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Improving Healthcare Quality and Cost with Six Sigma: Trends in the Healthcare Industry

Everything in today's healthcare world is pointing to increased costs and lower quality in healthcare. Efforts are being made by the federal government to promote healthcare technology as a shortcut to quality, but IT is a tool of quality and not quality itself. Only by applying true quality techniques such as Six Sigma to our processes (patient care and administrative) can we begin to proactively address the quality problems in healthcare.
This chapter is from the book


  • The Quality Crisis in Healthcare
  • Demographics: Financial, Political, Social, and Technological
  • The Cost of Healthcare and Six Sigma
  • Healthcare Quality and Error Reduction
  • Conclusion

Healthcare is preparing to go into hyper-change. Just as the computer and the Internet have enabled "telework," home shopping, and a permanent change in the recording industry's distribution strategy, so will healthcare be affected in the next 10 years.

Events that are unfolding and are leading the change in healthcare are threefold:

  • Evolution in the healthcare IT industry
  • Introduction of HSA/CDHC and consumerism in healthcare
  • Recognition of medical errors as a serious issue in healthcare

This book is not about the evolution of the healthcare IT industry, nor is it about consumerism in healthcare. It is, however, about medical errors, and the counterpoint of the issue, healthcare excellence—specifically, healthcare excellence that can be achieved through Six Sigma.

Trends in healthcare have been evolving in the direction of the customer since the advent of the Internet. One of the first popular search topics was healthcare, and it continues today. We have coined the phrase, "The Wired Retired" just to describe those aging baby boomers who have helped fuel the most rapid adoption of a technology in the history of the world. These boomers, wired retired, and even the young have not accepted the status quo of healthcare as it has been delivered since the dawn of the medicine man.

This education of the healthcare consumer has, for better or worse, led to the start of a healthcare consumer revolution, which logically leads to the recognition of quality and medical mistakes. This chapter describes some of these trends and how they lead us to Six Sigma.

The Quality Crisis in Healthcare

  • "Hospital Apologizes for Surgical Mistake," The New York Times, January 19, 2003, by the Associated Press. Linda McDougal, 46, underwent a double mastectomy after being advised by her surgeon that she had an aggressive form of cancer. Two days after the surgery, she was informed that the lab at United Hospital in St. Paul, MN, had switched her lab results with another patient and that Ms. McDougal in fact had never had cancer. Ms. McDougal has been fighting several infections and will undergo reconstructive surgery before she decides whether to sue for malpractice.

Medical errors became a national issue in 1999, when the Institute of Medicine issued a highly published report stating that medical errors in the United States contribute to more than 1 million injuries and up to 98,000 deaths annually. A study by Thomas, Studdert, et al.1 in Inquiry of 14,732 randomly selected 1,992 discharges from 28 hospitals found that medical errors cost an average of more than $65,000 per incident.

The most common medical errors are

  • Sepsis infections, which result in a 22 percent higher risk of death and add an additional cost of $57,727 to the hospital stay and 11 extra days of hospitalization
  • Surgical wounds, which result in a 10 percent higher risk of death and add an average additional cost of $40,323, plus more extra days of hospitalization
  • Medical objects accidentally left in patients
  • Adverse drug reactions (wrong or incorrect quantity of a drug given to the patient)

A study published in the Journal of the American Medical Association indicated that medical injuries in U.S. hospitals in 2000 led to about 32,600 deaths and at least 2.4 million extra days of patient hospitalization, with an additional cost to the U.S. healthcare system of about $9.3 billion. This is considerably lower than the 1999 study on medical errors reported by the Institute of Medicine that stated up to 98,000 deaths were caused by medical errors. In fact, it doesn't matter what the correct number actually is—even one lost life is one too many!

Although much of the information presented so far relates to the U.S. healthcare system, it is arguably one of the best in the world, and its error rate is probably below average. In some developed countries, one would assume the healthcare error rate is many times worse than in the U.S. The developing countries error rate is even much higher.

In an article recently published in the International Journal of Health Care Quality Assurance, Jim Harrington and Brett Trusko wrote that you are probably safer traveling in Saudi Arabia than lying in bed at your local hospital. In 2003, the best estimates are that only approximately 613 people were killed by terrorists. Our assessment when we wrote the article in 2005 was that by far, healthcare and government (confirmed by the handling of the Hurricane Katrina response) are the two major industries that have the biggest opportunity for improvement in process and quality.

Unfortunately, and even today with all of the coverage around healthcare related to Health Savings Accounts (HSAs), it seems that American consumers care less about the number of people killed due to medical errors than they care about other industry errors such as e-coli, mad cow disease, and airline accidents. As a case in point, let's examine the response to the Firestone/Ford rollover case a few years back. At worst, the problem killed a few dozen people, but it was highlighted on television and in newspapers, and at several times the Federal Government felt obligated to step into the debate. As a result of the bad publicity, Firestone and Ford stock fell. However, the truth is that you are also safer driving your car (with the defective tires) than you are lying in a hospital bed.

