HSA 4192 FIU Inmediata Data Breach Case Analysis Paper

This assignment allows us to view several historical/memorable occurrences in the healthcare field that have/will shape our future landscape. Each assignment has its own set of rules, but the general/basic rules still apply:

Historic Lesson/Case Analyses Assignment #1

All students review the healthcare data breaches details found here:

The submission should include these components:

This should summarize key details of the events that occurred. Yes, students must include information beyond what is provided in the above link and note “Wikipedia” is not a reliable source (but is a good starting point to gather general information). The grader will be looking for additional references beyond the course textbook and the provided link.

Using the course textbook, discuss one major concept that you feel the selected organization did not “master” which eventually lead to the breach. Be sure to substantiate your response with additional external sources (if necessary).

Daniel B. McLaughlin
John R. Olson
Healthcare
Operations
Management
Third EdiTion
AUPHA/HAP Editorial Board for Graduate Studies
Nir Menachemi, PhD, Chairman
Indiana University
LTC Lee W. Bewley, PhD, FACHE
University of Louisville
Jan Clement, PhD
Virginia Commonwealth University
Michael Counte, PhD
St. Louis University
Joseph F. Crosby Jr., PhD
Armstrong Atlantic State University
Mark L. Diana, PhD
Tulane University
Peter D. Jacobson, JD
University of Michigan
Brian J. Nickerson, PhD
Icahn School of Medicine at Mount Sinai
Mark A. Norrell, FACHE
Indiana University
Maia Platt, PhD
University of Detroit Mercy
Debra Scammon, PhD
University of Utah
Tina Smith
University of Toronto
Carla Stebbins, PhD
Des Moines University
Cynda M. Tipple, FACHE
Marymount University
Health Administration Press, Chicago, Illinois
Association of University Programs in Health Administration, Washington, DC
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Copyright © 2017 by the Foundation of the American College of Healthcare Executives.
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Library of Congress Cataloging-in-Publication Data
Names: McLaughlin, Daniel B., 1945– author. | Olson, John R. (Professor), author.
Title: Healthcare operations management / Daniel B. McLaughlin and John R. Olson.
Description: Third edition. | Chicago, Illinois : Health Administration Press; Washington, DC :
Association of University Programs in Health Administration, [2017] | Includes bibliographical
references and index.
Identifiers: LCCN 2016046001 (print) | LCCN 2016046925 (ebook) | ISBN 9781567938517
(alk. paper) | ISBN 9781567938524 (ebook) | ISBN 9781567938531 (xml) | ISBN
9781567938548 (epub) | ISBN 9781567938555 (mobi)
Subjects: LCSH: Medical care—Quality control. | Health services administration—Quality control. |
Organizational effectiveness. | Total quality management.
Classification: LCC RA399.A1 M374 2017 (print) | LCC RA399.A1 (ebook) | DDC 362.1068—
dc23
LC record available at https://lccn.loc.gov/2016046001
The paper used in this publication meets the minimum requirements of American National
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Health Administration Press
Association of University Programs
A division of the Foundation of the American   in Health Administration
College of Healthcare Executives
1730 M Street, NW
One North Franklin Street, Suite 1700
Suite 407
Chicago, IL 60606-3529
Washington, DC 20036
(312) 424-2800
(202) 763-7283
To my wife, Sharon, and daughters, Kelly and Katie, for their love and support
throughout my career.
—Dan McLaughlin
To my father, Adolph Olson, who passed away in 2011. Your strength as you
battled cancer inspired me to change and educate others about our healthcare
system.
—John Olson
The first edition of this book was coauthored by Julie Hays. During the final
stages of the completion of the book, Julie unexpectedly died. As Dr. Christopher
Puto, dean of the Opus College of Business at the University of St. Thomas, said,
“Julie cared deeply about students and their learning experience, and she was
an accomplished scholar who was well respected by her peers.” This book is a final
tribute to Julie’s accomplished career and is dedicated to her legacy.
—Dan McLaughlin
and John Olson
BRIEF CONTENTS
Preface………………………………………………………………………………………….xv
Part I Introduction to Healthcare Operations
Chapter 1. The Challenge and the Opportunity……………………………..3
Chapter 2. History of Performance Improvement…………………………17
Chapter 3. Evidence-Based Medicine and Value-Based Purchasing…..45
Part II Setting Goals and Executing Strategy
Chapter 4. Strategy and the Balanced Scorecard……………………………71
Chapter 5. Project Management………………………………………………..97
Part III Performance Improvement Tools, Techniques, and Programs
Chapter 6. Tools for Problem Solving and Decision Making…………135
Chapter 7. Statistical Thinking and Statistical Problem Solving………167
Chapter 8.
Healthcare Analytics………………………………………………203
Chapter 9. Quality Management: Focus on Six Sigma………………….221
Chapter 10. The Lean Enterprise……………………………………………….255
Part IV Applications to Contemporary Healthcare Operations Issues
Chapter 11. Process Improvement and Patient Flow……………………..281
Chapter 12. Scheduling and Capacity Management……………………….323
Chapter 13. Supply Chain Management………………………………………345
Chapter 14. Improving Financial Performance with Operations
Management…………………………………………………………369
vii
viii
B rief Co n t ents
Part V Putting It All Together for Operational Excellence
Chapter 15. Holding the Gains………………………………………………….391
Glossary……………………………………………………………………………………..411
Index…………………………………………………………………………………………419
About the Authors…………………………………………………………………………437
DETAILED CONTENTS
Preface………………………………………………………………………………………….xv
Part I Introduction to Healthcare Operations
Chapter 1. The Challenge and the Opportunity……………………………..3
Overview…………………………………………………………………3
The Purpose of This Book…………………………………………..3
The Challenge…………………………………………………………..4
The Opportunity ………………………………………………………6
A Systems Look at Healthcare……………………………………..8
An Integrating Framework for Operations Management
in Healthcare………………………………………………………12
Conclusion……………………………………………………………..15
Discussion Questions……………………………………………….15
References………………………………………………………………15
Chapter 2. History of Performance Improvement…………………………17
Operations Management in Action……………………………..17
Overview……………………………………………………………….17
Background……………………………………………………………18
Knowledge-Based Management………………………………….20
History of Scientific Management……………………………….22
Project Management………………………………………………..26
Introduction to Quality…………………………………………….27
Philosophies of Performance Improvement…………………..34
Supply Chain Management………………………………………..38
Big Data and Analytics……………………………………………..40
Conclusion……………………………………………………………..41
Discussion Questions……………………………………………….41
References………………………………………………………………42
Chapter 3. Evidence-Based Medicine and Value-Based Purchasing…..45
Operations Management in Action……………………………..45
ix
x
Det a iled Co n te n ts
Overview……………………………………………………………….45
Evidence-Based Medicine………………………………………….46
Tools to Expand the Use of Evidence-Based Medicine……54
Clinical Decision Support………………………………………….59
The Future of Evidence-Based Medicine and Value
Purchasing………………………………………………………….62
Vincent Valley Hospital and Health System and Pay for
Performance……………………………………………………….63
Conclusion……………………………………………………………..64
Discussion Questions……………………………………………….64
Note……………………………………………………………………..64
References………………………………………………………………65
Part II Setting Goals and Executing Strategy
Chapter 4. Strategy and the Balanced Scorecard……………………………71
Operations Management in Action……………………………..71
Overview……………………………………………………………….71
Moving Strategy to Execution……………………………………72
The Balanced Scorecard in Healthcare ………………………..75
The Balanced Scorecard as Part of a Strategic
Management System…………………………………………….76
Elements of the Balanced Scorecard System………………….76
Conclusion……………………………………………………………..93
Discussion Questions……………………………………………….93
Exercises………………………………………………………………..94
References………………………………………………………………94
Further Reading………………………………………………………95
Chapter 5. Project Management………………………………………………..97
Operations Management in Action …………………………….97
Overview……………………………………………………………….97
Definition of a Project………………………………………………99
Project Selection and Chartering………………………………100
Project Scope and Work Breakdown………………………….107
Scheduling……………………………………………………………113
Project Control……………………………………………………..117
Quality Management, Procurement, the Project
Management Office, and Project Closure……………….120
Agile Project Management………………………………………124
Innovation Centers…………………………………………………125
D etailed C ontents
The Project Manager and Project Team……………………..126
Conclusion……………………………………………………………129
Discussion Questions……………………………………………..129
Exercises………………………………………………………………129
References…………………………………………………………….130
Further Reading…………………………………………………….130
Part III Performance Improvement Tools, Techniques, and Programs
Chapter 6. Tools for Problem Solving and Decision Making…………135
Operations Management in Action……………………………135
Overview……………………………………………………………..135
Decision-Making Framework……………………………………136
Mapping Techniques………………………………………………138
Problem Identification Tools……………………………………143
Analytical Tools……………………………………………………..153
Implementation: Force Field Analysis………………………..162
Conclusion……………………………………………………………163
Discussion Questions……………………………………………..163
Exercises………………………………………………………………164
References…………………………………………………………….165
Chapter 7. Statistical Thinking and Statistical Problem Solving………167
Operations Management in Action……………………………167
Overview: Statistical Thinking in Healthcare……………….167
Foundations of Data Analysis……………………………………169
Graphic Tools………………………………………………………..169
Mathematical Descriptions………………………………………174
Probability……………………………………………………………178
Confidence Intervals and Hypothesis Testing………………185
Simple Linear Regression………………………………………..192
Conclusion……………………………………………………………198
Discussion Questions……………………………………………..199
Exercises………………………………………………………………199
References…………………………………………………………….201
Chapter 8. Healthcare Analytics……………………………………………….203
Operations Management in Action……………………………203
Overview……………………………………………………………..203
What Is Analytics in Healthcare?……………………………….203
Introduction to Data Analytics…………………………………205
xi
xii
Det a iled Co n te n ts
Data Visualization………………………………………………….209
Data Mining for Discovery………………………………………214
Conclusion……………………………………………………………217
Discussion Questions……………………………………………..218
Note……………………………………………………………………218
References ……………………………………………………………219
Chapter 9. Quality Management—Focus on Six Sigma………………..221
