Lean Management for the Healthcare Revenue Cycle June 21, Michael Axon Vice President of Process Excellence Medical Reimbursements of America

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1 Lean Management for the Healthcare Revenue Cycle June 21, 2012 Michael Axon Vice President of Process Excellence Medical Reimbursements of America

2 Agenda History Manufacturing vs. Revenue Cycle Discovering the Process Problems Wastes Rules-in-Use 2

3 Objectives We will cover Basic lean ideas How the tools and ideas apply in Revenue Cycle work Tools you can use tomorrow to learn more about your process We will not Show you how to deploy lean throughout your organization Make you a lean expert Don t let BEST get in the way of BETTER.

4 4

5 Lean vs. Six Sigma Lean Maximizes customer value while minimizing waste. Eliminates waste along the value stream. Based on the Toyota Production System Six Sigma Improves the quality of process outputs by identifying and removing the causes of defects and minimizing variability. Developed by Motorola (1986), and made popular by GE (1995) 3.4 defects per million % defect free

6 Lean Management System Relentless focus on exposing and solving problems to eliminate waste in systems such that you can continuously provide increasing value. Rules-in-Use 8 Wastes Value Stream Mapping Daily Management A3 Thinking Standardized Work Root-Cause Problem Solving

7 7

8 Manufacturing Process Customer Order Entry Prod. Plan. CR Ingot Scalp Pre- Heat Hot Roll Cool Cold Roll Cool Slit 048 Pack PM Aleris 7 Specs 62 Specs Cut Backs 0.9 MM lbs 68 Specs QRA Holds 0.5 MM lbs 91 Specs Avail. Perf. Quality OEE 0% Avail. Perf. Quality OEE 0% Avail. 67% Perf. 73% Quality 100% OEE 49% Avail. Perf. Quality OEE 0% Avail. 64% Perf. 86% Quality 98% OEE 53% Avail. Perf. Quality OEE 0% Avail. Perf. Quality OEE 0% Avail. Perf. Quality OEE 0% Inventory Levels: Ingot 15.7 MM lbs Scalp + Pre-Heat 8.7 MM lbs Hot Line Cooling 5.0 MM lbs Hot Line Inventory 11.5 MM lbs CCM Cooling 4.9 MM lbs CCM Inventory 13.7 MM lbs FG on-site 16.5 MM lbs In-Transit 1.8 MM lbs FG off-site 47.6 MM lbs TOTAL INVENTORY: MM lbs Median Flow Time = 33 days 8

9 Revenue Cycle Process Hospital Patient Accounting System Billing System Imaging System Patient Registration Packet Quick Reg Medical Treatment Bedside Reg. (I-Plan) Coding Hold Final Bill Transmit to Emdeon Post Payments $0 Bal or Next Payer Placement & Reg. Notes Via FTP UB04 & 1500 Notes & Transactions AOB EOB IS MR UB reprint MRA Case Creation Triage Investigations Resolve MP Resolve Health Resolve Liability Close Account Patient Contact Center Invoice Follow Up Bill Invoice Follow Up Bill Invoice Follow Up Bill Payers Send Payment Process Bill Deny Payment

10 Manufacturing vs. Revenue Cycle 1. Defined outcomes 2. Cannot complete task with one touch 3. Don t know the product at the beginning

11 Revenue Cycle Waste 40% of revenue waste 30% of revenue waste 20% of revenue waste Potential Errors: Insurances Demographics Accident Information Potential Errors: Charge Capture Coding Negative Results: Missed Timely Filing Denials Underpayments Rework Significant opportunities to eliminate waste and ineffectiveness throughout the revenue cycle.

12 Where do I Start? Satisfaction Time Maximize Customer Value Minimize Waste Quality Financial

13 Ideal Process On-Demand Defect-Free 1x1 No Waste Immediate Response Safe Physical Emotional Professional

14 What is a Problem? 1. No Standard or Expectation I billed 25 accounts today. 2. Deviation from the Standard I am expected to bill 30 accounts/day. I billed 25 accounts today. 3. Not Ideal I am expected to bill 30 accounts/day. I found a way to regularly bill 35 accounts/day.

