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How Six Sigma Applies to Healthcare
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Written by Carl Wright   

Six sigma is gaining in popularity as one of the most business improvement initiatives. Major corporations such as GE and Motorola implemented six sigma principles for many years. However, in recent years, the six sigma methodology has gained widespread use in hospitals, banks, department store chains, call centers, and many other non-manufacturing businesses.

Healthcare companies of various types are using six sigma projects as change management tools to improve the business.

To those people outside the six sigma knowledge circle, it is somewhat of a mystery. The perception is different than that of lean manufacturing, which the very words at least enable a guess regarding the objectives, although normally incorrect.

Six sigma, at it's core, is about the reduction of variation. It started out as primarily a set of tools to improve quality. However, these tools have evolved to be used to increase revenue, cut costs, improve flow and cycle times. In fact, six sigma tools can be utilized to assist in solving many business issues.

The healthcare industry, and hospitals in particular, were ripe for a set of improvement tools such as six sigma. When you think about the problems, as a customer, it was really out of control. In many ways, it still is out of control. For example, how many businesses can complete a very large percentage of their business without providing a quotation. How many businesses can tell their customer what products and services the customer will buy, when they will be given, how long it will be until it will be provided, with no knowledge of the cost.

This built in system of control paved the way for inefficiency. As one small example, if a hospital can charge $4,000 for a single round of COPD tests lasting 20 minutes without a customer inquiring about the cost until the bill is received, how much incentive is there to reduce cost, do more, or make it better.

Across the board, from surgeries to testing, these systems are under attack. Insurance companies now control price to a large degree, and customers have become price conscious regarding medical care in a larger way than ever before.

In some healthcare institutions, it has become imperative to reduce costs and provide better and more value added services all at the same time. And the time frame to get this done was "yesterday".

Six sigma is one initiative helping these companies combat this margin squeeze. For example, if a provider performed six ultrasounds per day, it may now be necessary to provide sixteen or more.

Six sigma tools include statistical analysis, both simple and complex. They include tools such as regression analysis, ANOVA (analysis of variance), FMEA (failure mode and effects analysis), cause and effects matrix, voice of the customer, design of experiments, control charts, hypothesis tests, comparison of means and standard deviations, CT trees, and many others.

As an example of how a tool is used, suppose a hospital chain is trying to find a way to increase the number of tests performed per day, such as X-rays. Six sigma tools can be used to help analyze each technician's results and times, and determine the most effective methods. The end solution might be a combined lean six sigma solution. For example, the analysis might show two technicians with the most output, highest quality and samples from the same population. Deeper analysis may show that scheduling improvements and pricing effects the backlog. The result might be a new price and standardized procedures to enable 16 tests to be performed per day in each unit. If eight hospitals averaged four tests per technician, and it is improved to sixteen tests per day, the additional contribution gained by the system is huge.

Design of Experiments is a tool often used in the "Improve" phase of a six sigma project. A design of experiment enables using a combination of factors at different levels to achieve the maximum output, or benefit. For example, two factors could be price and backlog. These two factors combined with each other at both high and low levels would require four "replications" or tests for every combination to be accomplished. More complicated DOE's could have many factors and levels. The properly designed experiment can provide a much improved combination without having to actually conduct the experiment with every possible combination.

Maximizing revenue per bed in a hospital is important. The system must provide excellent care, but providing a bed without providing any other services is not maximizing resources. It is therefore critical to find the optimum balance to fill every bed with the most rapid turnover of services while providing the best care possible.

There are hundreds of ways six sigma and lean six sigma can be used to improve the business in healthcare companies. They could be as simple as reducing the wasted motion for nurse's aides or as complex as finding the best combination of drugs to treat cancer.

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