Operations Management in Action……………………………221
Overview……………………………………………………………..221
Defining Quality……………………………………………………222
Cost of Quality………………………………………………………223
The Six Sigma Quality Program………………………………..225
Additional Quality Tools…………………………………………240
Riverview Clinic Six Sigma Generic Drug Project………..245
Conclusion……………………………………………………………250
Discussion Questions……………………………………………..250
Exercises………………………………………………………………250
References…………………………………………………………….253
Chapter 10. The Lean Enterprise……………………………………………….255
Operations Management in Action……………………………255
Overview……………………………………………………………..255
What Is Lean?……………………………………………………….256
Types of Waste………………………………………………………257
Kaizen………………………………………………………………….259
Value Stream Mapping……………………………………………259
Additional Measures and Tools…………………………………261
The Merging of Lean and Six Sigma Programs……………274
Conclusion……………………………………………………………276
Discussion Questions……………………………………………..276
Exercises………………………………………………………………277
References…………………………………………………………….277
Part IV Applications to Contemporary Healthcare Operations Issues
Chapter 11. Process Improvement and Patient Flow……………………..281
Operations Management in Action……………………………281
Overview……………………………………………………………..281
Problem Types………………………………………………………282
Patient Flow………………………………………………………….283
D etailed C ontents
Process Improvement Approaches…………………………….284
The Science of Lines: Queuing Theory ……………………..292
Process Improvement in Practice………………………………304
Conclusion……………………………………………………………318
Discussion Questions……………………………………………..319
Exercises………………………………………………………………319
References…………………………………………………………….320
Further Reading…………………………………………………….321
Chapter 12. Scheduling and Capacity Management……………………….323
Operations Management in Action……………………………323
Overview……………………………………………………………..323
Hospital Census and Rough-Cut Capacity Planning…….324
Staff Scheduling…………………………………………………….326
Job and Operation Scheduling and Sequencing Rules…..330
Patient Appointment Scheduling Models……………………334
Advanced-Access Patient Scheduling………………………….337
Conclusion……………………………………………………………341
Discussion Questions……………………………………………..341
Exercises………………………………………………………………341
References…………………………………………………………….342
Chapter 13. Supply Chain Management………………………………………345
Operations Management in Action……………………………345
Overview……………………………………………………………..345
Supply Chain Management………………………………………346
Tracking and Managing Inventory…………………………….347
Demand Forecasting………………………………………………349
Order Amount and Timing……………………………………..354
Inventory Systems………………………………………………….362
Procurement and Vendor Relationship Management…….364
Strategic View……………………………………………………….364
Conclusion……………………………………………………………365
Discussion Questions……………………………………………..366
Exercises………………………………………………………………366
References…………………………………………………………….368
Chapter 14. Improving Financial Performance with Operations
Management…………………………………………………………369
Operations Management in Action……………………………369
Overview: The Financial Pressure for Change……………..369
xiii
xiv
Det a iled Co n te n ts
Making Ends Meet on Medicare and the Pressure of
Narrow Networks………………………………………………370
Conclusion……………………………………………………………386
Discussion Questions……………………………………………..386
Exercises………………………………………………………………387
Note……………………………………………………………………387
References…………………………………………………………….387
Part V Putting It All Together for Operational Excellence
Chapter 15. Holding the Gains………………………………………………….391
Overview……………………………………………………………..391
Approaches to Holding Gains…………………………………..391
Which Tools to Use: A General Algorithm………………….397
Data and Statistics………………………………………………….404
Operational Excellence……………………………………………405
The Healthcare Organization of the Future………………..407
Conclusion……………………………………………………………408
Discussion Questions……………………………………………..408
Case Study……………………………………………………………409
References…………………………………………………………….410
Glossary……………………………………………………………………………………..411
Index…………………………………………………………………………………………419
About the Authors…………………………………………………………………………437
PREFACE
This book is intended to help healthcare professionals meet the challenges and
take advantage of the opportunities found in healthcare today. We believe that
the answers to many of the dilemmas faced by the US healthcare system, such
as increasing costs, inadequate access, and uneven quality, lie in organizational
operations—the nuts and bolts of healthcare delivery. The healthcare arena is
filled with opportunities for significant operational improvements. We hope that
this book encourages healthcare management students and working professionals to find ways to improve the management and delivery of healthcare, thereby
increasing the effectiveness and efficiency of tomorrow’s healthcare system.
Many industries outside healthcare have successfully used the programs,
techniques, and tools of operations improvement for decades. Leading healthcare organizations have now begun to employ the same tools. Although numerous other operations management texts are available, few focus on healthcare
operations, and none takes an integrated approach. Students interested in
healthcare process improvement have difficulty seeing the applicability of the
science of operations management when most texts focus on widgets and
production lines rather than on patients and providers.
This book covers the basics of operations improvement and provides
an overview of the significant trends in the healthcare industry. We focus on
the strategic implementation of process improvement programs, techniques,
and tools in the healthcare environment, with its complex web of reimbursement systems, physician relations, workforce challenges, and governmental
regulations. This integrated approach helps healthcare professionals gain an
understanding of strategic operations management and, more important, its
applicability to the healthcare field.
How This Book Is Organized
We have organized this book into five parts:
1. Introduction to Healthcare Operations
2. Setting Goals and Executing Strategy
3. Performance Improvement Tools, Techniques, and Programs
xv
xvi
Prefa c e
4. Applications to Contemporary Healthcare Operations Issues
5. Putting It All Together for Operational Excellence
Although this structure is helpful for most readers, each chapter also stands
alone, and the chapters can be covered or read in any order that makes sense
for a particular course or student.
The first part of the book, Introduction to Healthcare Operations,
begins with an overview of the challenges and opportunities found in today’s
healthcare environment (chapter 1). We follow with a history of the field
of management science and operations improvement (chapter 2). Next, we
discuss two of the most influential environmental changes facing healthcare
today: evidence-based medicine and value-based purchasing, or simply value
purchasing (chapter 3).
In part II, Setting Goals and Executing Strategy, chapter 4 highlights the
importance of tying the strategic direction of the organization to operational
initiatives. This chapter outlines the use of the balanced scorecard technique
to execute and monitor these initiatives toward achieving organizational objectives. Typically, strategic initiatives are large in scope, and the tools of project
management (chapter 5) are needed to successfully manage them. Indeed, the
use of project management tools can help to ensure the success of any size
project. Strategic focus and project management provide the organizational
foundation for the remainder of this book.
The next part of the book, Performance Improvement Tools, Techniques, and Programs, provides an introduction to basic decision-making and
problem-solving processes and describes some of the associated tools (chapter
6). Most performance improvement initiatives (e.g., Six Sigma, Lean) follow
these same processes and make use of some or all of the tools discussed in
chapter 6.
Good decisions and effective solutions are based on facts, not intuition.
Chapter 7 provides an overview of data collection processes and analysis techniques to enable fact-based decision making. Chapter 8 builds on the statistical
approaches of chapter 7 by presenting the new tools of advanced analytics and
big data.
Six Sigma, Lean, simulation, and supply chain management are specific
philosophies or techniques that can be used to improve processes and systems.
The Six Sigma methodology (chapter 9) is the latest manifestation of the use of
quality improvement tools to reduce variation and errors in a process. The Lean
methodology (chapter 10) is focused on eliminating waste in a system or process.
The fourth section of the book, Applications to Contemporary Healthcare Operations Issues, begins with an integrated approach to applying the
various tools and techniques for process improvement in the healthcare environment (chapter 11). We then focus on a special and important case of process
improvement: patient scheduling in the ambulatory setting (chapter 12).
Prefac e
Supply chain management extends the boundaries of the hospital or
healthcare system to include both upstream suppliers and downstream customers, and this is the focus of chapter 13. The need to “bend” the healthcare
cost inflation curve downward is one of the most pressing issues in healthcare
today, and the use of operations management tools to achieve this goal is
addressed in chapter 14.
Part V, Putting It All Together for Operational Excellence, concludes
the book with a discussion of strategies for implementing and maintaining the
focus on continuous improvement in healthcare organizations (chapter 15).
Many features in this book should enhance student understanding and
learning. Most chapters begin with a vignette, called Operations Management in
Action, that offers a real-world example related to the content of that chapter.
Throughout the book, we use a fictitious but realistic organization, Vincent
Valley Hospital and Health System, to illustrate the various tools, techniques,
and programs discussed. Each chapter concludes with questions for discussion,
and parts II through IV include exercises to be solved.
We include abundant examples throughout the text of the use of various
contemporary software tools essential for effective operations management.
Readers will see notes appended to some of the exhibits, for example, that
indicate what software was used to create charts, graphs, and so on from the
data provided. Healthcare leaders and managers must be experts in the application of these tools and stay current with the latest versions. Just as we ask
healthcare providers to stay up-to-date with the latest clinical advances, so too
must healthcare managers stay current with basic software tools.
