitators in any clinical redesign project. One goal of the process is to gradually transfer skills in facilitation, group leadership, and reengineering methodology design to the client so that further efforts may be mediated internally. An example of a project timetable for reengineering can be seen in Figure 2.


The mobilization phase is devoted to preparing the health care organization for the effort. Preliminary data regarding Length-of-Stay (LOS) and cost-per-DRG are reviewed. For example, Healthcare Information Association (HCIA) statistics collected from the "Top 100 Hospital" study[1] were used as comparison data in the Virginia and Michigan Projects; cost effectiveness and quality indicators were then contrasted with hospital competitors. The organization then chooses the diagnoses and/or DRGs it wants to reengineer based on the information regarding cost, total yearly discharges, and total-reimbursement-per-DRG, as well as the importance of various DRGs to the community and to managed care entities.

Common DRG/diagnoses selected for clinical reengineering are listed in Figure 3. In the Pennsylvania Project, inpatient care for mental health diagnoses was chosen because the hospital's senior leadership perceived this type of care to be a losing proposition for the future. Customer-oriented, efficient, full-continuum breast care for women was thought to be of major importance to managed care organizations and Michigan residents; thus, the Michigan Project focused on this area.

The hospital's administrative and physician leadership participate in focus groups and are interviewed to determine their readiness for change, their opinions on managed care, and their willingness to participate in the reengineering efforts. An assessment of other hospitals and managed care organizations is also performed to compare competitor information. During mobilization, a physician retreat is sponsored by the hospital at an off-site location. The consultant or third-party facilitator presents the survey data, speaks on topics of managed care, and introduces the concept of clinical reengineering. This focused, informal session has been found to be vital to garnering initial physician buy-in.

Next, the multi-disciplinary team for each of the DRGs is selected. Team members are identified jointly by the consultants and hospital senior leadership. Physician champions are designated based on informal or formal leadership ability, degree of buy-in, clinical experience, and credibility with other physicians on staff. In the Michigan and Pennsylvania projects, many physician champions were chosen based upon their involvement in previous clinical pathway initiatives.

Each team is composed of 10 to 20 members from clinical and nonclinical disciplines. The need for a specific discipline will vary with the DRGs or diagnoses proposed for redesign. Ancillary and clinical team members are usually picked from the following health care professionals: dietitian, social worker, nurse, physical therapist, occupational therapist, speech therapist, educator, pharmacist, radiology technician, laboratory technician, nurse practitioner, and physicians in other specialties. To expand the scope of care to the post-hospitalization of pneumonia patients in the Pennsylvania Project, nurses and administrators from home health care agencies and skilled nursing facilities were also asked to join the redesign team.

Teams are facilitated by pairs of clinical consultants, who provide guidance and challenge the team. Facilitators need to draw upon their clinical skills, as well as their leadership experience in group dynamics. The, set ground rules and move the team through ambitious agendas during weekly three-hour meetings. Participation is encouraged and expected. Multidisciplinary input is crucial to the overall team understanding of the existing process of care. Decisions are made by consensus. Over time, team members become closely allied and committed to the cause of redesigning quality, cost-effective care.

A steering committee comprising of senior administrators and key clinical leaders, is formed to oversee the redesign teams, provide advice on the process, help eliminate roadblocks, and formalize the hospital's commitment to the project. Members act as process owners and liaisons to individual redesign teams, thus providing a conduit of communication between the teams and the oversight committee.

In addition to the clinical redesign teams, two nonclinical teams are commissioned: documentation and case management. The documentation team redesigns the process for recording medical information to minimize duplication of effort and maximize efficiency. Forms and charts are shortened, streamlined for multidisciplinary use, and made more user-friendly. This team is also charged with designing the format for the clinical pathways that will eventually be developed.

The case management team is also charged with supporting the development of clinical pathways. It creates and outlines the role of the case manager as educator, negotiator, variance tracker, and liaison. Streamlining clinical pathway utilization is a primary objective. In the Virginia Project, a Case Management and Outcomes Review department was established to measure and monitor the new clinical pathways. Generally, clinical nurse specialists with expertise in the area of the selected pathway are asked to serve as case managers. Although qualifications of the newly- designated case managers may vary, most teams agree that preparation should include both Registered Nurse and advanced nursing degrees.

Communicating the goals to all stakeholders early is vital to obtaining commitment and buy-in. Thorough, credible communication must begin with the mobilization phase and continue throughout the process. A variety of forums should be employed, including newsletters, posters, one-on-one discussions, departmental meetings, and informal "rounds." For example, a story-board session was used in the Michigan Project to increase awareness among staff physicians about their reengineering effort. Such change management techniques are key to the project success.


