With millions of new patients coming into the U.S. health care system over the next decade, the term “operations” is taking on a whole new meaning in America’s hospitals.
Starting in the year 2014, as many as 32 million additional people will be covered by health insurance under the federal reform law passed last year. That additional demand comes at a time when medical facilities are struggling to reduce costs, improve safety, and provide higher patient satisfaction.
To address these issues in the past, many health care facilities looked to manufacturing and its specialized product lines as a model for how to treat patients most efficiently and effectively.
But little research has been done on how well these new “focused delivery” units have worked. To investigate this question, Nancy Lea Hyer, associate professor of operations management at Vanderbilt University’s Owen Graduate School of Management, turned to her own university’s experience setting up a dedicated trauma unit to look for answers. (The case study was published in the Journal of Operations Management in 2009, and last year won that publication’s Best Paper Award.)
“The following two questions were used to guide our research,” wrote Hyer, who collaborated on the project with Dr. John A. Morris Jr., Vanderbilt University Medical Center’s director of the Division of Trauma & Surgical Critical Care, and Professor Urban Wemmerlöv from the University of Wisconsin-Madison. “(1) How does the concept of focus, as it is used in connection with manufacturing plants, transfer to the context of a critical care hospital setting?, and (2) How does focus affect operational, clinical, and financial outcomes?”
Since 1987, Vanderbilt University Medical Center has served as Middle Tennessee’s only Level I trauma center — meaning it is equipped to handle the most severely injured patients — within a 65,000 square mile region. By 1993, executives at the Medical Center authorized the creation of a separate $5 million, 31-bed facility called the Vanderbilt Trauma Center. The dedicated facility opened in August 1998.
Administrators staffed the Trauma Center with a designated team of doctors, nurses, social workers, even security and cleaning personnel, and outfitted it with X-ray and lab equipment. Physicians work 12-hour shifts instead of the traditional 24-hour rotation, so they are in-house and immediately available during their time on duty. And the facility itself was designed with an open bay concept to accommodate the center’s 14 ICU beds. This layout permits cross-trained staff to assist each other as needed and makes it easy to rapidly reconfigure the unit to respond to changing circumstances, such as a sudden influx of critically-injured patients.
Prior to the creation of the Trauma Center, patients were transferred from unit to unit throughout the hospital as their recovery progressed. In directing patient care, trauma physicians travelled all over the hospital seeing patients and interacting with a wide array of staff who cared for both trauma and non-trauma patients. In the new critical-care facility, the dedicated staff delivers care in a single location and manages patient care through much, if not all, of the patient’s hospital stay. This has allowed the unit to develop and hone a specialized set of treatment protocols.
The Trauma Center also has its own financial director, who tracks physician and staff performance in much the same way a private company would. And to further differentiate themselves as an independent entity in the hospital, nurses and other staff wear distinctive black uniforms.
Did the measures work? To answer that question, Hyer and her co-authors examined the dedicated center’s length-of-stay, mortality rates, and financial metrics. To compare before-and-after performance, researchers used data from 1996-1998, the two years before the separate Trauma Center opened, and from 2000-2002, which allowed for a period of adjustment.
The length of stay for patients treated in the dedicated trauma center declined by an average of 6.5% overall, and by 15% for those with more severe injuries. However, researchers detected no change in the mortality rate.
On the financial front, trauma care operations showed losses of $2.20 million and $1.75 million in 1996 and 1997, respectively. In 1998, the Trauma Center saw a small surplus of $50,000. By 2000 and 2002, however, the independent trauma facility showed surpluses ranging from $5.50 million to $7.89 million. Calculated on a per-patient basis, the unit turned an average loss of $578 per-patient into a surplus of $2,493 per-patient. Researchers also found similarly positive results when comparing the unit’s performance to benchmark peers.
“The discovery by the trauma unit’s managers that (Vanderbilt) discharged patients quicker, while charging comparatively less for its services, was both an affirmation that the focused hospital unit worked as intended and a sign that they needed to increase the charge levels and have (the Medical Center) translate these into better contracts with the payers,” the authors write.