Acknowledgments
A number of people contributed to this work. Dan McLaughlin would like to
thank his many colleagues at the University of St. Thomas Opus College of
Business. Specifically, Dr. Ernest Owens provided guidance on the project management chapter, and Dr. Michael Sheppeck assisted on the human resources
implications of operations improvement. Dean Stefanie Lenway and Associate
Dean Michael Garrison encouraged and supported this work and helped create
our new Center for Innovation in the Business of Healthcare.
Dan would also like to thank the outstanding professionals at Hennepin
County Medical Center in Minneapolis, Minnesota, who provided many of the
practical and realistic examples in this book. They continue to be invaluable
healthcare resources for all of the residents of Minnesota.
John Olson would like to thank his many colleagues at the University
of St. Thomas Opus College of Business. In addition, he would like to thank
the Minnesota Hospital Association (MHA). Attributing much of his understanding of healthcare analytics to working with the highly professional staff
xvii
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Prefa c e
of the MHA, he wishes to acknowledge Rahul Korrane, Tanya Daniels, Mark
Sonneborn, and Julie Apold (now with Optum) as true agents for change in
the US healthcare system.
The dedicated employees of the Veterans Administration have helped
John embrace the challenges that confront healthcare today—in particular
Christine Wolohan, Lori Fox, Susan Chattin, Eric James, Denise Lingen, and
Carl (Marty) Young of the continuous improvement group, who are helping
to create an organization of excellence. John acknowledges their dedication to
serving US veterans and the amazing, high-quality service they deliver.
John and Dan also want to thank the skilled professionals of Health
Administration Press for their support, especially Janet Davis, acquisitions editor, and Joyce Dunne, who edited this third edition.
Finally, this book still contains many passages that were written by Julie
Hays and are a tribute to her skill and dedication to the field of operations
management.
Instructor Resources
This book’s Instructor Resources include PowerPoint slides; an updated
test bank; teaching notes for the end-of-chapter exercises; Excel files and
cases for selected chapters; and new case studies, for most chapters,
with accompanying teaching notes. Each of the new case studies is one to
three pages long and is suitable for one class session or an online learning
module.
For the most up-to-date information about this book and its Instructor
Resources, visit ache.org/HAP and browse for the book’s title or author
names.
This book’s Instructor Resources are available to instructors who adopt
this book for use in their course. For access information, please e-mail
hapbooks@ache.org.
Student Resources
Case studies, exercises, tools, and web links to resources are available at
ache.org/books/OpsManagement3.
PART
I
INTRODUCTION TO
HEALTHCARE OPERATIONS
CHAPTER
THE CHALLENGE AND THE OPPORTUNITY
The Purpose of This Book
Excellence in healthcare derives from
four major areas of expertise: clinical
care, population health, leadership,
and operations. Although clinical
expertise, the health of a population,
and leadership are critical to an organization’s success, this book focuses
on operations—how to deliver highquality health services in a consistent,
efficient manner.
Many books cover operational improvement tools, and some
focus on using these tools in healthcare environments. So why have we
devoted a book to the broad topic
of healthcare operations? Because we
see a need for organizations to adopt
an integrated approach to operations
improvement that puts all the tools
in a logical context and provides a
road map for their use. An integrated
approach uses a clinical analogy: First,
find and diagnose an operations issue.
Second, apply the appropriate treatment tool to solve the problem.
The field of operations research
and management science is too deep
to cover in one book. In Healthcare
Operations Management, only those
tools and techniques currently being
deployed in leading healthcare organizations are covered, in part so that we
may describe them in enough detail
1
OV E RVI E W
The challenges and opportunities in today’s complex healthcare
delivery systems demand that leaders take charge of their operations. A strong operations focus can reduce costs, increase safety—for
patients, visitors, and staff alike—improve clinical outcomes, and allow
an organization to compete effectively in an aggressive marketplace.
In the recent past, success for many organizations in the US
healthcare system has been achieved by executing a few critical strategies: First, attract and retain talented clinicians. Next, add new technology and specialty care services. Finally, find new methods to maximize
the organization’s reimbursement for these services. In most organizations, new services, not ongoing operations, were the key to success.
However, that era is ending. Payer resistance to cost
increases and a surge in public reporting on the quality of healthcare are forces driving a major change in strategy. The passage of
the Affordable Care Act (ACA) in 2010 represented a culmination
of these forces. Although portions of this law may be repealed or
changed, the general direction of health policy in the United States
has been set. To succeed in this new environment, a healthcare
enterprise must focus on making significant improvements in its
core operations.
This book is about improvement and how to get things done.
It offers an integrated, systematic approach and set of contemporary
operations improvement tools that can be used to make significant
gains in any organization. These tools have been successfully deployed
in much of the global business community for more than 40 years and
now are being used by leading healthcare delivery organizations.
This chapter outlines the purpose of the book, identifies
challenges that healthcare systems currently face, presents a systems
view of healthcare, and provides a comprehensive framework for the
use of operations tools and methods in healthcare. Finally, Vincent
Valley Hospital and Health System (VVH), the fictional healthcare
delivery system used in examples throughout the book, is described.
3
4
Hea lt h c a re O p e ra ti o n s M a n a g e me n t
to enable students and practitioners to use them in their work. Each chapter provides many references for further reading and deeper study. We also
include additional resources, case studies, exercises,
On the web at
and tools on the companion website that accompanies
ache.org/books/OpsManagement3
this book.
This book is organized so that each chapter builds on the previous one
and is cross-referenced. However, each chapter also stands alone, so a reader
interested in Six Sigma can start in chapter 9 and then move to the other
chapters in any order he wishes.
This book does not specifically explore quality in healthcare as defined
by the many agencies that have as their mission to ensure healthcare quality,
such as The Joint Commission, the National Committee for Quality Assurance,
the National Quality Forum, and some federally funded quality improvement
organizations. In particular, The Healthcare Quality Book: Vision, Strategy,
and Tools (Joshi et al. 2014) delves into this perspective in depth and may be
considered a useful companion to this book. However, the systems, tools, and
techniques discussed here are essential to completing the operational improvements needed to meet the expectations of these quality assurance organizations.
The Challenge
Agency for
Healthcare
Research and
Quality (AHRQ)
A federal agency
that is part of
the Department
of Health and
Human Services.
It provides
leadership and
funding to identify
and communicate
the most effective
methods to deliver
high-quality
healthcare in the
United States.
Health spending is projected to grow 1.3 percent faster per year than the gross
domestic product (GDP) between 2015 and 2025. As a result, the health share
of GDP is expected to rise from 17.5 percent in 2014 to 20.1 percent by 2025
(CMS 2015). In addition, healthcare spending is placing increasing pressure
on the federal budget. In its expenditure report summary, the Centers for
Medicare & Medicaid Services (CMS 2015) notes that “federal, state and local
governments are projected to finance 47 percent of national health spending
by 2024 (from 45 percent in 2014).”
Despite the high cost, the value delivered by the system has been questioned by many policymakers. For example, unexplained quality variations in
healthcare were estimated in 1999 to result in 44,000 to 98,000 preventable
deaths every year (IOM 1999). And those problems persist. A 2010 study of
hospitals in North Carolina showed a high rate of adverse events, unchanged
over time even though hospitals had sought to improve the safety of inpatient
care (Landrigan et al. 2010).
Clearly, the pace of quality improvement is slow. “National Healthcare
Quality Report, 2009,” published by the Agency for Healthcare Research
and Quality (AHRQ), reported: “Quality is improving at a slow pace. Of
the 33 core measures, two-thirds improved, 14 (42%) with a rate between 1%
and 5% per year and 8 (24%) with a rate greater than 5% per year. . . . The
C h a p te r 1: The C hallenge and the Op p or tunity
median rate of change was 2% per year. Across all 169 measures, results were
similar, although the median rate of change was slightly higher at 2.3% per
year” (AHRQ 2010).
These problems were studied in the landmark work of the Institute of
Medicine (IOM), Crossing the Quality Chasm: A New Health System for the 21st
Century. The IOM (2001) panel concluded that the knowledge to improve
patient care is available, but a gap—a chasm—separates that knowledge from
everyday practice. The panel summarized the goals of a new health system in
terms of six aims, as described in exhibit 1.1.
Although this seminal work was published more than a decade ago, its
goals still guide much of the quality improvement effort today.
Many healthcare leaders are addressing these issues by capitalizing on
proven tools employed by other industries to ensure high performance and
quality outcomes. For major change to occur in the US health system, however,
these strategies must be adopted by a broad spectrum of healthcare providers
and implemented consistently throughout the continuum of care—in ambulatory, inpatient, acute, and long-term care settings—to undergird population
health initiatives.
The payers for healthcare must engage with the delivery system to find
new ways to partner for improvement. In addition, patients need to assume
strong financial and self-care roles in this new system. The ACA and subsequent
health policy initiatives provide many new policies to support the achievement
of these goals.
Although not all of the IOM goals can be accomplished through operational improvements, this book provides methods and tools to actively change
the system toward accomplishing several aspects of these aims.
1. Safe, avoiding injuries to patients from the care that is intended to help
them
2. Effective, providing services based on scientific knowledge to all who
could benefit, and refraining from providing services to those not likely
to benefit (avoiding underuse and overuse, respectively);
3. Patient centered, providing care that is respectful of and responsive to
individual patient preferences, needs, and values, and ensuring that
patient values guide all clinical decisions;
4. Timely, reducing wait times and harmful delays for both those who
receive and those who give care;
5. Efficient, avoiding waste of equipment, supplies, ideas, and energy; and
6. Equitable, providing care that does not vary in quality because of personal characteristics such as gender, ethnicity, geographic location, and
socioeconomic status.
