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Process Re-Engineering: Re-Designing the Business of Healthcare.

Business transformation, process improvement, process re-engineering. The terms get confusing, so the basic concepts need to be defined. Let's start with the most basic and important term, "business process." The work of any organization consists of business processes. Simply stated, these are sets of related activities that combine to complete a unit of work. Each process has a customer, either internal or external.

In many companies, business processes are not very visible to management. Instead of understanding and supporting the goals of an entire process, department managers often focus on the small pieces of the process that fall within their department. But, it is process performance --not departmental performance--that determines an organization's effectiveness and success.

So, it is a matter of the "whole being greater than the sum of its parts." To be efficient and effective, organizations must manage overall business processes, not just the separate parts.

Pro-Active Managed Steps

The other basic terms, process improvement, process re-engineering and business transformation all refer to pro-active, managed steps that an organization can take to improve process performance. Process improvement refers to any process changes that eliminate waste, enhance flexibility or improve quality.

Process re-engineering is a very structured and deep version of process improvement. Process re-engineering dramatically streamlines business processes and clearly and closely aligns them with customers' needs.

Business transformation is a broader concept that involves coordinated re-engineering of processes, changes to employee responsibilities, modification of other aspects of a company's operations, and introduction of new information system technologies. Profound changes in a company's business or competitive environment require comprehensive business information.

The process of process re-engineering can be simply described. It begins by bringing visibility to prevailing business processes by clearly defining the content and boundaries of each process. Process flow diagrams then summarize the actual business processes. Next, we identify the customers of the process and assess their needs. At that point, we evaluate the extent to which existing business processes align with customers' needs. On the basis of that evaluation, we define necessary activities and work flows and then formulate an implementation program to help the organization adapt.

The Keys to Effective Process Management

Because most organizations have a departmental view of activities, end-to-end processes are not clearly defined or effectively managed. For example, organizations tend to measure resource utilization and performance by department; they typically have very little information about overall process performance. And accountability for process performance is usually diffused throughout the organization.

As organizations become more "process aware," they recognize that their functional organizational structure is an impediment to effective process management. Too much effort is spent on coordination, often through team meetings, memos, and complex computer systems. Too much time is wasted on hands-off and quality problems between departments.

The first step to overcoming this impediment is to assign accountability for process performance to a single process leader who can be held responsible for process outcomes. But simply assigning a process leader will not result in success. The process leader must have authority to manage the activities that make up the process.

There are two general approaches for empowering process leaders. One approach is to create cross-functional process management teams that include representatives from each workgroup involved in a process. The second approach is to rebuild the organizational structure around processes. In the long-term, organizations are most effective when end-to-end responsibilities for core processes reside within a single department or workgroup.

Rapid and Relentless Change

It is the onset of rapid and relentless change that forces industries to learn the discipline of managed business transformation. The ability to adapt to change becomes a survival skill when an entire industry undergoes radical change. In the long-term, only those organizations that learn to adapt will survive.

Process re-engineering is relatively new in healthcare, but it is well established in other industries. This approach to business change originated in the Japanese auto industry in the 1980s. The Japanese developed a post-war manufacturing capability that was able to adapt to changing business requirements. When American manufacturers could not effectively respond to the oil embargo of the early '80s, Japanese firms started delivering cars that buyers wanted. Very quickly, the Japanese captured a huge share of the American market. It took close to a decade for American car companies to learn how to match that level of flexibility.

Telecommunications was the next industry to be turned upside-down by changes in the business environment. The breakup of AT&T and de-regulation of that industry required rapid change to survive. Now, healthcare is in the midst of this profound transformation.

Process Re-Engineering in Healthcare

The healthcare industry is now at a point of rapid change driven by the demands of employers, payers, and patients. Competition impels payer, managed care and provider organizations to evolve rapidly. There are, of course, mergers and acquisitions, consolidations and the formation of entirely new types of healthcare businesses, such as integrated delivery systems.

In addition, the demand for value (the best outcomes for the most reasonable price) requires profound changes in the actual organization and management of the process of patient care. In response, healthcare businesses must learn to organize, focus and manage activities to meet customer needs.

At the high-end of business and process complexity, integrated delivery systems so far have failed to fully realize the financial benefits from consolidation. I believe this will be the case until they began to look at cross-entity process re-engineering. By providing services across the continuum of care--and understanding how these processes can be integrated into a seamless, coordinated plan of care for the patient--all the stakeholders will benefit.

Physician Practice Re-Engineering

Here's an example of process re-engineering in healthcare. Independent physician group practices also need to adapt to their changing environment. An orthopedic surgery practice undertook a re-engineering project that resulted in significant time and cost savings to their practice. They identified 15 processes that were being performed and calculated the transaction costs for each. This enabled them to identify those processes and activities that were consuming a disproportionate amount of resources.

For this group practice, the surgery scheduling process was the major problem, and they substantially streamlined it. In addition, they uncovered other opportunities for improvement, such as cross training of medical assistants, standardization of patient charts, and re-assignment of some job responsibilities to lower-cost employees. All of these improvements focused on the processes and management of the medical practice.

Process re-engineering obviously applies not just to administrative tasks in healthcare, also to the actual process of patient care. As purchasers undertake direct contracting with providers, and as managed care organizations increasingly move to capitated contracts and other risk arrangements, the financial risk is shifting to physicians and physician organizations. Healthcare providers are experiencing downward price pressures and demands for quantified outcomes information.

In response to the imperative to manage value, there is a new openness to evaluating and questioning all aspects of the patient care process. While physicians are becoming more productive by using technology to reduce the amount of time spent on administrative tasks, additional opportunities are becoming apparent to manage care delivery across the entire continuum of care. Outcomes management and case management are two areas that can directly benefit from process re-engineering.

IS and Business Processes Tied Together

Process re-engineering also relates to healthcare information systems because information systems and business processes are inextricably tied together. While most organizations can quickly adapt to changing conditions through re-engineering of their processes, in reality they are often constrained by the technology with which they run their business. Due to their inflexibility, traditional information systems tend to lock in existing business processes, even if they have to change.

At Object Products, our approach has evolved to make information system design flow directly and seamlessly from process design work. The key to this approach is the definition of information system "use cases." Each use case describes an information system user's interaction with the system.

Our approach follows these basic steps:

* Document current process workflows;

* Identify improvement opportunities and design new process workflow;

* Add use cases to the new process work flow diagram; and

* Develop an implementation strategy for coordinated process and information system changes.

Obviously, this approach only works if an organization's information systems are flexible enough to adapt to changing process workflow. In order to respond effectively to customers and competitors, now and in the future, healthcare organizations must implement adaptable information system technology and deploy software in the context of process re-engineering. Increasingly, object-oriented software technologies are offering this degree of flexibility.

Jim Reitsema is Vice President of Implementation Services at Object Products, Inc. He has over 15 years of experience in guiding businesses through successful transformations involving process re-engineering integrated with information systems technology planning. He explains the basic concepts of process re-engineering and discusses its application to healthcare organizations.
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Copyright 1999 Gale, Cengage Learning. All rights reserved.

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Title Annotation:Technology Information
Author:Reitsema, Jim
Publication:Health Management Technology
Article Type:Glossary
Date:May 1, 1999
Words:1467
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