15 8 Wastes Defects WASTE DEFINITION REVENUE CYCLE EXAMPLES Over-Production Waiting Not Clear (Confusion) Transportation Inventory Motion Excess- Processing Information or services that do not meet the specification. Any situation where the supply and demand are not aligned. It is getting the right item, in the right amount, with the right timing. Time when people, information, equipment, or materials are not available to complete the task. People who are performing the work are not confident about the best way to perform the tasks. Movement of the patient or information that does not add value. Items that are not actively being processed. Movement of people that does not add value. Any time more work is done than the customer requires. These activities do not add value from the patient s (customer s) perspective. Incomplete and inaccurate registration data; denials and underpayments; miscoding Batching medical records in HIM Payment delays to providers and patients; delays in claims processing; waiting for information; patients waiting for care Coordination of benefits Chart flow through ED and HIM Medical records/claims waiting to be processed Multiple trips per patient by ED registrars to capture demographic and insurance information Rework; duplicate documentation; multiple requests for claim status and information

16 Rules-in-Use Embody what is truly fundamental in TPS. Harvard University Doctoral Thesis Dr. Steven Spear Codification of the implied rules that govern the Toyota Production System Validated by Toyota Steven Spear and H. Kent Bowen, Decoding the DNA of the Toyota Production System, Harvard Business Review, Sept.-Oct. 1999, p. 96

17 Rule 1 - Activities The work of each person should be highly specified: Content Sequence of Steps Time Required Location Outcome The activity should be designed with built-in tests to automatically signal if it was not performed as specified or if the expected outcome was not achieved.

18 Rule 1 and People Defines precisely how the work should be done Provides the means for quickly and visually alerting those closest to the work of a problem Provides the person with a pre-specified way to call for help Helps solve problems at the source... keeps reducing the difficulties a person faces in doing their job by incorporating the solution to the problem into the new standard It establishes the person doing the work as the expert in their work

19 Rule 2 - Connections The connection between every customer and supplier must be pre-specified to be: Direct Binary (simple, unambiguous, yes/no) Paced (element of time) Connections should be designed with built-in tests to automatically signal if a request does not trigger the expected response or if a response occurs without a request.

20 Customer/Supplier Relationships Request Response Supplier Customer

21 Rule 3 - Pathways Products, services and information must follow a pathway that is: Simple Pre-Specified No Forks and Looping. The pathways should be designed with built-in tests to automatically signal if a prescribed was not followed

22 Rule 4 - Improvement All improvements, for individual work, connections, or pathways, must be highly specified and: Use the Scientific Method Be Guided by a Teacher/Coach Occur at the Level in the Organization that is Closest to the Problem Design the improvement process with built-in tests to automatically signal if improvements are not being performed by the specified procedures and in the expected time or if the expected outcome is not achieved

23 Implications of Rule 4 People are not expected to learn and improve strictly on their own; coaching and assistance is provided within the system Managers have a major responsibility to teach Learning is primarily by frequent problem solving, guided by others who are more knowledgeable, experience or skilled. A learning and teaching supply chain connects various levels of the organization. Improvement never stops, because IDEAL is the end point, with everyone s efforts needed until it is achieved

24 Rules-in-Use Rule 1 Activities Request Request Request Request Request Response Response Response Response Response Rule 2 Connections Rule 3 Pathways Rule 4 Improvements Pre-specified Built-in Tests

25 Practice What problems do you see? What wastes do you see?

26 Where do I Start? Satisfaction Lean Tools Time Maximize Customer Value Minimize Waste Quality Ideals 8 Wastes Rules-in-Use Financial

27 Questions Michael Axon VP, Process Excellence Medical Reimbursements of America (615)

Pragmatic Problem-Solving for Healthcare: Principles, Tools, and Application Manimay Ghosh Dr. Durward K. Sobek, II Mechanical and Industrial Engineering Dept, Montana State University, Bozeman, MT Acknowledgement

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