Source: Information from IOM (2001).
5
Institute of
Medicine (IOM)
The healthcare
arm of the
National Academy
of Sciences; an
independent,
nonprofit
organization
providing unbiased
and authoritative
advice to decision
makers and the
public.
EXHIBIT 1.1
Six Aims for
the US Health
System
6
Hea lt h c a re O p e ra ti o n s M a n a g e me n t
The Opportunity
While the current US health system presents numerous challenges, opportunities for improvement are emerging as well. A number of major trends provide
hope that significant change is possible. The following trends represent this
groundswell:
• Informatics systems are maturing, and big data and analytics tools are
becoming ever more powerful.
• Automation, robots, and the Internet of Things will begin to replace
human labor in healthcare.
• Supply chains and the relationships among health plans, healthcare
systems, and individual providers are changing through mergers,
partnerships, and acquisitions.
• Primary care is being redesigned with new provider models and new
tools, such as telemedicine and mobile applications.
• Medicine itself is undergoing rapid change with the adoption of
precision medicine tools, such as pharmacogenomics, to individualize
patient treatments.
• A new emphasis on population health accountability and management
will lead to healthier environments and lifestyles.
Evidence-Based Medicine
Evidence-based
medicine (EBM)
The conscientious
and judicious
use of the best
current evidence in
making decisions
about the care of
individual patients.
The use of evidence-based medicine (EBM) for the delivery of healthcare in
the United States is the result of 40 years of work by some of the most progressive and thoughtful practitioners in the nation. The movement has produced
an array of care guidelines, care patterns, and shared decision-making tools
for caregivers and patients.
The impact of EBM on care delivery can be powerful. Rotter and colleagues (2010) reviewed 27 studies worldwide including 11,938 patients and
assessed the use of clinical pathways. They found that the cost of care for patients
whose treatment was delivered using the pathways was $4,919 per admission
less than for those who did not receive pathway-centered care.
Comprehensive resources are available to healthcare organizations that
wish to emphasize EBM. For example, the National Guideline Clearinghouse
(NGC 2016) is a comprehensive database of more than 4,000 evidence-based
clinical practice guidelines and related documents. NGC is an initiative of
AHRQ, which itself is a division of the US Department of Health and Human
Services. NGC was originally created in partnership with the American Medical
Association and American Association of Health Plans, now America’s Health
Insurance Plans.
C h a p te r 1: The C hallenge and the Op p or tunity
Evidence-Based Medicine (EBM)
The Institute of Medicine has been a leading advocate for comparative effectiveness research, the National Academy of Sciences’ concomitant deployment of EBM. The IOM Roundtable on Value and Science-Driven Healthcare
has set a “goal that by the year 2020, 90 percent of clinical decisions will be
supported by accurate, timely, and up-to-date clinical information and will
reflect the best available evidence” (IOM 2011, 4; emphasis in original).
To achieve this end, the IOM Roundtable recommends a sophisticated
set of processes and infrastructure, which it describes as follows (IOM 2011, 10).
Infrastructure Required for Comparative Effectiveness Research: Common
Themes
• Care that is effective and efficient stems from the integrity of the
infrastructure for learning.
• Coordinating work and ensuring standards are key components of the
evidence infrastructure.
• Learning about effectiveness must continue beyond the transition from
testing to practice.
• Timely and dynamic evidence of clinical effectiveness requires bridging
research and practice.
• Current infrastructure planning must build to future needs and
opportunities.
• Keeping pace with technological innovation compels more than a headto-head and time-to-time focus.
• Real-time learning depends on health information technology
investment.
• Developing and applying tools that foster real-time data analysis is an
important element.
• A trained workforce is a vital link in the chain of evidence stewardship.
• Approaches are needed that draw effectively on both public and private
capacities.
• Efficiency and effectiveness compel globalizing evidence and localizing
decisions.
In short, EBM is the conscientious and judicious use of the best current evidence in making decisions about the care of individual patients.
Big Data and Analytics
Healthcare delivery has been slow to adopt information technologies, but
many organizations have now implemented electronic health record (EHR)
systems and other automated tools. Although implementation of these systems
7
8
Hea lt h c a re O p e ra ti o n s M a n a g e me n t
has sometimes been organizationally painful, EHRs are now becoming mature
enough to have a substantial positive impact on operations.
In addition, data science computer engineering has evolved to provide
significant new tools in the following areas:
Health savings
account (HSA)
A personal
monetary account
that can only be
used for healthcare
expenses. The
funds are not
taxed, and the
balance can be
rolled over from
year to year. HSAs
are normally
used with highdeductible health
insurance plans.
Consumer-directed
healthcare
In general,
the consumer
(patient) is well
informed about
healthcare prices
and quality and
makes personal
buying decisions
on the basis of
this information.
The health
savings account
is frequently
included as a key
component of
consumer-directed
healthcare.
Patient care
microsystem
The level of
healthcare
delivery that
includes providers,
technology,
and treatment
processes.
• Big data storage and retrieval—high volume, high velocity, and high
variety of data types
• New analytical tools for reporting and prediction
• Portable and wearable devices
• Interoperabilty of devices and databases
Chapter 8 describes a set of analytical tools to fully utilize these new resources.
Active and Engaged Consumers
Consumers are assuming new roles in their own care through the use of health
education and information and by partnering effectively with their healthcare
providers. Personal maintenance of wellness though a healthy lifestyle is one
essential component. Understanding one’s disease and treatment options and
having an awareness of the cost of care are also important responsibilities of
the consumer.
Patients are becoming good consumers of healthcare by finding and
considering price information when selecting providers and treatments. Many
employers now offer high-deductible health plans with accompanying health
savings accounts (HSAs). This type of consumer-directed healthcare is likely
to grow and increase pressure on providers to deliver cost-effective, customersensitive, high-quality care. In addition, the ACA provides new tools for employers to motivate their employees financially to engage in healthy lifestyles.
The healthcare delivery system of the future will support and empower
active, informed consumers.
A Systems Look at Healthcare
The Clinical System
To participate in the improvement of healthcare operations, healthcare leaders
must understand the series of interconnected systems that influence the delivery
of clinical care (exhibit 1.2).
In the patient care microsystem, the healthcare professional provides
hands-on care to the patient. Elements of the clinical microsystem include
• the team of health professionals who provide clinical care to the patient,
• the tools that the team has at its disposal to diagnose and treat the
patient (e.g., imaging capabilities, laboratory tests, drugs), and
C h a p te r 1: The C hallenge and the Op p or tunity
9
EXHIBIT 1.2
A Systems View
of Healthcare
Environment
Level D
Organization
Level C
Microsystem
Level B
Patient
Level A
Source: Ransom, Joshi, and Nash (2005). Based on Ferlie, E., and S. M. Shortell. 2001. “Improving
the Quality of Healthcare in the United Kingdom and the United States: A Framework for Change.”
Milbank Quarterly 79 (2): 281–316.
• the logic for determining the appropriate treatments and the processes
to deliver that care.
Because common conditions (e.g., hypertension) affect a large number
of patients, clinical research has been conducted to determine the most effective ways to treat these patients. Therefore, in many cases, the organization
and functioning of the microsystem can be optimized. Process improvements
can be made at this level to ensure that the most effective, least costly care is
delivered. In addition, the use of EBM guidelines can help ensure that the
patient receives the correct treatment at the correct time.
The organizational infrastructure also influences the effective delivery
of care to the patient. Ensuring that providers have the correct tools and skills
is an important element of infrastructure.
The EHR is one of the most important advances in the clinical microsystem for both process improvement and the wider adoption of EBM.
Another key component of infrastructure is the leadership displayed by
senior staff. Without leadership, progress and change do not occur.
Finally, the environment strongly influences the delivery of care. Key
environmental factors include market competition, government regulation,
demographics, and payer policies. An organization’s strategy is frequently influenced by such factors (e.g., a new regulation from Medicare, a new competitor).
Many of the systems concepts regarding healthcare delivery were initially developed by Avedis Donabedian. These fundamental contributions are
discussed in depth in chapter 2.
10
Hea lt h c a re O p e ra ti o n s M a n a g e me n t
System Stability and Change
Elements in each layer of this system interact. Peter Senge (1990) provides a
useful theory for understanding the interaction of elements in a complex system
such as healthcare. In his model, the structure of a system is the primary mechanism for producing an outcome. For example, the presence of an organized
structure of facilities, trained professionals, supplies, equipment, and EBM care
guidelines leads to a high probability of producing an expected clinical outcome.
No system is ever completely stable. Each system’s performance is modified and controlled by feedback (exhibit 1.3). Senge (1990, 75) defines feedback
as “any reciprocal flow of influence. In systems thinking it is an axiom that every
influence is both cause and effect.” As shown in exhibit 1.3, increased salaries
provide an incentive for employees to achieve improvement in performance
level. This improved performance leads to enhanced financial performance
and profitability for the organization, and increased profits provide additional
funds for higher salaries, and the cycle continues. Another frequent example in
healthcare delivery is patient lab results that directly influence the medication
EXHIBIT 1.3
Systems with
Reinforcing
and Balancing
Feedback
Employee
motivation
+
+
Financial
performance,
profit
Salaries
+
–
Actual
staffing
level
Add or
reduce staff
–
Compare actual to
needed staff based
on patient demand
C h a p te r 1: The C hallenge and the Op p or tunity
ordered by a physician. A third example is a financial report that shows an
over-expenditure in one category that prompts a manager to reduce spending
to meet budget goals.