Looking into some of the reasons for the improved performance on length-of-stay and financial measurements, researchers found ways the staff became more efficient treating patients. For example, before the creation of a separate trauma center, tracheotomies (a common procedure for patients who may be on a ventilator for an extended time) had typically been performed in an operating room, where it took an average of 80 minutes’ worth of physician time. In the new Trauma Center, doctors developed a bedside tracheotomy procedure, which only takes 15 minutes of a doctor’s time and is just as safe as one performed in a fully equipped operating room. Whether done in an operating room or at the bedside, however, the high reimbursement rates are the same, allowing the Trauma Center to capture the financial gains.
The finding prompted the unit to redouble its efforts to charge procedures more accurately for reimbursement, and most importantly not to overlook them as had sometimes been done when patients were shuttled between departments.
But the authors acknowledge that one case study is not enough to suggest a need for broader changes within the health care system. Further, they write that nothing in their research suggests that the creation of a dedicated unit in itself is “a sufficient condition for success.” Rather, such initiatives should be aligned with other changes to factors such as hospital infrastructure, management, and culture.
Nevertheless, the case does indicate a need to further explore reasons why a dedicated unit can help bolster hospital performance. “Hopefully,” the authors write, “future studies will determine with greater precision what factors need to co-exist with (focused hospital units) to create better performing health care delivery organizations.”
In another kind of case study, Michael Lapré, E. Bronson Ingram Associate Professor of Operations Management at Owen, documents his development of a course on health care operations in a recent article for the journal INFORMS Transactions on Education.
Lapré, who has spent years studying learning curves in organizations, particularly in the airline industry, turned his sights to health care several years after Owen had begun offering a specialization in the field as part of its MBA program.
By fall 2008, when Lapré taught his first health care operations class, 33% of the most recent graduating class had started their careers in health care, and enrollment in the specialized track would soon grow to a quarter of Owen’s MBA students.
“When I started designing HCO (Health Care Operations), I had almost no experience in health care,” Lapré writes. “However, aided by the wealth of readings and cases, I delivered a course that was well received by students who were more knowledgeable about the health-care context.”
Students in that first class had already taken several business-school courses related to health care, and many had significant work experience in the industry.
Nevertheless, Lapré found that many of the core ideas in operations management were easily adapted to health care. These include designing health-care delivery systems, capacity planning and decision-making in uncertain situations, as well as process failure, learning and improvement.
Lapré also wanted to use these categories to touch on the many different parts of the health care industry, such as pharmaceuticals and medical device manufacturers.
“This variety of health-care organizations has several benefits,” Lapré writes. “First, MBA graduates end up working in a variety of health-care organizations. Second, regardless of the health-care organization an MBA graduate ends up working in, it is beneficial to have exposure to different types of organizations. Third, exposure to multiple health-care organizations can be rather beneficial for graduates who end up in health-care consulting.”
Case studies in the class examine everything from throughput and system capacity at bariatric surgery centers to handling customer defections at CVS retail pharmacies. The cases also include some of the most pressing issues in the industry, including patient flow at major teaching hospitals and dealing with uncertain demand at large drug makers.
Lapré says students were generally pleased with the balance of quantitative and qualitative material in the class, as well as the mix of cases. The one glaring omission in the first offering of the course in 2008, he says, was the lack of material on supply chain management. However, he addressed this omission in 2009 with the adoption of a new case on supply-chain coordination between a medical supply distributor and a hospital.
“Lastly, there was the challenge of having health-care MBA students and operations students in a single class,” Lapré writes, explaining that he now offers a set of slides summarizing the main lessons of operations theory on the course’s intranet site.
With “the abundance of interesting, recent, and relevant cases on health care operations,” Lapré continues to tweak the course. And “faced with all sorts of efficiency and quality issues, there will be ample opportunities for MBA graduates to work in health-care operations.”