The assessment phase begins with the first multidisciplinary team meeting and ends at the fifth or sixth week of meetings. The process of care for a given diagnosis or DRG is mapped out in a flow-chart format, first from a "macro"" level by the team, then individually by team members on a "micro" level. The macro and micro-processes are then dissected to isolate areas of inefficiency. "Fishbone diagrams" are used by the facilitators to pinpoint the root causes of the ineffective processes. Areas of error, rework, waste, and excessive hand-offs that lead to decreased quality of care, increased cost of care, or decreased customer satisfaction are identified. Additional clinical reengineering principles used to streamline care are listed in Figure 4.

The assessment phase also includes a chart abstraction exercise. Members of each clinical redesign team perform medical chart reviews on 60 to 100 cases-per-DRG or diagnosis. The sheer scope of this effort in the Virginia Project was logistically challenging; 1,200 charts were reviewed by 13 teams of 10 to 15 members each. The key to a successful chart abstraction outcome is to collect pertinent clinical data to ultimately define the normative practice of treating physicians.

Typically, physician orders are examined to determine what medications, laboratory tests, radiology studies, and consults are ordered on a daily basis during hospitalization. Although most charts reviewed reflect an average length-of-stay for the DRG, certain "outlier" charts, with much longer or shorter lengths-of-stay (75th and 25th percentile, respectively), are included to give insight into the variation and its potential impact on redesign. If available, outpatient or office charts are also abstracted to capture medical practice across the continuum of care. Data are collated and analyzed offsite and returned to the team to develop care pathways.

Another useful assessment tool is the benchmarking and literature search exercise. For benchmarking, team members are asked to develop a set of standard questions that can be posed to health care organizations locally, regionally, and nationally that have undergone a similar initiative. Questions are geared to uncover best practices and best outcomes that exist in other organizations. Simultaneously, the medical literature germane to the DRG/diagnosis is collected by team members in order to compile a set of evidence-based protocols that can be incorporated into a clinical pathway.

Finally, team members are asked to create customer satisfaction surveys for all stakeholders to determine their special needs and requirements. Separate questionnaires are developed for patients, physicians, and hospital staff. All questionnaires contain predominantly DRG-specific questions posed in Likert scale format, but may also include a limited number of more general questions involving topics of importance to JCAHO or to discharge planning professionals. Like the chart abstraction data, the survey data is collated and presented in user-friendly graphs and charts. This information is ultimately used to create a DRG pathway of care that ensures sensitivity to all customers.


The last four to five weeks of clinical team meetings are devoted specifically to redesign. Using the template sanctioned by the documentation team, the redesign team creates clinical pathways that support quality-based, cost-effective medical care across the continuum. Multiple pathways may be required to support the care provided: from the outpatient office setting, through, the emergency room and inpatient arena, to a home or skilled nursing facility setting. Developing clinical pathways for all settings is encouraged. Pathways are usually composed of two subsections: an interdisciplinary action plan (IDAP), which is kept at the bedside, and a physician's orders section. The pertinent actionable areas are: laboratory tests, activity level, diet, medications, discharge planning, diagnostic tests, psychosocial/spiritual counseling, and key patient indicators or benchmark goals within a given time period.

The clinical pathway is divided into two time blocks; days of stay for typical inpatient diagnoses, and minutes or hours for other settings, such as pre-operative areas or emergency rooms. Other clinical or operational recommendations needed to support the pathways must also be documented by the team. For example, a protocol for the efficient use of oxygen was developed by clinicians in the Michigan Project,s Congestive Heart Failure redesign team and then disseminated for general use for all inpatients requiring oxygen. The Virginia Project drafted a resolution requiring that the hospital, system adopt a 24-hour per day/7-day per week services availability policy. A subacute unit and additional skilled nursing beds were identified as operational requirements to supplement the clinical pathways in the Pennsylvania Project.

The redesign team is charged with producing other deliverables, such as booklets outlining the patient education process. A guide explaining in non-technical terms the day-by-day course of care is created to be given to patients.

Videotapes should be considered as a medium to provide high-quality patient education. Any additional proposed resources, either capital or human, must be examined from a cost benefit perspective. Cogent, written justification for adding these resources must accompany the pathway. Full job descriptions must explain newly-created positions. Cross-training programs for existing workers must be documented.

A cost-savings analysis must also accompany any proposed clinical pathway. True cost savings estimates, based on hospital cost accounting or activity-based costing principles, are ideal; however, most hospitals do not have access to this data and must rely on traditional accounting principles in the form of cost center charge data. A simple calculation of charge avoidance may be all that is possible in this setting.

The redesign team also produces a implementation plan that outlines the orientation and training procedures for physicians and staff. This guide explains how information is communicated, to whom, and when. It outlines an orientation timetable and specifies who trains whom, at what time, and at what site. It is expected that most team members will participate in training their colleagues. An executive summary booklet of comparative competitor data (LOS, charge), the assessment data (chart abstraction surveys, literature search, benchmarking), and the redesign deliverables is complied. This text serves as a final resource for all interested parties.