A more complete definition of a feedback-driven operational system
includes an operational process, a sensor that monitors process output, a feedback loop, and a control that modifies how the process operates.
Feedback can be either reinforcing or balancing. Reinforcing feedback
prompts change that builds on itself and amplifies the outcome of a process,
taking the process further and further from its starting point. The effect of reinforcing feedback can be either positive or negative. For example, a reinforcing
change of positive financial results for an organization could lead to increases
in salaries, which would then lead to even better financial performance because
the employees are highly motivated. In contrast, a poor supervisor could cause
employee turnover, possibly resulting in short staffing and even more turnover.
Balancing feedback prompts change that seeks stability. A balancing
feedback loop attempts to return the system to its starting point. The human
body provides a good example of a complex system that has many balancing
feedback mechanisms. For example, an overheated body prompts perspiration
until the body is cooled through evaporation. The clinical term for this type
of balance is homeostasis. A treatment process that controls drug dosing via
real-time monitoring of the patient’s physiological responses is an example of
balancing feedback. Inpatient unit staffing levels that determine where in a
hospital patients are admitted is another. All of these feedback mechanisms are
designed to maintain balance in the system.
A confounding problem with feedback is delay. Delays occur when
interruptions arise between actions and consequences. In the midst of delays,
systems tend to “overshoot” and thus perform poorly. For example, an emergency department might experience a surge in patients and call in additional
staff. When the surge subsides, the added staff stay on shift but are no longer
needed, and unnecessary expense is incurred.
As healthcare leaders focus on improving their operations, they must
understand the systems in which change resides. Every change will be resisted
and reinforced by feedback mechanisms, many of which are not clearly visible.
Taking a broad systems view can improve the effectiveness of change.
Many subsystems in the total healthcare system are interconnected.
These connections have feedback mechanisms that either reinforce or balance
the subsystem’s performance. Exhibit 1.4 shows a simple connection that originates in the environmental segment of the total health system. Each process
has both reinforcing and balancing feedback.
This general systems model can be converted to a more quantitative
system dynamics model, which is useful as part of a predictive analytics system.
This concept is addressed in more depth in chapter 8.
11
12
Hea lt h c a re O p e ra ti o n s M a n a g e me n t
EXHIBIT 1.4
Linkages Within
the Healthcare
System:
Chemotherapy
Payers want
to reduce
costs for
chemotherapy
New payment
method for
chemotherapy
is created
Chemotherapy
treatment needs to
be more efficient to
meet payment
levels
Environment
Organization
Clinical microsystem
Changes are made in
care processes and
support systems to
maintain quality
while reducing costs
Patient
An Integrating Framework for Operations Management in
Healthcare
The five-part framework of this book (illustrated in exhibit 1.5) reflects our view
that effective operations management in healthcare consists of highly focused
strategy execution and organizational change accompanied by the disciplined
use of analytical tools, techniques, and programs. An organization needs to
understand the environment, develop a strategy, and implement a system to
effectively deploy this strategy. At the same time, the organization must become
adept at using all the tools of operations improvement contained in this book.
These improvement tools can then be combined to attack the fundamental
challenges of operating a complex healthcare delivery organization.
Introduction to Healthcare Operations
The introductory chapters provide an overview of the significant environmental
trends healthcare delivery organizations face. Annual updates to industrywide trends
can be found in Futurescan: Healthcare Trends and Implications 2016–2021 (SHSMD
and ACHE 2016). Progressive organizations tend to review these publications carefully, as they can use this information in response to external forces by identifying
either new strategies or current operating problems that must be addressed.
Business has aggressively used operations improvement tools for the
past 40 years, but the field of operations science actually began many centuries
ago. Chapter 2 provides a brief history.
Healthcare operations are increasingly driven by the effects of EBM and
pay for performance; chapter 3 offers an overview of these trends and how
organizations can effect change to meet current challenges and opportunities.
Setting Goals and Executing Strategy
A key component of effective operations is the ability to move strategy to
action. Chapter 4 shows how the use of the balanced scorecard and strategy
maps can help accomplish this aim. Change in all organizations is challenging,
and the formal methods of project management (chapter 5) can deliver effective, lasting improvements in an organization’s operations.
C h a p te r 1: The C hallenge and the Op p or tunity
Setting goals
and executing
strategy
Performance
improvement
tools,
techniques, and
programs
Fundamental
healthcare
operations
issues
High performance
Performance Improvement Tools, Techniques, and Programs
Once an organization has its strategy implementation and change management
processes in place, it needs to select the correct tools, techniques, and programs
to analyze current operations and develop effective adjustments.
Chapter 6 outlines the basic steps of problem solving, which begins
by framing the question or problem and continues through data collection
and analyses to enable effective decision making. Chapter 7 introduces the
building blocks for many of the advanced tools used later in the book. (This
chapter may serve as a review or reference for readers who already have good
statistical skills.)
Closely related to statistical thinking is the emerging science of analytics. With powerful new software tools and big data repositories, the ability to
understand and predict organizational performance is significantly enhanced.
Chapter 8 is new to this edition and presents several tools that have become
available to healthcare analysts and leaders since publication of the second
edition.
Some projects require a focus on process improvement. Six Sigma tools
(chapter 9) can be used to reduce variability in the outcome of a process. Lean
tools (chapter 10) help eliminate waste and increase speed.
Applications to Contemporary Healthcare Operations Issues
This part of the book demonstrates how these concepts can be applied to
some of today’s fundamental healthcare challenges. Process improvement
techniques are now widely deployed in many organizations to significantly
improve performance; chapter 11 reviews the tools of process improvement
and demonstrates their use in improving patient flow.
Scheduling and capacity management continue to be major concerns for
most healthcare delivery organizations, particularly with the advent of advancedaccess scheduling, a concept promoted by the Institute for Healthcare Improvement and discussed in chapter 12. Specifically, the chapter demonstrates how
13
EXHIBIT 1.5
Framework
for Effective
Operations
Management in
Healthcare
14
Hea lt h c a re O p e ra ti o n s M a n a g e me n t
simulation can be used to optimize scheduling. Chapter 13 explores the optimal
methods for acquiring supplies and maintaining appropriate inventory levels.
Chapter 14 outlines a systems approach to improving financial results, with a
special emphasis on cost reduction—one of today’s most important challenges.
Putting It All Together for Operational Excellence
In the end, any operations improvement will fail unless steps are taken to
maintain the gains; chapter 15 contains the necessary tools to do so. The
chapter also provides a detailed algorithm that helps practitioners select the
appropriate tools, methods, and techniques to effect significant operational
improvements. It demonstrates how our fictionalized case study healthcare
system, Vincent Valley Hospital and Health System (VVH), uses all the tools
presented in the book to achieve operational excellence. In this way, a future
is envisioned in which many of the tools and methods contained in the book
are widely deployed in the US healthcare system.
Vincent Valley Hospital and Health System
Woven throughout the chapters are examples featuring VVH, a fictitious but
realistic health system. The companion website contains an expansive description of VVH; here we provide some essential details.
VVH is located in a midwestern city with a population of 1.5 million.
The health system employs 5,000 staff members, operates 350 inpatient beds, and has a medical staff of 450
On the web at
ache.org/books/OpsManagement3
physicians. It operates nine clinics staffed by physicians
who are employees of the system. VVH competes with
two major hospitals and an independent ambulatory surgery center that was
formed by several surgeons from all three hospitals.
The VVH brand includes an accountable care organization to reflect
the increased emphasis it has placed on population health in its community.
The organization also is working to create a Medicare Advantage plan. It has
significantly restructured its primary care delivery segment and has contracted
with a variety of retail clinics to supplement the traditional office-based primary
care physicians with whom it is affiliated. It recently added an online diagnosis
and treatment service, with 24-hour telehealth now available.
Three major health plans provide most of the private payment to VVH,
which, along with the state Medicaid system, have recently begun a pay-forperformance reimbursement initiative. VVH has a strong balance sheet and a
profit margin of approximately 2 percent, but its senior leaders feel the organization is financially challenged.
The board of VVH includes many local industry leaders, who have asked
the chief executive to focus on using the operational techniques that have led
them to succeed in their own businesses.
C h a p te r 1: The C hallenge and the Op p or tunity
Conclusion
This book is an overview of operations management approaches and tools. The
reader is expected to understand all the concepts in the book (and in current use in
the field) and be able to apply, at the basic level, most of the tools, techniques, and
programs presented. The reader is not expected to execute at the more advanced
(e.g., Six Sigma black belt, project management professional) level. However,
this book prepares readers to work effectively with knowledgeable professionals
and, most important, enables them to direct the work of those professionals.
Final Note About the Third Edition
Prior editions of this book included a chapter on simulation. Although simulation is a valuable tool in many industries, it is not used widely in healthcare, so
the chapter was eliminated, with some of the principles of simulation moved to
chapter 11. We hope the industry embraces this tool in the future—and then
we will bring this chapter back.
Discussion Questions
1. Provide three examples of system improvements at the boundaries of
the healthcare subsystems (patient, microsystem, organization, and
environment).
2. Identify three systems in a healthcare organization (at any level) that
have reinforcing feedback.
3. Identify three systems in a healthcare organization (at any level) that
have balancing feedback.
4. Identify three systems in a healthcare organization (at any level) in
which feedback delays affect the performance of the system.
References
Agency for Healthcare Research and Quality (AHRQ). 2010. “National Healthcare Quality
Report, 2009: Key Themes and Highlights from the National Healthcare Quality Report.” Last reviewed March. http://archive.ahrq.gov/research/findings/
nhqrdr/nhqr09/Key.html.