Simply put, healthcare needs to be reinvented. Some statistics related to the healthcare quality crisis in America include

  • By extrapolating the deaths attributable to healthcare errors in the United States to the global population, we estimate that somewhere between 1.5 million and 2.2 million people die annually as a result of healthcare errors. The low-end estimates of a global pandemic related to bird flu are smaller than those of medical mistakes.2 However, more money is spent to protect the world from bird flu than medical errors (understanding that the potential deaths from bird flu would outnumber those from errors by many thousands if the direst of predictions come true).
  • According to the Centers for Disease Control, 1 person dies every 8 minutes as a result of nosocomial infection, 95 percent of which are preventable (CDC).
  • Hospitals with an "atmosphere of mistrust" have a death rate 58 percent higher than average.3
  • Some 2 million patients per year contract an infection in the U.S. while hospitalized for other conditions, and 88,000 die as a direct or indirect result. This adds an extra healthcare cost of $5 billion.4
  • In the U.S., healthcare accounts for 15 percent of the GDP and, according to U we Reinhardt, a noted health policy expert and economist at Princeton University, that number is expected to be 20 percent of the GDP by 2013.5
  • According to the Corporate Research Group, healthcare premiums rose only a modest 9 percent in 2005. Historically speaking, this is a small increase. Recent studies suggest that that amount is more in the last couple of years.
  • U.S. national healthcare spending is $1.7 trillion.
  • Approximately 46.6 million people in the U.S. do not have healthcare insurance.
  • The first group of baby boomers is now retiring. This represents some 77 million people entering a time of life when healthcare consumption begins to rise.
  • U.S. healthcare consumers pay the highest prices in the world for drugs, therapists, medical diagnostics, and treatment technologies, effectively subsidizing both healthcare research and development and treatment in other industrialized nations, as well as developing countries.
  • Patients are uninformed about the quality of service and acceptable standard of care they will receive. This is largely in part due to poor information technologies in the United States. This issue is being addressed with approximately $100 million given to the Healthcare Technology office, which is only a fraction of what has been spent on the Iraq war, Homeland Security, and more importantly, other countries on their healthcare IT infrastructure.
  • Geographic location is a significant variable in the quality of care a patient receives because higher quality doctors tend to be attracted to urban locations.
  • It takes 15 to 20 years for evidence to be integrated into clinical care.
  • Few healthcare facilities are ISO 9000 certified.
  • Healthcare fraud and abuse are estimated to cost between $50 and $75 billion per year.
  • Performance metrics in healthcare are virtually nonexistent, and there is strong resistance due to nonconformity of processes, regional differences in the way healthcare is practiced, and the fear of loss of business or litigation based on poor performance against metrics. Unfortunately, it is the understanding and communication of this information that helps to solve other problems.
  • Indications are that physicians incorporate the latest medical evidence into their treatment decisions only 50 percent of the time, preferring to practice what they are comfortable with.
  • Healthcare costs are contributing to the move of jobs off-shore (a tax on employment) with the latest reports attributing $1,200 of the cost of a new American-made car to healthcare premiums.
  • According to the World Health Organization, administrative costs account for 15 percent of the healthcare premium dollar, and some studies suggest as much as 25 percent.
  • We estimate that 30–40 percent of the cost of waste in the healthcare system is caused by medical inefficiencies and resultant errors.
  • According to the Kaiser Family Foundation, the uninsured are about three times as likely as the insured to postpone seeking care, fail to get needed care, leave prescriptions unfilled, or skip recommended treatment. And many end up disabled—or die—because of these delays.
  • The U.S. is the only developed country where healthcare is not run by the government.
  • Total Quality Management (TQM) and Continuous Quality Improvement (CQI) were at best poorly implemented in most healthcare organizations in the 1980s and '90s.
  • There is a critical shortage of nurses.
  • The U.S. Government estimates that it can save $140 billion per year through improved patient care and the elimination of redundant tests.
  • According to the Institute of Medicine, a total of 2 percent of hospital patients experience an adverse drug reaction, resulting in increased length of stay and $4,700 added in needless expense. This accounts for 2.5 percent of the typical hospital's budget.
  • The healthcare error rate is approximately 6,210 errors per million opportunities (3.8 sigma), and for some, treatment activities run as high as a 1 sigma. Compare this with the manufacturing Six Sigma standard of 3.4 errors per opportunity for all processes.
  • A patient improves faster at home by 10 to 60 percent than in a healthcare facility.
  • In 2002, 13 percent of hospitals reported that they used EHRs (Electronic Health Records) (HIMSS, 2002). Physician office EHR use rates reported in 2002 ranged from 14 percent to a possible high of 28 percent, but there is almost no integration between systems, which is where the real value lies.
  • About 20 percent of U.S. products and services' extra cost is caused by the legal system.
  • In Canada, medical errors account for 9,000 to 24,000 deaths per year.
  • One in four babies born vaginally suffers injury.
  • One hip is fractured out of every 1,124 hospitalized seniors.
  • Adverse events occurred in 7.5 percent of medical or surgical admissions, 37 percent of which are deemed preventable.
  • Australia's adverse event rate is 16.6 percent (the Quality in Australian Healthcare Study Report).
  • The U.K.'s adverse event rate is about 10 percent (UK Department of Health).
  • Europe's adverse event rate is about 10 percent (European Working Party on Health).
  • In the U.K., the average waiting time to get into a hospital is 9 months after the doctor recommends an operation. The government is trying to improve this to 18 weeks.

If this isn't enough to make you stand up and pay attention, then this book isn't for you.

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