This phase is perhaps the most critical, because it is here that the true test of the value, usefulness, and credibility of the redesign process begins. Each redesign team makes a presentation to the steering committee outlining its assessment data, clinical pathways, and objectives. The leadership displayed by the physician champions at this presentation is key to igniting the enthusiasm that must eventually sweep the organization. A "go-live" date is chosen early in the implementation phase, and training and orientation sessions are strategically matched to this date. Clinical pathways and other redesign activities are discussed in all departmental meetings. Here, questions are answered, active discussion ensues, and sometimes favors are called in.

Clinical consultants attend physician departmental meetings to provide support and credibility. They also meet one-on-one or with small groups of physicians, who may skeptically voice concerns about the redesign process. Residents and other physicians-in-training are included in all training activities. All hospital staff and physicians must be taught how to initiate, sign, and document the clinical pathway. It is vital that a critical mass of physicians be committed and buy into using the clinical pathways. Typically, these physicians provide the impetus to make the effort successful.

Communicating the benefits and progress of the redesign process must be ongoing to eliminate the spread of rumors throughout the organization. Senior management needs to be visible and voice support for the project, as well as provide strong leadership during the ensuing organizational culture change. All reasonable requests for new resources and improved operational efficiencies should be approved by the steering committee and expeditiously handled by competent and responsible managers. Accurate, consistent press releases should be regularly promulgated to the local community.


Preliminary statistics from health care organizations that have undergone clinical reengineering are exciting. Data show pathway compliance to exceed 75 to 80 percent for many DRGs and/or diagnoses covered in the Virginia Project. Average actual cost savings in the first few months of single pathway use have been quoted as high as $2 million. Initial outcome and patient satisfaction indicators suggest that the quality of health care delivered has not suffered.

An example of results from the Virginia Project's Coronary Bypass redesign team can be viewed in Figure 5. The senior leadership of an newly-reengineered organizations, who may have initially been tentative, have since become vocal supporters of a new quality-based culture. Although a daunting and challenging task, the process of clinical reengineering appears to be delivering true value to anxious, and sometimes faltering, health care institutions. If this trend is borne out over time, clinical redesign should become a true benchmark strategy for today's health care marketplace.
TABLE 3 DRGs/Diagnoses for Clinical Reengineering

 * Coronary Artery Bypass Grafting (CABG)
 * Hip/Knee Replacement
 * Pneumonia
 * Pediatric Asthma
 * Stroke
 * Large/Small Bowel Surgery

TABLE 4 Clinical Reengineering Principles

 * Reduce redundancies
 * Remove non-value-added steps
 * Decrease hand-offs among clinicians
 * Minimize rework
 * Eliminate unnecessary QA and approval layers
 * Simplify points of contact for patients
 * Establish accountability of all elements of the process
 * Automate when possible
 * Decrease cycle time
 * Employ physician led multidisciplinary approach


[1.] 100 Top Hospitals - Benchmarks for Success, HCIA, Inc. and William M. Mercer, Inc., 1995.

[2.] Berdick, E. L. and Humphres, V. W. Hospitals Increase Satisfaction and Reduce Costs by Redesigning Around Patients; Healthcare Strategic Management, Volume 12, I SS:6, June, 1984 (p.18).

[3.] Farrell, J. P. and J. A. Pagoaga. Making Change Pay. Hospitals and Health Networks, Volume 69, I SS17, September 5, 1995 (pp. 26-33).

[4.] Anderson D.F. et. al., Managing Change - A Tale of Two Hospitals in an Integrated Network; The TQM Magazine, Volume 8, Number 3, 1996 (pp.27-34).

[5.] Holman, J. et. al. Reengineering Care Across the Continuum; A Lesson in Critical Mass, accepted by The Joint Commission Journal on Quality Improvement in 1995.

[6.] Lumsdon, K. Reengineering the Old Fashioned Way. Hospitals and Health Networks, Volume 69, I SS2, January 20, 1995

[7.] Schweikert, S. B. and V. S. Daniels. Reengineering the Work of Caregivers; Role Definition, Team Structures, and Organization Redesign. Hospital and Health Services Administration, Volume II, V SS:1, Spring, 1996 (pp.19-36).
COPYRIGHT 1996 American College of Physician Executives
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1996, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

Article Details
Printer friendly Cite/link Email Feedback
Title Annotation:in medical cost control
Author:Lowenhaupt, Manuel
Publication:Physician Executive
Date:Oct 1, 1996
Previous Article:Integrating medical and operational management.
Next Article:Quality assessment tools add value.

Related Articles
Hitting the Mark.
Evaluation of physician practice using risk-adjusted commercial databases.
"Nonbiotech News" & "Performance Improvement Advisor" from NHI.
Benchmarking: a tool for property managers.
A case study: reducing the cost per order and improving productivity within a chemicals distribution center.
National Health Information launches and acquires newsletters.
Year-end plan review: it's the ideal time for a formal review of your company's health plans.

Terms of use | Privacy policy | Copyright © 2021 Farlex, Inc. | Feedback | For webmasters |