Centers for Medicare & Medicaid Services (CMS). 2015. “National Health Expenditure
Projections 2014-2025 Forecast Summary.” Published July 14. www.cms.gov/
Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/National
HealthExpendData/Downloads/Proj2015.pdf.
15
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Hea lt h c a re O p e ra ti o n s M a n a g e me n t
Institute of Medicine (IOM). 2011. Learning What Works: Infrastructure Required for
Comparative Effectiveness Research. Workshop Summary. Accessed August 8, 2016.
www.nap.edu/catalog/12214/learning-what-works-infrastructure-required-forcomparative-effectiveness-research-workshop.
———. 2001. Crossing the Quality Chasm: A New Health System for the 21st Century. Washington, DC: National Academies Press.
———. 1999. To Err Is Human: Building a Safer Health System. Washington, DC: National
Academies Press.
Joshi, M. S., E. R. Ransom, D. B. Nash, and S. B. Ransom. 2014. The Healthcare Quality
Book: Vision, Strategy and Tools, 3rd edition. Chicago: Health Administration Press.
Landrigan, C. P., G. J. Parry, C. B. Bones, A. D. Hackbarth, D. A. Goldmann, and P. J.
Sharek. 2010. “Temporal Trends in Rates of Patient Harm Resulting from Medical
Care.” New England Journal of Medicine 363 (22): 2124–34.
National Guideline Clearinghouse (NGC). 2016. Home page. Accessed August 8. https://
guideline.gov/.
Ransom, S. B., M. S. Joshi, and D. B. Nash (eds.). 2005. The Healthcare Quality Book: Vision,
Strategy, and Tools. Chicago: Health Administration Press.
Rotter, T., L. Kinsman, E. L. James, A. Machotta, H. Gothe, J. Willis, P. Snow, and J. Kugler.
2010. “Clinical Pathways: Effects on Professional Practice, Patient Outcomes, Length
of Stay and Hospital Costs.” Cochrane Database of Systematic Reviews 3: CD006632.
Senge, P. M. 1990. The Fifth Discipline: The Art and Practice of the Learning Organization.
New York: Doubleday.
Society for Healthcare Strategy and Market Development (SHSMD) and American College of Healthcare Executives (ACHE). 2016. Futurescan: Healthcare Trends and
Implications 2016–2021. Chicago: SHSMD and Health Administration Press.
CHAPTER
HISTORY OF PERFORMANCE IMPROVEMENT
Operations Management in Action
2
OVE RVI E W
During the Crimean War, a conflict that waged from
This chapter provides the background and historical
October 1853 to February 1856 pitting Russia against
context for performance improvement—which is not
Britain, France, and Ottoman Turkey, reports of tera new concept. Several of the tools, techniques, and
rible conditions in military hospitals began to emerge
philosophies outlined in this text are based in past
that alarmed British citizens. In response to the outefforts. Although the terminology has changed, many
cry, the British government commissioned Florence
of the core concepts remain the same.
Nightingale, now widely recognized as a pioneer in
The major topics in this chapter include the
nursing practice, to oversee the introduction of nurses
following:
to military hospitals and to improve conditions in the
• Background for understanding operations
hospitals. When Nightingale arrived in Scutari, Turkey,
management
she found the military hospital there overcrowded and
• Systems thinking and knowledge-based
filthy. She instituted many changes to improve the
management
sanitary conditions in the hospital, and many lives
were saved as a result of these reforms.
• Scientific management
Nightingale was among the first healthcare
• Project management
professionals to collect, tabulate, interpret, and graph• Introduction to quality, and quality experts of
ically display data related to the impact of process
note
changes on care outcomes—what is known today as
• Philosophies of performance improvement,
evidence-based medicine. To quantify the overcrowdincluding Six Sigma, Lean, and others
ing problem, she compared the average amount of
• Introduction to supply chain management
space per patient in London hospitals—1,600 square
• Introduction to big data and analytics
feet—to the space in Scutari—about 400 square feet.
She developed a standardized document, the Model
Although these tools and techniques have been
Hospital Statistical Form, to enable the collection of
adapted for contemporary healthcare, their roots
consistent data for analysis and comparison. In Febare in the past, and an understanding of this history
ruary 1855, the patient mortality rate at the military
(exhibit 2.1) can enable organizations to move successhospital in Scutari was 42 percent. As a result of Nightfully into the future.
ingale’s changes, by June of that year the mortality
rate had decreased to 2.2 percent.
To present these data in a persuasive manner, she developed a new type of
graphic display, the polar area diagram. The diagram was a pie chart with a monthly
slice for mortality numbers and their causes displayed in a different color. A quick
glance at the diagram “showed that except for the bloodiest month in the siege of
Sevastopol, battle deaths take up a very small portion of each slice,” notes Lienhard
17
18
Hea lt h c a re O p e ra ti o n s M a n a g e me n t
(2016). It revealed that “The Russians were a minor enemy. The real enemies were
cholera, typhus, and dysentery. Once the military looked at that eloquent graph,
the modern army hospital system was inevitable” (Lienhard 2016).
After the war, Nightingale used the data she had collected to demonstrate
that the mortality rate in Scutari following her reforms was significantly lower than
in other British military hospitals. Although the British military hierarchy was resistant to her changes, the data were convincing and resulted in reforms to military
hospitals and the establishment of the Royal Commission on the Health of the Army.
Were she alive today, Nightingale would recognize many of the philosophies,
tools, and techniques outlined in this text as essentially the same as those she
employed to achieve lasting reform in hospitals throughout the world.
Sources: Information from Cohen (1984), Lienhard (2016), Neuhauser (2003), and Nightingale (1858).
Background
The healthcare industry faces many challenges. The costs of care and level of
services delivered are increasing; even as the population ages, we are able to prolong lives to an ever greater extent as technology advances and expertise grows.
The expectation of quality care with zero defects, or failures in care, is being
pursued by government and other stakeholders, driving the need for healthcare
providers to produce more of a high-quality product or service at a reduced
cost. This need can only be met through improved utilization of resources.
Specifically, providers must offer their services more effectively and efficiently than at any time in the past by optimizing their use of limited financial
assets, employees and staff, machines and facilities, and time.
Enter operations management.
Operations management is the design, implementation, and improvement of the processes and systems that create and deliver the organization’s
products and services. Operations managers plan and control delivery processes
and systems within the organization.
Forward-thinking healthcare leaders and professionals have realized
that the theories, tools, and techniques of operations management, if properly
applied, can enable their organizations to become efficient and effective care
delivery environments. However, for many of the aims identified by the US
healthcare system to be achieved, essentially all healthcare providers must adopt
these tools and techniques, many of which have enabled other service industries and manufacturing sectors to improve efficiency and effectiveness. The
operations management information presented in this book should similarly
enable hospitals and other healthcare organizations to design systems, processes,
products, and services that meet the needs of their stakeholders. Importantly,
it should also allow continuous improvement in these systems and services to
keep pace with the quickly changing healthcare landscape.
1300
A. Erlang,
queueing
1900
Henry Gantt,
Gantt charts
Florence
Nightingale
Adam Smith,
specialization
of labor
Venice Arsenal,
first moving
assembly line
Frank and Lillian Gilbreth,
time and motion
Frederick Winslow Taylor,
father of
scientific management
1925
TPS
1950
CPM
method
Joseph M. Juran,
quality trilogy
W. Edwards Deming,
father of
quality movement
(Japan)
If Japan Can . . .
Why Can’t We?
Harlan Cleveland,
knowledge
hierarchy
PERT
method
Project Management
Institute
1975
Russell L. Ackoff,
systems thinking
Eliyahu M. Goldratt,
TOC
Baldrige
Award,
ISO
9000
2000
100K
Lives
SCM
IOM report
To Err
Is Human,
Baldrige
Award
in Healthcare,
AHRQ
Six
Sigma
Institute for Healthcare
Improvement;
James Womack,
TQM,
The Machine that
JIT,
Changed the World;
Avedis
Robert S. Kaplan,
Donabedian
balanced scorecard
W. Edwards Deming
(US)
Shigeo Shingo,
poka-yoke and SMED
Kaoru lshikawa,
TQM, fishbone
Genichi Taguchi,
cost of variation
Walter A. Shewhart,
grandfather of
quality movement
Henry Ford,
mass production
EXHIBIT 2.1
Important Events in Performance Improvement
C h a p te r 2: H istor y of Per for m anc e Im p rovem ent
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To improve systems and processes, however, one must first know the
system or process and its desired inputs and outputs.
Knowledge
hierarchy
The foundation of
knowledge-based
management,
composed of five
categories of
learning: data,
information,
knowledge,
understanding,
and wisdom.
EXHIBIT 2.2
Systems View
of the Provision
of Services for
Purposes of
This Book
Knowledge-Based Management
This book takes a systems view of service provision and delivery, as illustrated
in exhibit 2.2, and focuses on knowledge-based management (KBM)—using
data and information toward basing management decisions on facts rather than
on feelings or intuition—to frame that view. The improvement in computer
systems and new analytical approaches support the increased use of KBM,
especially in terms of building a knowledge hierarchy.
The knowledge hierarchy relates to the learning that ultimately underpins KBM. As illustrated in exhibit 2.3, the knowledge hierarchy consists of
the following five categories (Zeleny 1987):
Labor
Material
Machines
Management
Capital
Goods or
services
Transformation
process
INPUT
OUTPUT
Feedback
EXHIBIT 2.3
Knowledge
Hierarchy
Wisdom
morals
Importance
Understanding
principles
Knowledge
patterns
Information
Data
relationships
Learning
C h a p te r 2: H istor y of Per for m anc e Im p rovem ent
1. Data. Symbols or raw numbers that simply exist; they have no structure
or organization. Entities collect data with their computer systems;
individuals collect data through their experiences. At this stage of the
hierarchy, one can presume to know nothing because raw data alone are
not adequate for decision making.
2. Information. Data that are organized or processed to have meaning.
Information can be useful, but it is not necessarily useful. It can answer
such questions as who, what, where, and when—in other words, know
what.
3. Knowledge. Information that is deliberately useful. Knowledge enables
decision making—know how.
4. Understanding. A mental frame that allows use of what is known and
enables the development of new knowledge. Understanding represents
the difference between learning and memorizing—know why.
5. Wisdom. A high-level stage that adds moral and ethical views to
understanding. Wisdom answers questions to which there is no known
correct answer and, in some cases, to which there will never be a known
correct answer—know right.
A simple example may help explain this hierarchy. Say your height is
67 inches and your weight is 175 pounds (data). You have a body mass index
(BMI) of 26.7 (information). A healthy BMI is 18.5 to 25.5 (knowledge).
Your BMI is high, and to be healthy you should lower it (understanding). You
begin a diet and exercise program and lower your BMI (wisdom).
Finnie (1997, 24) summarizes the relationships in the hierarchy and
notes our tendency to focus on its less important levels:
We talk about the accumulation of information, but we fail to distinguish between
data, information, knowledge, understanding, and wisdom. An ounce of information
is worth a pound of data, an ounce of knowledge is worth a pound of information,
an ounce of understanding is worth a pound of knowledge, an ounce of wisdom is
worth a pound of understanding. In the past, our focus has been inversely related to
importance. We have focused mainly on data and information, a little bit on knowledge, nothing on understanding, and virtually less than nothing on wisdom.
Knowledge Through the Ages
The roots of the knowledge hierarchy can be traced to eighteenth-century
philosopher Immanuel Kant, much of whose work attempted to address the
questions of what and how we can know.
The two major philosophical movements that significantly influenced
Kant were empiricism and rationalism (McCormick 2006). The empiricists,
most notably John Locke, argued that human knowledge originates in one’s
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experiences. According to Locke, the mind is a blank slate that fills with ideas
through its interaction with the world. The rationalists, including Descartes
and Galileo, argued that the world is knowable through an analysis of ideas
and logical reasoning. Both the empiricists and the rationalists viewed the mind
as passive, either by receiving ideas onto a blank slate or because it possesses
innate ideas that can be logically analyzed.
Kant joined these philosophical ideologies by arguing that experience leads
to knowing only if the mind provides a structure for those experiences. Although
the idea that the rational mind plays a role in defining reality is now common,
in Kant’s time this was a major insight into what and how we know. Knowledge
does not flow from our experiences alone, nor only from our ability to reason;
rather, knowledge flows from our ability to apply reasoning to our experiences.
Relating Kant’s philosophy to the knowledge hierarchy, data are our
experiences, information is obtained through logical reasoning, and knowledge
is obtained when we apply structured reasoning to data to acquire knowledge
(Ressler and Ahrens 2006).
The intent of this text is to enable readers to gain knowledge. We discuss
tools and techniques that allow the application of logical reasoning to data
toward obtaining knowledge and using it to make decisions. This knowledge
and understanding should help the reader provide healthcare in an efficient
and effective manner.
History of Scientific Management
Scientific
management
A disciplined
approach to
studying a system
or process and
then using data
to optimize it to
achieve improved
efficiency and
effectiveness.
Frederick Taylor (whose work is covered in more detail later in the chapter)
originated the term scientific management in The Principles of Scientific Management (Taylor 1911). Scientific management methods called for eliminating
the old rule-of-thumb, individual way of performing work and, through study
and optimization of the work, replacing the varied methods with the one “best”
way of performing the work to improve productivity and efficiency. Today, the
term scientific management has been replaced with operations management,
but the concept is similar: Study the process or system and determine ways to
optimize it to achieve improved efficiency and effectiveness.
Mass Production
The Industrial Revolution and mass production set the stage for much of Taylor’s work. Prior to the Industrial Revolution, individual craftsmen performed
all tasks necessary to produce a good using their own tools and procedures.
In the eighteenth century, Adam Smith advocated for the division of labor—
increasing work efficiency through specialization. To support a division of
labor, a large number of workers are brought together, and each performs a
specific task related to the production of a good. Thus, the factory system of
C h a p te r 2: H istor y of Per for m anc e Im p rovem ent
mass production was born, and Henry Ford’s assembly line eventually emerged,
making industrial conditions ripe for Taylor to introduce scientific management.
Mass production allows for significant economies of scale, as predicted
by Smith. Before Ford set up his moving assembly line, each car chassis was
assembled by a single worker and took about 12½ hours to produce. After the
introduction of the assembly line, this time was reduced to 93 minutes (Bellis
2006). The standardization of products and work ushered in by the assembly
line not only led to a reduction in the time needed to produce cars but also
significantly reduced the costs of production. The selling price of the Model
T fell from $1,000 to $360 between 1908 and 1916 (Simkin 2005), allowing
Ford to capture a large portion of the market.
Although Ford is commonly credited with introducing the moving
assembly line and mass production in modern times, both processes were
in practice several hundred years earlier. The Venetian Arsenal of the 1500s
employed 16,000 people and produced nearly one ship every day (NationMaster.com 2004). Ships were mass produced using premanufactured, standardized
parts on a floating assembly line (Schmenner 2001).
One of the first examples of mass production in the healthcare industry
is Shouldice Hospital (Heskett 2003). Much like Ford, who is commonly cited
as saying people could have the Model T in any color, “so long as it’s black,”
Shouldice, founded in 1945 in Toronto, performs just one type of surgery—
routine hernia operations—and it continues to thrive with its unique approach
(Heskett 2003).
Furthermore, evidence is growing in healthcare that level of experience in
treating specific illnesses and conditions affects the outcome of that care. Higher
volumes of cases often result in better outcomes (Halm, Lee, and Chassin 2002).
Specifically, the additional practice associated with higher volume results in better outcomes. The idea of “practice makes perfect,” or learning-curve effects,
has led organizations such as the Leapfrog Group (made up of organizations
that provide healthcare benefits) to list patient volume among its criteria for
quality (Halm, Lee, and Chassin 2002). The Agency for Healthcare Research
and Quality (AHRQ) report Localizing Care to High-Volume Centers devotes an
entire chapter to this issue and its impact on medical practice (Auerbach 2001).
Frederick Taylor
Taylor began his work when mass production and the factory system were in
their infancy. He believed that US industry was “wasting” human effort and
that, as a result, national efficiency (now called productivity) was significantly
lower than it could be. The introduction to The Principles of Scientific Management (Taylor 1911) illustrates his intent:
[O]ur larger wastes of human effort, which go on every day through such of our acts
as are blundering, ill-directed, or inefficient, and which Mr. [Theodore] Roosevelt
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refers to as a lack of “national efficiency,” are less visible, less tangible, and are but
vaguely appreciated. . . . This paper has been written:
First. To point out, through a series of simple illustrations, the great loss which the
whole country is suffering through inefficiency in almost all of our daily acts.
Second. To try to convince the reader that the remedy for this inefficiency lies in
systematic management, rather than in searching for some unusual or extraordinary
man [referring to the so-called great man theory prevalent at the time].
Third. To prove that the best management is a true science, resting upon clearly
defined laws, rules, and principles, as a foundation. And further to show that the
fundamental principles of scientific management are applicable to all kinds of human
activities, from our simplest individual acts to the work of our great corporations,
which call for the most elaborate cooperation. And, briefly, through a series of illustrations, to convince the reader that whenever these principles are correctly applied,
results must follow which are truly astounding.
Note that Taylor specifically mentions systems management as opposed
to the individual; this is a common theme that we revisit throughout this book.
Rather than focusing on individuals as the cause of problems and the source
of solutions, emphasis is placed on systems and their optimization.
Taylor believed that much waste was the result of what he called “soldiering,” which today might be thought of as slacking. Further, he believed
that the underlying causes of soldiering were as follows (Taylor 1911):
First. The fallacy, which has from time immemorial been almost universal among
workmen, that a material increase in the output of each man or each machine in
the trade would result in the end in throwing a large number of men out of work.
Second. The defective systems of management which are in common use, and which
make it necessary for each workman to soldier, or work slowly, in order that he may
protect his own best interests.
Third. The inefficient rule-of-thumb methods, which are still almost universal in all
trades, and in practicing which our workmen waste a large part of their effort.
To eliminate soldiering, Taylor proposed instituting incentive schemes.
While at Midvale Steel Company, he used time studies to set daily production
quotas. Incentives were paid to those workers who reached their daily goals,
and those who did not reach their goals were paid significantly less. Productivity at Midvale doubled. Not surprisingly, Taylor’s ideas produced considerable
backlash. The resistance to increasingly popular pay-for-performance programs
in healthcare today is analogous to that experienced by Taylor.
Taylor believed that “one best way” existed to perform any task and
that careful study and analysis would lead to the discovery of that way. For
C h a p te r 2: H istor y of Per for m anc e Im p rovem ent
example, while at Bethlehem Steel Corporation, he studied the shoveling of
coal. Using time studies and a careful analysis of how the work was performed,
he determined that the optimal amount of coal per shovel load was 21 pounds.
Taylor then developed shovels that would hold exactly 21 pounds for each
type of coal; workers had previously supplied their own shovels (NetMBA.com
2005). He also determined the ideal work rate and rest periods to ensure that
workers could shovel all day without fatigue. As a result of Taylor’s improved
methods, Bethlehem Steel was able to reduce the number of workers shoveling
coal from 500 to 140 (Nelson 1980).
Taylor’s four principles of scientific management are to
1. develop and standardize work methods on the basis of scientific study,
and use these to replace individual rule-of-thumb methods;
2. select, train, and develop workers rather than allowing them to choose
their own tasks and train themselves;
3. develop a spirit of cooperation between management and workers
to ensure that the scientifically developed work methods are both
sustainable and implemented on a continuing basis; and
4. divide work between management and workers so that each has an
equal share, where management plans the work and workers perform
the work.
Although some would be problematic today—particularly the notion
that workers are “machinelike” and motivated solely by money—many of
Taylor’s ideas can be seen in the foundations of newer initiatives such as Six
Sigma and Lean, two important quality improvement approaches discussed in
depth later in the book.
Frank and Lillian Gilbreth
The Gilbreths were contemporaries of Frederick Taylor. Frank, who worked
in the construction industry, noticed that no two bricklayers performed their
tasks the same way. He believed that bricklaying could be standardized and the
one best way determined. He studied the work of bricklaying and analyzed the
workers’ motions, finding much unnecessary stooping, walking, and reaching.
He eliminated these motions by developing an adjustable scaffold designed
to hold both bricks and mortar (Taylor 1911). As a result of this and other
improvements, Frank Gilbreth reduced the number of motions in bricklaying
from 18 to 5 (International Work Simplification Institute 1968) and raised output from 1,000 to 2,700 bricks a day (Perkins 1997). He applied what he had
learned from his bricklaying experiments to other industries and types of work.
In his study of surgical operations, Frank Gilbreth found that doctors
spent more time searching for instruments than performing the surgery. He
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developed a technique still seen in operating rooms today: When the doctor
needs an instrument, he extends his hand, palm up, and asks for the instrument, which is then placed in his hand. This technique eliminates searching
for the instrument and allows the doctor to stay focused on the surgical area,
thus reducing surgical time (Perkins 1997).
Frank and Lillian Gilbreth may be more familiarly known as the parents
in the book Cheaper by the Dozen (Gilbreth and Carey 1948) (which was made
into a movie by the same title in 1950 and remade in 2003). The Gilbreths
incorporated many of their time-saving ideas in their family as well. For example,
they bought just one type of sock for all 12 of their children, thus eliminating
time-consuming sorting.
Scientific Management Today
Program
evaluation and
review technique
(PERT)
A graphic
technique to
link and analyze
all tasks within
a project; the
resulting graph
helps optimize the
project’s schedule.
Critical path
method (CPM)
The critical path
is the longest
course through
a graph of linked
tasks in a project.
The critical path
method is used to
reduce the total
time of a project
by decreasing the
duration of tasks
on the critical path.
Scientific management fell out of favor during the Depression, partly because
of the sense that it dehumanized employees, but mainly because of a general
belief in society that productivity improvements resulted in downsizing and
increased unemployment. Not until World War II did scientific management,
renamed operations research, see a resurgence of interest.
In healthcare today, standardized methods and procedures are used to
reduce costs and increase the quality of outcomes. Specialized equipment has
been developed to speed procedures and reduce labor costs. In a sense, we are
still searching for the one best way. However, we must heed the lessons of the
past. If the tools of operations management are perceived to be dehumanizing
or to result in downsizing by healthcare organizations, their implementation
will meet significant resistance.
Project Management
The discipline of project management began with the development of the Gantt
chart in the early twentieth century. Henry Gantt worked closely with Frederick
Taylor at Midvale Steel and in Navy ship construction during World War I.
From this work, he developed bar graphs to illustrate the duration of project
tasks and display scheduled and actual progress. These Gantt charts were used
to help manage large projects, including construction of the Hoover Dam,
and proved to be such a powerful tool that they are commonly used today.
Although Gantt charts were originally adopted to track large projects, they
are not ideal for very large, complicated projects because they do not explicitly
show precedence relationships, that is, what tasks need to be completed before
other tasks can start. In the 1950s, two mathematic project scheduling techniques
were developed: the program evaluation and review technique (PERT) and
the critical path method (CPM). Both techniques begin by developing a project
network showing the precedence relationships among tasks and task duration.
C h a p te r 2: H istor y of Per for m anc e Im p rovem ent
PERT was developed by the US Navy to address the desire to accelerate the Polaris missile program. This “need for speed” was precipitated by
the Soviet launch of Sputnik, the first space satellite. PERT uses a probability
distribution (the beta distribution), rather than a point estimate, for the duration of each project task. The probability of completing the entire project in a
given amount of time can then be determined. This technique is most useful
for estimating project completion time when task times are uncertain and for
evaluating risks to project completion prior to the start of a project.
The CPM technique was developed at the same time as PERT by the
DuPont and Remington Rand corporations to manage plant maintenance
projects. CPM uses the project network and point estimates of task duration
times to determine the critical path through the network, or the sequence of
activities that will take the longest to complete. If any one of the activities on
the critical path is delayed, the entire project is delayed. This technique is most
useful when task times can be estimated with certainty and is typically used in
project management and control.
Although both of these techniques are powerful analytical tools for
planning, implementing, controlling, and evaluating a project plan, performing the required calculations by hand is tedious, and use of the techniques
was not initially widespread. With the advent of commercially available project
management software for personal computers in the late 1960s, use of PERT
and CPM increased considerably. Today, numerous project management software packages are commercially available. Microsoft Project, for instance, can
perform network analysis on the basis of either PERT or CPM; the default is
CPM, making it the more commonly used technique.
Projects are an integral part of many of the process improvement initiatives found in the healthcare industry. Project management and its tools
are needed to ensure that projects related to quality, Lean, and supply chain
management are completed in the most effective and timely manner possible.
Introduction to Quality
Any discussion of quality in industry—including healthcare—should begin
with those recognized as originators in quality improvement methodology.
Here we introduce the individuals credited with developing various quality
approaches, and later in the section we discuss some prevailing quality improvement processes. This introductory discussion establishes the background for
the in-depth treatment of the concepts throughout the book.
Walter Shewhart
If W. Edwards Deming and Joseph Juran (profiled in later subsections) are
considered the fathers of the quality movement, Walter Shewhart may be seen
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Statistical process
control (SPC)
A scientific
approach to
controlling the
performance
of a process by
measuring the
process outputs
and then using
statistical tools to
determine whether
this process is
meeting expected
performance.
Plan-do-check-act
(PDCA)
A core process
improvement
tool with four
elements: Plan
a change to a
process, enact
the change, check
to make sure it
is working as
expected, and
act to make sure
the change is
sustainable. PDCA
functions as a
continuous cycle
and, as such,
is sometimes
referred to as the
Deming wheel.
as its grandfather. Both Deming and Juran studied under Shewhart, and much
of their work was influenced by his ideas.
Shewhart believed that managers need certain information to enable them
to make scientific, efficient, and economical decisions. He developed statistical
process control (SPC) charts to supply that information (Shewhart 1931). He
also believed that management and production practices need to be continuously evaluated, and then adopted or rejected on the basis of this evaluation, if
an organization hopes to evolve and survive. Deming’s cycle of improvement,
known as plan-do-check-act (PDCA) (sometimes rendered as plan-do-studyact), was adapted from Shewhart’s work (Shewhart and Deming 1939).
W. Edwards Deming
Deming was an employee of the US government in the 1930s and 1940s, working with statistical sampling techniques. He became a supporter and student of
Shewhart, believing Shewhart’s techniques could be useful in nonmanufacturing environments. Deming applied SPC methods to his work at the National
Bureau of the Census to improve clerical operations in preparation for the
1940 population census. As a result, in some cases productivity improved by
a factor of six (Kansal and Rao 2006).
Deming taught seminars to bring his and Shewhart’s work to US and
Canadian organizations, where major reductions in scrap and rework resulted.
However, after World War II, Deming’s ideas lost popularity in the United
States, mainly because demand for all products was so great that quality became
unimportant; any product, regardless of how well it was made, was snapped
up by hungry consumers.
After the war, Deming traveled to Japan as an adviser for that country’s
census. While he was there, the Union of Japanese Scientists and Engineers
invited him to lecture on quality control techniques, and Deming brought
his message to Japanese executives: Improving quality reduces expenses while
increasing productivity and market share. During the 1950s and 1960s, Deming’s
ideas were widely known and implemented in Japan, but not in the United States.
The energy crisis of the 1970s was the turning point. In part as a result
of oil shortages, the small, well-built Japanese automobiles increased in popularity, and the US auto industry saw declines in demand, setting the stage for the
return of Deming’s ideas. The 1980 television documentary If Japan Can . . .
Why Can’t We?, investigating the increasing competition that numerous US
industries faced from Japan, made Deming and his quality ideas known to a
broad audience. Much like the Institute of Medicine report To Err Is Human
(1999) increased awareness of the need for quality in healthcare, this documentary drove US industry’s attention to the need for quality in manufacturing.
Deming’s quality ideas reflected his statistical background, but his experience in their implementation prompted him to expand his approach. He
instructed managers in the two types of variation—special cause, resulting from
C h a p te r 2: H istor y of Per for m anc e Im p rovem ent
29
a change in the system that can be identified or assigned and the problem fixed,
and common cause, deriving from the natural differences in the system that cannot
be eliminated without changing the system. Although identifying the common
causes of variation is possible, these causes cannot be fixed without the authority
and ability to improve the system, for which management is typically responsible.
Movi…